John Hutton – 2006 Speech to Future Services Network

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the Future Services Network on 22nd June 2006.

I’m grateful for the opportunity to join you this afternoon and to add my support for the work the Future Services Network is doing in bringing together public, private and voluntary sectors to shape the future of public service delivery and achieve better outcomes for individuals and communities.

If we are to deliver world class public services, then I believe we need to continue to build on the steps we have already taken to combine increased investment with a new model of delivery – one that rejects the old world of top down monolithic public services run from the centre in favour of greater devolution, diversity and choice. One that puts the customer first, shifting the focus onto meeting the individual needs of those who use our services; and prioritising the quality and not just the quantity of public service provision.

It means embracing new partnerships and working with new providers – whether in the public, private or voluntary sectors. It means ensuring the right incentives are in place so that improvements in quality are self sustaining. And it means getting away from the outdated belief that Whitehall always knows best. Because it doesn’t.

So we should remain focused on improving the quality of publicly funded services and be prepared to change things that aren’t working. I don’t, however, believe the problem we face is one of values. The values of public service are the right ones. Universality, opportunity, security and equity. They don’t need revising or changing. But they do have to be combined with a new discipline that offers the consumer the best service; and the taxpayer the best value for money in today’s rapidly changing world. One that deliberately puts the power of choice and therefore control into the hands of the people who use these public services – because when it comes to public service reform, we should always trust the people.

It is this combination of the right values and a new customer focused approach to service delivery that will lay the foundations for the success of publicly funded services in the future – from health and education to welfare.

But achieving this requires Government to change its approach as well. Central Government will always want to prioritise national goals and objectives. But our challenge is to match this with our desire to continue to expand operational flexibility for the newly created and empowered foundation hospitals or trust schools, or welfare to work providers – so that they themselves can make a real difference to individuals, families and communities.

And we know what a difference locally-tailored solutions can make. Last week

I visited the Harlem Children’s Zone in New York – an inspirational initiative that offers a comprehensive network of social service, education and community-building programmes to transform opportunities for children and families in some of New York’s most deprived neighbourhoods. Locally based and independently-run – it gives people the belief they have the power to improve their services from the ground up. And you can see the difference in the educational achievements of those young people going through its programmes.

Here in the UK, in Glasgow and Manchester, for example, we’re seeing real progress in getting local agencies, both public, voluntary and in the private sector, working together to reduce worklessness with excellent results. We need to see more of this across the UK as a whole.

And that’s why the national roll-out of Pathways to Work and the creation of the Cities Strategy are such crucial elements of our welfare reforms – opening up new opportunities for delivering employment services to some of our most disadvantaged communities.

Our principle objective in welfare reform today must be to design and deliver the most effective and efficient re-employment services anywhere in the world. With providers being properly incentivised to deliver the best possible services to the customer, and job seekers actively engaged in finding work or improving their employability.

We are seeing important progress – with more people in work than ever before and last week’s OECD report finding that, now, for the first time in 50 years, we not only have the highest employment rate of the G7 countries but also the lowest combination of unemployment and inactivity rates.

But we have much further to go. The challenge we face today is how to build a modern welfare state that allows people to exercise their fundamental right to work – at a time when our national economy is changing more rapidly than at any time since the industrial revolution.

Our success in tackling poverty and worklessness – and our ability to preserve the values of social justice which we hold dear – hinge not on preserving the existing system of welfare delivery – but on modernising it; not on standing back and celebrating what we have already achieved with Jobcentre Plus and the New Deal – but on driving forward and building on that success; harnessing the powerful engine for change that markets can provide without sacrificing the principle of equity which markets, if not properly regulated, can so easily undermine.

So a devolved active welfare system needs to be managed by Government within a clear framework where outcomes as well as values are prioritised. It needs to step beyond old antiquated caricatures and recognise that the world is not neatly divided into two halves – a public sector built on values and ethics and a private sector, somehow devoid of these attributes, but efficient and responsive.

And we need to move away from a 19th Century view of the voluntary and not-for-profit sector as providers of last resort to a 21st century view where they rightly take their place alongside the public and private sectors as providers of first resort, across the whole range of publicly funded services.

