David Boyle's Blog, page 61

Why the economy still needs rebalancing

"It's far too soon to say 'job done'. It's not even half done. That's why 2014 is the year of hard truths."

So said Nick Clegg in an interview on the Andrew Marr show.  He was talking about the economy, and he was absolutely right - the economy may be on its way towards recovery, but it is a long way from there yet.
Yet there is a hard truth which does need to be articulated.  It takes nothing away from the coalition's success in pushing the economy out of the hole in landed in by 2008.  That is, and will remain a Lib Dem success, but there is an absolutely vital element which has only just begun.
I don't know whether this is what the Lib Dem leader meant when he said the job was "not even half done".  But I hope it was, because the part needs to be clear what the objective is.  We need to be reassured that the objective is still the same as it was back in 2010: rebalancing the economy.

I say this because I fear the great objective of rebalancing was allowed to slip down the agenda since then.  The coalition has focused its attentions on the systemic risk to the financial system to banks operating under the safe umbrella of the government guarantee. But too little has been done so far to tackle the other banking problem – the lack of choice or competition in the banking sector, and the resulting sidelining of small businesses compared with other countries.

Yes, there is the seven-day switch regulations, which means more competition in the existing baning sector, but the existing sector is inadequate for the needs of the economy.

This is a Lib Dem issue.  It may even be the Lib Dem issue.  The closest to a proposed solution at the last general election in 2010 was in the Lib Dem manifesto, which promised to: “Break up the banks and get them lending again to protect real businesses”. This was translated in the coalition agreement along these lines:

“We want the banking system to serve business, not the other way round. We will bring forward detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry. We will develop effective proposals to ensure the flow of credit to viable SMEs.” 

Let's face it; this has not yet been achieved.  Ed Miliband has made noises to suggest that he is moving in this direction, and it would be galling for Lib Dems to be outflanked on an issue that was once their own.
And don't let's pretend any of this is simple.  The UK economy has been pretty unbalanced since the Industrial Revolution, which the City failed to fund.  Keynes had another go via the Macmillan Committee in 1930.  It is the most important unfinished business of the nation.
It also seems to me that only the Lib Dems can achieve it.  But don't let's pretend it will require a little tweaking here and there.  It is a big project and, as Clegg said, "it is not even half done".  If that's what he meant...

When you lean against an Oyster machine by mistake

It struck me a few days ago, as I climbed on a London bus, how the everyday rituals of life change so quickly.

Until 2005 or so, the words "time, gentlemen, please" were pretty familiar - even if landlords tended to cover both genders by then.  But, a decade ago, would we have imagined that very familiar feeling of putting an Oyster card on the reader only to find there was not enough cash - especially if we have waited for the bus for 15 minutes or so in the rain beforehand?

This happened to me over the weekend again and I discovered, because the driver told me, that I can now pay with a debit card, swiping it across the reader.

My Co-op card didn't work (another irritation with Co-op) but my other card duly lost £1.40 in one quick sweep.

This is, of course, very convenient.  But there are a couple of worries about it, and they are linked.

The first is that our local buses are often absolutely packed on a rainy evening, and I have often squeezed in up against the card reader myself.  If I do so now, the machine is liable to debit me £1.40.

The second is that there is absolutely nothing anyone can do about this.  The driver is powerless to put it right because the infrastructure is extremely distant, opaque and unresponsive.  We know how often the software makes a mistake, and of course you can get it put right - but the prospect is exhausting and it is intended to be.

This is true in so many areas of modern life.  There are complex systems between us and the organisations we use, and the drivers or conductors or cashiers are now powerless machine minders, trusted to do little more than press go and stop.

This is fine most of the time, but we have all had infuriating experiences when it is not fine - and nobody is able to put things right, as the bus conductor would have been able to do in my youth.

It is hard to underestimate how much this trend has alienated us from the faceless, unresponsive agencies that now dominate our lives.  It is important, a major barely-debated shift.

Is there a solution?  In the medium-term, software is going to be more flexible for all of us - or so I believe - and the concrete, McKinsey-style systems of control will begin to look like dinosaurs.

In the meantime, we need to find ways that intermediaries can over-ride these systems immediately, easily and transparently.  If only for the sake of human dignity.

