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Editor's blog Monday 22 February 2010: KPMG sees the future through assertions darkly

Hello. Hope your weekend was good.

A new contribution to the policy conversation comes from Mark Britnell's new employers KPMG. Their new report, Tough Choices Ahead: the future of the public sector, suggests a three-stage approach to public service reform, which "should be implemented within the context of a debate between the public sector’s policy and decision makers and the public regarding the role of the public sector.

"This debate takes two major forms. First, we advocate that governments should demonstrate their commitment to eliminate low-value, non-core programs and services and improve efficiency. Secondly, we assert that, on its own, this is insufficient to make the financial impact required and that there is a bigger challenge – specifically, how to achieve the strategic transformation required in this new economic era."

Its direction of travel, stated explicitly in the graphic on page 7, is "redefining the role of the state". The three stages to this are:
1. short-term cost reduction (insufficient, although necessary, it suggests)
2. efficiency improvement (see point one, above)
3. strategic transformation

Public-private services
The report echoes a dismal earlier KPMG-funded effort by not-long-for-this-House Charles Clarke MP in its view that "Redesigning the role of the public sector will involve some devolution of responsibility from the government to the individual, requiring a fundamental shift in the collective mindset of the electorate".

Yet it offers very little in concrete examples of what it means by successfully achieving the above-listed three stages. Some of the public-private partnership savings or projects it cites are deeply contentious: the London congestion charge costs almost half of what it earns to run; has not significantly improved congestion (its stated goal) and in terms of travel in the capital, is in no danger of contributing to any strategic transformation.

The report is utterly uncritical of the PFI, saying that “PFIs transfer risk management from the public to the private sector”. Very few policy observers believe that this has happened to any real extent in health. KPMG's Alan Downey is quoted as saying, “It is difficult to see how the challenges the UK government faces will be addressed without a substantial shift to involving the private and not-for-profit sectors in the delivery of services, whether by joint venture, conventional outsourcing, PPP or PFI". Mmmm. Yet it is impossible to compare PFI procurement with public sector procurement because the latter has been rejected as an option. And governments can always borrow more cheaply than markets.

Downey also suggests, staggeringly, that "It is a question of enabling the public sector to get the best out of the private sector relationships they have. This has not always gone smoothly, but it is not a reason to step back from doing it now”. In other words, we should ignore the significant evidence that the public sector does consistently bad deals, and that the investment consortia are at no real risk of payer default.

Another canard that few health observers would believe is the unsubstantiated statement that "Ultimately, the need for strong leadership is at the heart of public sector reform. Short-term cost reduction and efficiency gains will be delivered by junior and middle managers, but strategic transformation can only be implemented by senior decision makers, some of whom have historically resisted major change". This is pretty much the opposite of most people's observations in health: that senior managers tend to get the need for major changes to working practices, which are in practice frequently hobbled by middle and junior managers.

It approvingly cites Total Place ... which is mainly a government-quango collaboration, with some support from Tribal Consulting.

Meanwhile, the report suggests that "A stronger commitment to ‘user-pays’ schemes can cushion the financial shortfall resulting from decreased tax revenue. Numerous examples are emerging in policy fields such as transportation, education, pension reform and increasingly, health". Its reference for this startling statement? Ummmm ... How Best to Pay for Ever Higher Expectations of our Public Services.
KPMG in the UK research, January 2009. By Charles Clarke MP.

The few examples offered are weak. The reasoning is questionable. Much is asserted; little is proven.