My Cap X article

The public sector proceeds by running out of cash and then demanding more
More government spending is not the same as better public services
The UK’s lost public sector productivity could fill the Chancellor’s black hole
Here’s something people of all parties and of none ought to agree about. If we could raise public sector productivity we could have better service for less money. Could we also agree that the failure of the public sector to raise its productivity so far this century is something we should be able to change? The official forecasters pencil in good progress in raising productivity in the private sector, so shouldn’t the public sector be able to help out? As the public sector spends a fortune on bigger and better computers, shouldn’t there be some savings on the wages bill? If the public sector had managed just 1% annual growth in productivity, there would have been no black hole in the Chancellor’s figures. If we could get back up to 2019 levels of public sector productivity, there would have been no need for all those Budget tax rises.

Much of what the state does can be automated – tax collection and benefit payments already largely are. These big clerical factories can plan for fewer, better-paid people to manage the systems, deal with hard cases and talk to the public while much more of the work is done by the digital giants. The NHS is moving over to more being done online and via computer booking. Policing draws more on computers, mobile phone records and camera evidence to trace, track and arrest criminals.

Quality and efficiency are two sides of the same coin. Get things right first time and you can slim down the complaints department. You have more happy service users and less correspondence and fewer calls to handle. Get things right and you waste less of your supplies. Doing things well and providing a quality service is good for staff morale, encourages a can-do attitude and gives people a wish to avoid waste.

In the private sector, when I have been leading companies I have always put customers first. Without them you do not have a business. I have always stressed the importance of managing the cash. A profit is not a proper profit unless it is reflected in a bigger cash balance. The aim is to get enough revenue from satisfied customers to pay decent wages, meet the other costs and have some left over. You need the profit to invest in the future, to replace old plant and reward the shareholders who put the money up in the first place.

Good businesses generate cash, giving them options to renew and improve. If you can get productivity rising, you can reward people better and still have more left over to fund future plans. Failure to manage the cash leads to decline and bankruptcy, which can come swiftly if things have drifted.

In the public sector, I have always found there was plenty of cash if you knew where to look and intended to manage it. Most of the public sector always claims it has insufficient cash and always wants new money for new ideas without looking to see what could be shut down or reduced to pay for them. It is reluctant to go on the journey of continuous improvement. It proceeds by deliberately running out of cash and then demanding more, against threats to close or cut the most important things it does.

The good private sector manager, by contrast, is always on the road to better performance, accepts the need to cut or close marginal or poorly-performing activities and always has money for the core purposes and the key services. Any sign of cutting corners or spending too little on quality flows quickly into fewer sales and a bigger financial black hole.

In my new monograph for the Centre for Policy Studies, I set out some of the basics of how a manager improves productivity and quality. It does not need compulsory redundancies or big new investment programmes.

The first task of a public sector productivity programme today should be to get back up to 2019 levels. The public sector knows it could achieve that. And 2019 was before AI, so you do not need a big investment in new computing to do it.

What it does require is better management of staff. People are moved around too often in the public sector, so you do not get the benefit for long after they have worked out the best way to do a job. Rewards need to be better aligned with performance. Bonuses are paid too readily without requiring good results. How did the CEOs of the Post Office get bonuses for losing the state a fortune and locking up some of their best employees? How did bosses at HS2 get bonuses for massive delays and cost overruns on their railway line?

The public sector is also overstocked, and often writes off stock which goes to waste in some half-remembered warehouse. The property estate is rambling, and has not been modernised and downsized for the era of working from home. Much capital spend is one-off, overspecified and changed too often in the process of designing and building it.

The public sector needs to improve its customer or service-user focus. Public sector managers look upwards, knowing they rely on senior officials in the Treasury and Ministers to underwrite their mistakes and provide them with more money when the cash runs out. The habits of spending badly and in a rush before the year-end, parking money in reserves or unlikely capital spending to vire (i.e. transfer) it out when needed, are bad ideas.

Answering every question about what the government is doing to improve services with statements about increases in spending shows the wrong mindset. If I go into a shop to buy a shirt, I do not care how much it costs the shop to provide me with the service. Nor would I regard it as a good reply to be told that, although they don’t have the item in stock, they plan to spend £1 million in future to fix the problem. I would expect them to tell me how quickly they can get one and how it will be delivered to me. I want them to offer high-quality, low-cost retailing to keep their prices down.