The true costs of corrosive compliance

I know, I know, bloggers are endlessly vain about being proved right - and we so rarely are, that you have to hand it to us when one of our predictions turn up.

I have been arguing for some time that the whole system of transparency and accountability in public services is about to unravel - because Goodhart's Law is a good deal more ferocious that anyone expected.  And yesterday, it seemed for a moment as if I was going to be proved right.  A historic moment.

Goodhart's Law, as I may have said before, was formulated in the 1980s and was intended for monetary policy - it says that measures that are used to control people will always be inaccurate.
When the Blair government introduced 10,000 new targets in their first term of office, Goodhart's Law was ignored.  But it meant that frontline staff and their managers may be useless at their job, but they will always be able to finesse the target figures.
What I don't think any of us realised - even people like me who were deeply sceptical of the targets regime - was how corroding this would be.  It is beginning to become clear that far more creative energy went into finessing the target figures, manipulating the definitions in marginally justifiable ways, than went into actually doing the job.
There were the ministers talking about 'evidence-based policy', searching around for hard-objective numbers, when - all the time - those very numbers were slipping through their fingers.
I believe this year will prove to be the moment when it becomes clear just how empty these systems have become, and just how unreliable the figures are as a result.
And just as I said so, along comes the commissioner of the Metropolitan Police, confirming that the figures for burglaries and sexual offences have been manipulated downwards, maybe by as much as a quarter - to fit in with the demands of the deputy mayor.
Anyone who has worked in the public sector or voluntary sector knows how corrosive these things are, and the enormous effort that goes into creating systems that can bypass them - the small changes in definition that change everything. 
Nor is it just the targets.  The whole caboodle of compliance and inspectors who use tickboxes rather than common sense have been doubling and re-doubling the effect.
Now, nobody claims - least of all me - that some other kind of system, that somehow allows frontline staff and service managers to focus on what they do best, is going to be easy to develop.  Certainly not a system that also holds them to account in some way, without undermining their efforts and hollowing out their institutions.
But something is necessary.  Because by the end of this year, I believe, we will begin to see the true cost of the targets and compliance regime of the Blair/Brown years, and it will begin to explain why public services have become so expensive that we seem - at least according to the Chancellor - not to be able to afford them any more.

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I never thought I'd agree with Owen Paterson

But don't let's go overboard about it.  I'm not sure either that the Defra Secretary has thought through the implications of what he said or that I agree very much with what he has thought through.

But I don't want to be curmudgeonly, Owen Paterson has made an interesting intervention in the debate, arguing that the UK should produce more of its own food, urging the nation to produce at least a quarter of the £8bn we currently spend importing agricultural produce.

He is absolutely right.  It is insane that we can only produce a third of our own cucumbers.  And don't get me started on apples....

I say this not because I am a little Englander who refuses to buy foreign stuff.  I say it because, if we could revive the diversity of our own production and retail systems, making them more local, we could use fewer resources, improve local economies and help our rural areas survive economic downturns better.

I'm sure the Treasury is even now shaking its head and accusing Paterson of being a protectionist - and this is an interesting and important debate, but it hasn't started yet.

If he wanted to put up trade barriers, then of course this would be 'protection'.  But if he wants to encourage new producers, and the systems and distributors they need, then it would be providing more competition - and that increases our resilience.

There are a few dinosaurs around who really believe we must be wholly passive in the face of any economic shift.  There are some who think that shrinking production and retailing into ever fewer hands is somehow more efficient.  It isn't - in most senses of the word.  It leaves people out of work when they could be doing something useful, and it leaves land lying wasted too.

The question is what Paterson wants to do about it.  The only hint in the news items suggests that he wants to allow more GM production in the UK, which seems to me going in precisely the opposite direction - and will leave farmers that much more dependent on a handful of monopolistic seed-producers.

Something will have to be done to make retailing less monopolistic too.  If Tesco is able to insist on paying our farmers after three months - providing themselves with an interest-free loan equal to two months stock - then it is hardly surprising UK farming is struggling.

In fact, the local food economy is one of the UK's enterprising bright spots, but it is all happening very slowly (it would help if the new free school meals policy was linked to local producers too).

