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The 2020 Public Services Trust Blog

Tuesday, September 8, 2009

Public services – it’s the economy stupid!

By Ben Lucas

Mathew Taylor in his blog yesterday, makes the point that what is missing from public debate is a strong economic case for public services. This is because the post-war welfare state settlement was conceived partly as being about social justice and partly about social amelioration.  Of course it had an economic function, to maintain a healthy and contented workforce, but this economic case was not the explicit rationale for the settlement.

If you separate the public service settlement from the economy then it is inevitable that the sole focus becomes what society can afford.  Yet the real question should be what is the welfare state/public service settlement designed to achieve.  Here as Roger Liddle, Chair of the Policy Network, and one of our 2020 Commissioners has pointed out, there is something we can learn from continental Europe. There the question of welfare reform is posed in explicitly economic terms. The aim of social and welfare reform is to enable the highest possible level of participation in the workforce, so as to create a more sustainable society and a tax base that can fund pensions, health care etc.

In the UK there is a danger that the focus will be exclusively on debt levels in public finance rather than the wider economic challenges, of which debt levels are part.  We should be at least as worried about the decline in the tax base, as about debt levels. In the medium term the biggest challenge that Britain will face will be about the dependency ratio – the proportion of the population that contribute through taxation to society, as opposed to the net beneficiaries.  Demographic change allied with globalisation will lead to an older society, with a smaller proportion of people in work and a further decline in ‘traditional working class jobs’.

Public services face a perfect storm of growing demand pressures as a result of demography, globalisation, behavioural challenges and climate change combined with a massive funding squeeze. The proper response to this would be a new public service settlement with the twin objectives of increasing both economic and social participation in society.  This then makes the case for talking as Matthew Taylor does about public service productivity, but also for focussing on what can be done through public service reform to boost participation in the workforce. This ranges from skills, education and training policy through to welfare reform and early intervention. Some of this policy work has been developed by Government and Opposition. What has been missing so far is a strategy which links public service reform with economic growth.

This is a theme which we will be focussing on over the next few months, as our Commission on 2020 Public Services develops its key propositions for a new social settlement.

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