The public sector often blames the user for not conforming to its bad service, whereas successful private sector businesses thrive on meeting customer requirements. The Christmas pudding maker does not tell you he cannot supply for Christmas because that’s when everyone wants one. The public sector rations road space to create traffic jams in an effort to stop people wanting to travel so much or at the times that fit their lives. It does not see high demand for certain routes to be an opportunity to provide more and better service.

Getting productivity back up in the public sector is the nearest to finding a magic money tree in the overrun public sector jungle. The sooner we find it, the sooner we can have tax levels that help growth, and a better balance between the public and private sectors.

I launched a piece of research into public sector productivity and service quality at the Centre for Policy Studies on Wednesday evening. I am grateful to them for publishing the work which is available through their website.

I set out the official figures showing there has been no overall productivity growth in the public sector since 1997. We have missed out on more than a quarter century of improvement despite large sums spent on computerisation and labour saving automation. If we had achieved just 1% a year growth in productivity our public services would be saving us around £280 bn a year, or would be 30% better.

I drew on my experiences running parts of the public sector as an Executive Councillor and as a Minister, where it was sometimes possible to save money, reduce stocks, cut back on excess property, use natural wastage to slim workforces. I also learned from leading two international industrial businesses from their English head offices how to bring the aspirations of staff into line with the needs of customers. I always focused the businesses on customers and service, linking salaries and bonuses to providing excellence for customers.

I developed or introduced Quality systems. I regarded a customer complaint as a stimulus to improvement. First remedy the issue for the customer. If they have lost provide compensation. Next try to design out the fault to prevent it happening again. Continuous improvement and learning from mistakes are critical.

The public sector in places has much to learn from well run customer friendly businesses. Billions of our taxes and borrowings every year go on paying for inefficiencies and mistakes that create low productivity. We cannot afford more HS 2 s and Post Office computer investments that backfire so badly.

Some of you have asked about or commented on whipping in Parliament.

I support good Parliamentary whipping. It is personnel management to organise a government that can govern and a strong Opposition that can oppose.You cannot govern without the backing of a majority of MPs to help you put through measures and ward off No confidence motions . You should not be able to carry proposals in Parliament without satisfying most of your supporters of their wisdom.

Whips will inform MPs of when and how to back government proposals and take back to Ministers criticisms and suggestions for improvement. The MPs as the sales force for government policies have a say through feedback in the manufacture of the product.If a proposal is annoying a lot of MPs there will be meetings with the relevant Ministers. These can result in amendment or even dropping of the measures.

Politics is always a numbers game. It is no good an MP having all the right ideas if the majority will not support them.

In the Commons every day there is at least a one line whip saying your attendance is requested, with no requirement to vote. Many days are 3 line whips where your presence is required and your vote needed.You need to explain if you wish to be absent, abstain or vote against the whip. Whips have power to issue slips from votes. They usually agree if the MP is ill, has an important meeting to attend on government or constituency business or a family emergency. In extreme cases and key votes you could be subject to disciplinary processes . Loss of the whip is a sanction which would stop you being an official party candidate at the next election.

Whipping in the Lords is less intense. The Conservative whip is usually a two line where your attendance is encouraged. The importance of the guidance the whip offers is seen in recent votes as on Chagos where the government was defeated by combined action. I have accepted the Conservative whip and look forward to helping the official opposition in the Lords.

This site remains an independent site, not an official Conservative party one. That was also true when I was on the Commons Conservative whip.

The Prime Minister’s remaining advisers did a good job for him on Monday. They nipped the Scottish rebellion in the bud and got statements of support from the Cabinet and others. This has bought the PM time. The Cabinet felt cornered, decided it was too early for their individual moves against the PM and so they had to come out with supportive statements. The Prime Minister had to face a worried party of MPs, and moved leftwards in his rhetoric to win them over.

Today the PM is the prisoner of the leading members of the Cabinet and Parliamentary party. Ed Miliband has been out and about, defining a leftwards lurch in government which he says is now needed to show the electors Labour is the party of change. Most Labour MPs are glad to see the back of Mandelson and will wish to explain their distaste of his policies as they distance themselves from the unfortunate events of the last year.