Because hidden away in Owen Paterson's message is a clue about the future direction of Liberal economic policy (what? Is there such a thing? There certainly is: it is called competition).

Liberal economic policy used to involve breaking the power of monopolies, whether it is seed manufacturers, retailers or food importers.  It involves diversity and efficiency with resources, not just streamlined efficiency with capital.

I would be only too pleased if the Conservative Party adopted Owen Paterson's lead, but don't hold your breath.  So, while we wait to find out if they do, here is a quotation from my friend and colleague Andrew Simms, writing in 2007:

"In 2004, the UK imported 17.2 million kilos of chocolate-covered waffles and wafers and exported 17.6 million kilos; we imported 10.2 million kilos of milk and cream by weight, from France and exported 9.9 million,” he wrote in 2007. The figures for the same trade with Germany were 15.5 million kilos and 17.2 million. Germany sent us 1.5 million kilos of potatoes and we sent them, yes, 1.5 million kilos of potatoes. We imported 43,000 scarves from Canada and exported 39,000... Just as we imported 44,000 tonnes of frozen boneless cuts of chicken, we exported 51,000 tonnes of fresh boneless chicken. From an environmental perspective, it would seem that someone somewhere is pulling a chicken’s leg..."

Quite so, and just to show there's nothing new under the sun, here is the great Liberal agrarian campaigner Jesse Collings, writing a century before:

“They say the land will not produce now. Has it lost its character? Take one article: how is it we buy every year £5,000,000 worth of cheese from the foreigner? Can England not produce this? How is it we purchase from £12,000,000 to £14,000,000 worth of butter? Is England not a butter producing country.”

We might say the same thing now: is England not a cucumber-producing country?  Or are we the kind of country where, for the sake of streamlined efficiency, we allow our land and people to be wasted?

The strange design of money

We have lost too many pioneering green economists lately.  First David Fleming and then Richard Douthwaite, and now Margrit Kennedy, who died just before New Year.

Back in the mid-1980s, when I first got interested in the future of money, there was Tom Greco to read about local currencies, Michael Linton to read about for his pioneering currencies in Canada - but if you wanted a critique of the way money worked, then really there was just Margrit, and her book Interest and Inflation-Free Money.
I wrote about her work in my reader  The Money Changers , and like so many others among the 'new economists' who emerged from the arid 1980s, she didn't start as an economist.  She was trained as an architect and came to the design of money via the design for communities.  It is peculiar, thinking back to that period, how little questioning there was about the basics of economics - certainly the basic design of money itself.
It was Margrit Kennedy who pointed out the mathematical flaw if all money is created with interest attached.  A penny invested at average rates of interest at the time of Christ would now be worth nearly 9,000 balls of gold, each equal to the weight of the earth.
Now, three decades later, I suppose the answer is that - for whatever reason - wealth doesn't build up quite like that.  Yet, Margrit was right that it tends to.  We know that Antwerp remained a banking centre three centuries after Antwerp ceased to be a major business centre. The rich tend to get richer, and the inexorable mathematics of interest goes some way to explaining it.

“The economic necessity and the mathematical impossibility create a contradiction ...which has led to innumerable feuds, wars and revolutions in the past,” she wrote.

That’s the danger of charging interest. Since most money in circulation is created via loans from banks, then nearly all money – except the notes and coins in our pockets – carries this burden because it has to be paid back some day, plus interest. Nature isn’t like that: it doesn’t grow nearly so fast. “The assumption is that growth is good and more is better,” said the green economist Paul Ekins in Wealth Beyond Measure. “It’s as if economists have never heard of cancer.”
More about this in my book Money Matters.
Three decades on, at least two things have changed.  The first is that only three per cent of money is created interest free, in the form of notes and coins.  When I was born, it was about 30 per cent.
The other things that has changed is that these issues, although not exactly mainstream, are at least familiar.  Groups like Positive Money have made this a respectable debate.  You are no longer dismissed as a lunatic fringe, even if you remain fringe, for asking about the implications of the way that money is created - mostly in the form of mortgages.
And if anyone is now asking if there might be a better way, that is partly at least thanks to the pioneering work of Margrit Kennedy. 