We’re already seeing the voluntary and community sector playing a crucial role in welfare delivery and the recent New Deal competition – which overall broadly maintained the numbers of different providers involved in New Deal delivery – saw the proportion of New Deal providers from the third sector increase from about one fifth to around one third.

But we need to go further and deliver a truly dynamic and effective market where good providers are valued and properly rewarded, whether they come from the public, private or the voluntary not for profit sectors. I believe there are five key tests we need to meet to achieve this.

First – we need to get the right incentives – to attract the best providers, from all sectors, and incentivise them to deliver outcomes that reflect our social objectives – with the support to innovate and an incentive structure that rewards providers for helping more difficult cases and which reflects our ambition not simply to help people move into work but to help them stay there.

Second – we need to give providers the flexibility they need to forge new cross-sector partnerships; breaking down the barriers of short-term stop-go contracts that too often stifle innovation and prevent new potential providers from entering the market; and synchronising tendering timetables to allow greater flexibility over the bidding process – including, for example, enabling providers to bid for larger contracts with clusters of districts.

Third – we need clearly defined, robust mechanisms for monitoring performance, which enable us to regulate quality with clear sanctions and rewards, while recognising the power of the consumer and avoiding the temptation to micro-manage from the centre and inadvertently obstruct local innovation.

Fourth – providers need clear information over what’s expected of them and when. And they need confidence in the transparency of the procurement decision making process with a much stronger sense of co-ordination across Government and its agencies contracting with this market.

And the fifth and final test is around the delivery of personalised outcomes – and the extent to which we can embed a new degree of personalisation into welfare delivery – with ever greater tailoring to the specific needs of individuals and an ever greater range of tools with which to help people.

I want to achieve more consistent, standardised and ultimately simplified procurement processes in the DWP; better forward planning and communication of changing Jobcentre Plus requirements; and more effective use of management information to help improve provider performance – including exploring a version of the provider “Star Rating” system such as that currently used in Australia, where high-performing providers are clearly identified and benefit from a simpler contracting process. I know the demands we make of our providers are more diverse than those in Australia – so we can’t simply transfer a system from country to another. But the key point is that we have to find an appropriate way to take unnecessary bureaucracy out of the contracting system, while maintaining a level playing field that is open to new players.

We’re also keen to ensure that output-focussed payment systems are designed in such a way as to ensure that smaller organisations also have a chance to compete. We want our competitive tendering processes to deliver the best possible local delivery systems – so we need to get the balance right between providing the flexibility that allows large-scale providers to enter the market and to pitch for large contracts with clusters of districts – with the need to ensure that smaller providers with specialised programmes or local expertise can also compete on a level playing field.

This is particularly important if we are to ensure that voluntary and community based providers in the third sector are fully able to play their part in this new partnership to tackle worklessness and poverty in some of our most deprived areas.

Voluntary and not-for-profit providers are not looking for special favours – they just want the ability to compete fairly and not to make a loss. If we fail to ensure a level playing field, we deny ourselves the commitment and contribution of some of the best and most innovative providers who I believe have a crucial role to play in enabling us to meet our social justice goals.

That’s why, over the summer, as part of a wider examination of the welfare to work market, I have asked my Department to carry out a specific review to ensure the competitive neutrality of the welfare to work market – so that as we take forward the modernisation of welfare delivery – we do so with a level playing field.

It shouldn’t matter whether a provider comes from the public, private or voluntary sector. That isn’t the issue anymore. What matters is the service they provide, the values they communicate and reflect, and the difference they can make to the lives of their customers.

The times we live in will require from us a very different approach to welfare from the one pioneered by Atlee and Beveridge in the post-war period. But it’s underpinned by the same values and the same ambitions. To provide opportunity as well as security; to promote full employment and the right to work. To enhance personal responsibility – not undermine it. And by creating a mixed economy of welfare provision and bringing together the public, private and voluntary sector in a new mission to transform some of Britain’s most disadvantaged communities, we are setting out a modern vision of welfare of which William Beveridge and generations of progressive politicians that have gone before us, would, I hope, have been fully able to support.