The markets had a little wobble on Monday as they briefly contemplated a lurch to the left under a possible new leader. For most of the time including all of the last year since Starmer and Reeves took over it has cost the UK government more to borrow longer term loans than on the one day spike up on the worst day of the Truss/LDI crisis in the bond markets. That is an understandable reaction to two Reeves budgets which put spending and borrowing up by too much. The Reeves re jig of the Treasury rules allowed the state to borrow more in the first half of this government’s term. She hoped for faster growth from extra public spending, but instead growth has slowed.

So now the country and the Labour government are in a bind. The Cabinet will try to enforce higher spending bigger public sector policies on Starmer who is their hostage. The bond markets will start to warn the government more that there are limits to how much they can spend and borrow before the lenders decide they have had enough or impose too high a price for the money needed.

It is particularly bad news if Mr Miliband gains greater influence at the head of the group of Cabinet members who become the left wing enforcers. He will want more and more extreme versions of his net zero policies as people refuse to buy heat pumps and electric cars and as renewable power waits for years to get access to enough new grid. There will be no magic green growth for the UK, with ever increasing dependence on Chinese impots of batteries, cheaper electric cars, turbines, solar panels and all the rest of the items Mr Miliband wants to impose on us.

Meanwhile Starmer will be seeking to woo the Labour audience with bigger and bigger give aways to the EU in another mistaken belief that will generate growth when it will lock us into a low and no growth zone and impose on taxpayers yet bigger bills.

Why?
There are good reasons why we need to keep the Chagos.
1. We are bound by a US/Uk Treaty to keep the freehold of our crucial Indian Ocean joint base.
2. Giving it to Mauritius could mean Chinese fishing boats getting licences to plunder the seas near the base.
3. It could mean occupation of adjacent islands to Diego Garcia limiting use of base
4. Mauritius has signed an anti nuclear Treaty but Diego Garcia is a nuclear handling base.
5. It could lead to commercial exploitation of the seas and islands, damaging a well protected marine environment.
6 Uk taxpayers will be ripped off actually having to make large payments as well as giving the valuable freehold away for nothing.

Legal issues
1. The UK cannot be bound by an advisory opinion of the ICJ which has led to this policy.
2. Any way the UK has an opt out for Commonwealth and defence matters from any ICJ verdict.
3 The UK is bound by the US Treaty to keep the freehold of the islands.

Likely outcome
The US is being alerted to the dangers if this deal. The UK authorities now know they have to modify the US Treaty first. The US President has not yet formally endorsed the disastrous UK deal.

The Labour Manifesto set out two very clear goals or overriding themes. They would bring in a politics driven by a sense of service, not based on party or self interest. They would make sure if you work hard they would respect your contribution and give you a fair chance to get on.
A few days into the Mandelson crisis, and after living through two lethal tax raising budgets that clobbered many different groups of self employed, employees, and small businesses, the government looks well detached from these guiding principles they set out.
The Manifesto broke down these themes into 6 first steps they would take as a government, so things we could expect in say the first nineteen months.
1. They promised economic stability, keeping taxes, inflation and mortgages as low as possible. Instead they have helped put inflation up and have put through a series of punitive tax rises.
2.They would cut NHS waiting lists by offering more treatments and appointments. Instead they are trying to get the waiting lists down by taking people off the lists.
3.They would set up a new Border Command to “smash the criminal boat gangs”. Instead they scrapped the new law that illegal migrants cannot claim asylum on entry , and presided over a big increase in illegal arrivals.
4.Set up Great British Energy to cut energy bills. Instead energy bills have been hiked several times and they have signed up to more long term contract renewable power at very high prices.
5.Crack down on anti social behaviour. No evidence of that.
6. Recruit 2500 new teachers

The public certainly heard the promise amidst the election noise that they would smash the gangs, and they have been bitterly disappointed. They heard and wanted to believe the pledge not to increase taxes on working people and are angry at the big tax rises put through hitting employment and cutting take home pay and spending power.

In accordance with my long stated policy of making this blog mainly about current government policy and what to do next I have not been discussing the Labour government’s great recession and banking crash of 2007-10 for many years. We talked about it at the time. I explained how Brown and Darling could have avoided the worst of the banking squeeze that undermined the banks. I with the Opposition and others had warned of the excessive credit and money causing inflation in the long run up to the crisis. I blamed them for keeping money and credit too loose on the way up and making it too tight on the way down along with their chums at the Bank of England.

They put us on a merciless big dipper, said it was caused by the rest of the world, trashed their reputation for economic competence and duly lost the election. As always the public blamed the incumbents not worldwide trends and in this case were clearly right to do so.