Waking the NHS from enchanted sleep

I make no apology for returning to Roy Lilley’s NHS Managers blog, partly because it is probably the most expert influential public services blog we have, and partly because meeting Roy a year ago inspired me to take up blogging rather more often than once a month.

I don't always agree with him, but he has that absolutely vital ingredient that seems to be lacking from so many other experts in public services: humanity and common sense.

I’ve only written two posts this year and both have been about much the same idea and this is too. It is how to inject humanity back into the public service systems that were conceived by McKinsey, shaped by the service management gods of the Blair years, and implemented by the Brown regime (and not yet tackled fully by the coalition either)..

It was the contention  of my book The Human Element that services had become less effective, and therefore more expensive, because that humanity had been systematically excised in search of the old failed Taylorist notion of the ‘One Best Way’.

So I thought that Lilley's injunction today deserved repeating:

"Bad managers copy bad managers. Beware of any who only use sports, or military metaphors. Talk the language of friendship and family. Recognise the NHS employs more women than men and most patients, carers, residents and friends will be women. Is your place women friendly? How many senior managers and Board members are women?"

Management language of the kind his is talking about is invented by consultants, who need to give the impression of new wisdom and new ideas. Often they jargon takes the place of new ideas. Often there is no diernable idea at all behind it.

But the critical part of what Lilley says is that the language of family is what is required.

Clearly there are pitfalls here, and the most inhumane bureaucratic systems just get re-badged with friendly family-sounding language. The point he is making is that the NHS needs to give less respect to the jargon of management consultants, and more respect to those who use clear language which says unambiguously that the objective is love and care - not dehumanising people to make them easier to process.

If managers can do that, they may be able to see more clearly when their systems provide something else instead – even when they go haywire and start starving patients to death in pursuit of target figures.

This story has all the elements of fairy tale, maybe like Sleeping Beauty. Service managers have been enchanted by the jargon of the management elite. It puts them under a spell and makes it hard for them to see clearly what they are doing.

That is why actually the common sense of language of humanity can frighten the hierarchies. It is scary because it threatens to release staff from the spell, which may render them – horror – inefficient.

In fact, as I have argued elsewhere, their human skills are very much more effective at creating change, once and for all, in other people - and much more than their IT and systems skills.  Losing the veneer of efficiency will paradoxically make them more effective, and therefore reduce the cost of the service.

So there is a new year’s injunction for all of us. Shun the language of assembly lines, and the latest fads of the consultants, and tell it very clearly how it is.  That's how we wake from our enchanted speech.

Tackle the most difficult cases first

Just a few weeks before Christmas, there was a thrilling interview by Decca Aitkenhead in the Guardian with Louise Casey, the head of the government's troubled families programme.

I realise that 'thrilling' is not a usual epithet to use about this kind of thing.  I found it so because it was authentic and because I admire Louise, which is why she played such a key role in my book about the future of organisations, The Human Element.

Perhaps I also imagined some echo of the thesis I made there when she said:

"All of what we do turns on something very simple: the relationship between the worker and the family."
I believe that to be the case, and it is a revolutionary doctrine to be articulated from inside government because so many of the approved systems imply something so different, and - as I believe - very much less effective.
What I originally found so interesting about the way that Louise Casey worked, back in the days when she was tackling rough sleepers, was her refusal to accept more than the most basic official targets.  She did this, as she does everything, through sheer force of personality - but the reason is illuminating: because projects of that kind need to concentrate their resources on the most difficult cases first.
If you do that, then the less difficult cases tend to get swept up in the process, but if you are bound by targets then you tend - encouraged by the less broad-minded consultancies, McKinsey for example - to focus on the easiest first.  Especially if this is a payment-by-results contract.
What happens then is that the most difficult cases just get further entrenched, while government resources are poured into supporting mild cases.  You can see this absolutely everywhere: it is part of the tragedy of UK public services in the Blair/Brown years, and it has still not really been tackled.
So when I heard that the Universal Credit's delivery chief has decided to test out the system on the easiest cases first, you kind of suspect the game is up.  The system thinker John Seddon suggests it should be the most common cases, and his newsletter which discusses this is not online, so I can only quote from it, explaining why overpayments happen:
"Overpayments occur because successive governments have industrialised tax and benefits services; no longer do claimants have a relationship with people who administer credits and benefits; many of the errors are down to systemic failures in administration: badly designed services, which, for example, take so long that peoples’ circumstances change during processing and ‘back offices’ that apply rules (instead of meeting people) which fail to take account of variety, and some are due to the difficulty people have accessing services. In fact underpayments are as big a problem as overpayments, but Duncan Smith doesn’t mention that. Although he doesn’t say so I think Duncan Smith wants us to believe we have overpayments because people are naughty (‘scroungers’). There may be a few, but an IT system is the least efficacious way to catch them."
If you notice the parallels here between what Seddon says and what Louise Casey says, then I hardly need to go on - the vital importance of face to face relationships, as the best and ultimately cheapest way to deal with diversity.
If UC is going to be tested on the easiest cases first, the writing is already on the wall - which is a pity, because it is a radical and important idea, disastrously implemented.
And if you are still wondering why the DWP is boasting that it has an IT asset worth £150m after writedowns, take for a moment the case of the US insurance giant MetLife.  They have a new app that allows them to see into all their 70 different and incompatible databases and see what each customer needs.  Guess how long it took to build?  Ninety days.
Anyone who persuades the government that we need to mortgage the nation on huge new IT systems that can't deal with variety, and therefore take years to kick into some kind of miserable life, may now need to be locked away where they can do no more harm.  It is like selling crack to an addict.  There is only one solution: just say no. 

Three political headaches for the year ahead

Happy new year to anyone tuning in. Vaguely political bloggers like me are expected occasionally to be a little like we frame ourselves – as wise seers, travellers in the future, bringing back news.

We have to actually put ourselves on the line some time, and here we have an unfair advantage. When we predict the future wrong, as we invariably do, nobody remembers; but when we occasionally call it right, we are permitted to crow about it. It’s a win-win deal.

So here are my predictions for the way we will be debating politics in a year’s time. We will be discussing the following in agonisingly worried detail:

1. The rise of the intolerant, nationalist right across Europe, after their worrying and spectacular gains in the Euro-elections. It will be a revolt against technocracy, and we will be tut-tutting in the UK - without recognising how much we are responsible for it. The eastward expansion of the EU was carried out at the behest of the British, even though there was an obvious and probably permanent mismatch in our economies between west and east. And the petty-fogging rules, which have become such a symbol of the excesses of the European Commission, are a direct result of the single market cheer-led by the UK. A miserable irony.

2. Political stalemate over the status of Scotland. I know all the bets are on the Scots giving a whole-hearted thumbs down to independence, but I am not sure it will be overwhelming at all – and for the same reason for the revolt against the European Commission and the bureaucracy of the single market: voting yes to Scottish independence looks increasingly like a vote for imagination and open-minded courage, and against the miserable technocratic carping about how people’s narrow economic interests will be compromised.

3. The breakdown of the measurement and transparency system in UK public services, which will have revealed so many frauds and manipulations – affecting public and private sectors alike – and also revealing that the target data is wholly faulty too. I don’t think payment-by-results will survive it. A new system will be required, and I am hoping to spend some of the year ahead designing it.

So there you are. Those are my predictions for themes of the year ahead. Remember, you read it here first (and possibly, also, last).

Recovering from the McKinsey 'disease'

The almost complete disappearance of Gordon Brown from public life has done little for his reputation.  Without him around to remind us of the huge contribution he made to staving off financial collapse, all we remember was his Sauron-like tendencies - the all-seeing eye, the moments of jealous rage.

Yet it is worth remembering that, as Chancellor and Prime Minister, it was Brown who presided over what I have come to regard as the most disastrous years for public services - the hollowing out, the digital nightmare, the targets and detailed management from the centre, the disempowering destruction of frontline initiative.

The coalition has only begun to counteract this, partly by default - by creating a funding crisis in frontline care and releasing the energy locally to innovate.

Unfortunately, the coalition's record on benefits has gone in the other direction, mainly because they have accelerated in the same direction that Brown laid down - disempowering targets, no local discretion, systems which can't deal with diversity.