Labour lived under the shadow of their disaster for many years. They won in 2024 not because they had rebuilt trust with millions of voters they had lost but because the Conservative vote collapsed out of anger about what the Conservative government had done and not done, with mass abstentions and votes for parties that could not win that election carrying Labour into office.

In eighteen months Labour have halved their small support levels of the 2024 election and lost more of their rating for economic competence. They have so far put inflation, unemployment, illegal migration, taxes, borrowing, energy prices and closures of business up, and failed to deliver much by way of better public service for all the extra money spent on wage rises and more public sector staff.

Into this mess Gordon Brown decides to go on the media, possibly with the agreement of Keir Starmer, to demand changes with the way things are done to tackle the abuses he allowed or helped create in markets, banking and the economy 18 years ago. Bring it on! He has just made Labour’s worst days 18 years ago relevant to their worst days so far under this government, with the help of his new enemy Mr Mandelson who he brought back into the Cabinet and recommended for a peerage.

Gordon Brown has now made allegations about what Mandelson did, but these are all matters subject to a police investigation to see what evidence there is. Today Mr Mandelson is not guilty of breaking any law and faces no charges. Gordon Brown implies there are issues other than or as well as possible misconduct in public office that need looking into. Time will tell if there is anything that can be proven.

Gordon Brown pleads guilty himself to the same gross error Keir Starmer admits he made of welcoming Mandelson into the heart of government and believing him. Starmer and Brown are joined together in claiming Mandelson was a liar to both of them, and claiming that he both let the Brown government down and now the Starmer government. This is a far more serious crisis because a PM and a former PM both say they put a liar at the heart of government and both say he did damage. In Gordon Brown’s case he says he did not know at the time what damage Mandelson was doing and in Starmer’s case the damage is visible and tearing his government apart.Only they know what Mandelson did say to them, and will need to produce documents to prove their charge of lies.

2007-10 was a disaster for the UK economy, banks and markets. It took years of patient and difficult work to rebuild the strength of the banks and to get public spending and borrowing under some control. Labour MPs need to read the runes of 2007-10 and recognise if they make the wrong decisions about who to lead them and what action they take to improve the economy they could revisit some of the darkest economic and market days of their previous government. Mr Mandelson’s tenure as Ambassador to the US has ended by doing damage to the important US relationship.

Gordon Brown’s list of things to do to try to purge the two crises will not give us growth and lower prices. It seems more designed to make Mandelson take the blame for all failures rather than sort out today’s difficulties of policy. They do need a fair enquiry into Mandelson’s actions then and now. More than that they need new immigration and economic policies that work and are in line with public demands. Attacking workers, savers and strivers and giving away power money and islands to foreign interests is angering many more people. Smash the gangs? Give us the fastest growth? Keep taxes down ? When do they do any of these things?

Some people are arguing that now is the time for the opposition to table a no-confidence motion. The Leader of The Opposition has made it clear she will facilitate one if Labour MPs now want to get rid of the PM. The Opposition is of course free to do this but will only do so if it seems likely there are enough Labour MPs to make it a worthwhile thing to do. Often the Opposition tabling a motion simply unites the governing party to fight off the threat to the future of the government. This defers the infighting which the crisis has generated. MPs in a governing party are usually reluctant to vote to destabilise their own patronage machine or to hasten an election.

Of course if enough Labour MPs see a No Confidence motion as a means to rid themselves of an unpopular leader then the Opposition can help the rebels by tabling and voting for such a motion. When a party has such a large majority as Labour there is no chance of passing a No confidence vote without large numbers of Labour MPs voting for it. If that did happen the King would ask whoever emerges as the new Labour leader to form the next government. It would not bring on an early General Election.

The Labour Party at the moment is very divided with a large number of Labour MPs extremely unhappy about their leader and about the events surrounding Lord Mandelson. So far the rebels have not all agreed to get behind a single candidate as an alternative to the Prime Minister. Instead the leading contenders or their supporters are busy attacking the Prime Minister in their briefings and doubtless seeing how many other MPs would be willing to get behind a leadership bid by them. It takes 81 Labour MP s to all declare in public they want the same named replacement as Leader to trigger a contest.

I have deleted more than usual as people are ignoring guidance. You should not accuse people of criminal acts or claim people are corrupt when you have not supplied evidence and helped persuade the authorities to bring charges.