The question is: has Ed Miliband's leadership been able to hammer out a new way forward for public services in a time of austerity?  The answer, as a fascinating blog by Rafael Behr on the New Statesman site suggests, is no ('Miliband's sheet is still blank on public services')

As Behr suggests, this is partly because of the legacy of the Blair/Brown struggle, but it is also partly because Labour remains a centralising force in UK politics.  They have not begun to face up to the problems of their legacy in public services.

Only Jon Cruddas seems to be making an attempt with his concept of the 'unresponsive state'.

Of course, this is all disputed territory - even if it isn't disputed very much in Westminster yet - but ideas are beginning to shift.  Even the author and cause of the unresponsive state itself, the management consultants McKinsey, seems to be having a bit of a re-think.  This is what they said:

"Government by design calls on public-sector leaders to favor the rational and the analytical over the purely ideological, and to be willing to abandon tools and techniques that no longer work. Four principles are at its core: the use of better evidence for decision making, greater engagement and empowerment of citizens, thoughtful investments in expertise and skill building, and closer collaboration with the private and social sectors. Each of these principles is central to creating more effective yet affordable government."
Quite so, but a closer examination reveals that they have only half understood the way the world is changing:
1.  They are too obsessed with data.  Yes, data is important, but there is no point in data if there are no systems and no people to use it.  So much energy goes into monitoring older people at home, and so little - so far - into how to prevent the alarm going off in the first place.
2.  They miss the human element.  The vital element in modern services is a fully responsible, innovative front line cadre of staff, able to take action flexibly so that they can deal with diversity then and there.  McKinsey doesn't yet get the power of 'human by default'.
3.  They are still in thrall to Goodhart's Law.  Which, as you may remember, is that any measure used as a control will always be inaccurate.  That is the problem with the Moscow city 'dashboard' of indicators they praise so highly.  If these are targets, then the figures will simply measure the ability of staff to massage the figures.
But let's give McKinsey their due.  They are beginning to understand the importance of co-production, where service users and their families and neighbours work alongside professionals to deliver services.  They praise the New York 311 system, quite rightly, but don't yet take it to its logical conclusion: that everyone has something to offer that is vital for the success of services.
In those circumstances, a website just isn't enough.  There needs to be some kind of infrastructure that makes this partnership possible, it needs to be extremely local - and it will only work, to start with, if it is human and face to face.
The McKinsey disease - that all effective action is strategic, distant and arms-length - wreaked the most devastating results in UK services during the Blair/Brown years.  They are beginning to shake off the infection, but they are not there yet.
Perhaps they need to take their own advice and "be willing to abandon tools and techniques that no longer work".
This is the last blog before Christmas, so thanks so much for reading over the year.  See you in 2014!  Subscribe to this blog on email; send me a message with the word subscribe to dcboyle@gmail.com.  When you want to stop, you can email me the word unsuscribe.

The slow, inexorable decline of Tesco

The queues to get in and out of the Lidl car park in Norbury this morning are disturbing to behold, and the news that half the UK population visited Aldi or Lidl - the discount supermarkets - in the last 12 weeks does concentrate the mind wonderfully.

It does so because, among others, Tesco has always been the Great Satan as far as I'm concerned, the very symbol of a corporate that has been allowed to get too powerful, and which corrodes the UK food industry as a result.  It is a glimpse of the emerging world of semi-monopoly.

Only a few years ago, I wrote an essay which imagined a kind of Lion, Witch and Wardrobe future where there are only two companies left in the world, one of which is TescoVirgin.  You can read it in my book The Age to Come.

I still fear the emerging monopolies, but my guess is that Tesco won't be among them because - despite everything I said - there is still capacity for competition in the supermarket sector.  Aldi and Lidl have pushed Tesco below its 30 per cent market share.

They will go down slowly because of the virtual monopolies they have managed to build up in so many times, but they will go down.

Because if you want to shop somewhere where there is nobody to help you, and the security guards keep you obviously under observation, then - well, you might as well go somewhere cheaper.  If you want a shop without soul, then why not go to Lidl.

They are the Woolworths of the 2010s.  We will see their like again, and it will be Aldi.  This is not an optimistic prospect, as half of us now know - it is the least sensitive to local markets of any supermarket model.  Go along to your local discount store, and see the downside of the vision of the future.

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