Gaming the technocrats

Last week the special advisors network in Westminster (all of the UK governing politicians personal spin-doctors) were having a collective belly-laugh at the expense of the non-partisan permanent bureaucrats who are responsible for the everyday smooth running of UK major offices of state. The extent to how efficiently they run them and execute their political masters orders – not least the spending of large amounts of taxpayer bucks – is a question a powerful independent parliamentary committee called the Public Accounts Committee (PAC) is constantly trying to get to the bottom of. Unfortunately the head of the Ministry of Defence, Ursula Brennan, failed to provide any convincing answers last week triggering much deeper questions in the UK about the competency of permanent officials (something the political special advisers have been making jokes about since day one of the new UK coalition government: “…the engine of a lawn mower, and the breaks of a rolls royce”)

The entertainingly aggressive chair and deputy chair of the committee (Margaret Hodge and Richard Bacon) seem determined to make the permanent officials more publicly accountable for the spending of their departments. While this is somewhat of a challenge for traditionally anonymous public officials in the Westminster government model, it is ultimately a good thing for both the state and society. Firstly greater transparency of state spending should lead to more efficient use of public funds; through both a greater incentive to prove efficient practices as well as greater opportunities for outsiders to point out inefficiencies to address. Secondly, society should have greater faith in state institutions spending its tax money if it knows how the money is being spent.

Sadly though the PAC seems to be banging its head against oak-panelled committee room walls at the moment in an effort to show incompetence is rife amongst Westminster bureaucrats. It is not. Recently, as an advisor in the thick of it at Westminster, I met many capable public servants whose talents and drive were more often than not frustrated by a system which intrinsically defaults to inertia. So if the PAC really wants to enhance scrutiny it needs to find a smarter mechanism that both incentivises more open information and rewards those who give it competent and credible answers. A mechanism that enables parliamentarians to get even, rather than get mad, so to speak

A former head of the UK civil service often presented his own ‘capability reviews’ to the British Prime Minister as evidence that the permanent bureaucracy were driving their own “improvements”. From what I could understand, relative to how a good business would review itself, these were all about ticking organisational process boxes rather than focusing on the achievement of outcomes. Still, there did seem to be something in the relative rankings; especially how the heads of department defensively reacted when you pointed out their ‘league placing’ compared to another department. Permanent officials, it seems, are highly competitive animals when judged against each other. While of course in public they can all agree on the wine list, in truth nobody would want to be left drinking the merlot!

So, could this point to some innovation for Hodge and Bacon to exploit in their quest to enhance transparency and improve bureaucratic efficiency? Rather than simply grandstanding their frustration with permanent officials (which is certainly not good for your health or long term career prospects in the old fashioned Westminster model!) the PAC could more systematically rank the performance given by each permanent official it cross examines, and keep an updated league table on its website. One doesn’t have to think too hard about the different criteria each committee member could score the permanent accounting officers (who are responsible for value for money in their department) on:

• Provided clear spending data to the auditors / committee in advance (max 5 points)
• Answers committee questions clearly and fully (max 5 points)
• Committee has confidence official is on top of department expenditure (max 5 points)
• Able to to present evidence to show spending is maximising value-for-money, within the ministerial decisions taken (max 10 points)
• Demonstrates a credible understanding of future threats and challenges to current spending projections (max 5 points)

So the idea is an ‘accounting officers premier league’. For sure it wouldn’t get much notice beyond the Westminster bubble, but the PAC could be sure that when the heads of department sit round the table together each wednesday morning they will all know who is at the top and who is at the bottom! Could this incentivise senior bureaucrats to up their game in front of Hodge and Bacon, resulting in a more transparent state having to explain more competently the spending taken on behalf of society? You betcha! Will Hodge and Bacon have the courage to try such an innovation when the new parliamentary term starts next week? Well, they are a breath of fresh air providing a much needed kick to the system, but doubt you will see this sort of innovation anytime soon.

Political cannon-fodder

Today the UK population are going to the polls to vote in the annual local elections. These elections decide which political party (Labour, Conservatives or Liberals) get to hold power in many of the UK’s local administrations. Each local area elects local politicians (‘councillors’) to run the local authority and make local tax, spend as well as key local services and planning decisions on behalf of the local electorate. There is one big problem though: most people don’t know who their local councillor is, or for that matter what they do. These elections – like many of the US federal mid-terms – are too often simply a referendum on the governing executive of the day.

In most regions of the UK, less than one-in-three could name the local politician representing them at the local authority. Hence why, every year when there are local elections the national media use results – with some justification – as a barometer of the national political party leaders prospects at the next general election. However, if you stop and think about this current system you would realise this is complete madness! These local politicians are decision-makers in their own right, they have important decisions to take and should in their own right have to earn the trust of their local electorate on what they will do (not what the national leader has done). It’s surely pure madness that a high performing local councillor could simply find themselves collateral damage to a system which sees local elections first and foremost as a national opinion poll.

The UK are now slowly catching up with some of the American innovations in local democracy such as directly elected city-mayors and police commissioners. In London, where the mayoralty is now becoming firmly established since its introduction well over a decade ago, there is an increasing decoupling between the drivers of voter choice (i.e. mayoral personality) and the national picture (i.e. government popularity) meaning a greater electoral focus on local issues (i.e. transport fares, housing and crime). Yet the national media will no doubt analyse the London Mayor election in the same way it will local election results: what it means for national political party prospects rather than what it means for local voters.

So the introduction of more localised television media broadcasters and coverage in some parts of the UK may start to tackle the national sate bias, but for the foreseeable future the impact is likely to be very marginal. We know disconnects between state decision-makers and society matters hugely, regardless of whether it is at the national or local level, as it results in a breakdown of legitimacy (collective trust) and deters potential active citizens from participating in partnership with the state to strengthen society.

If politicians were serious about a transformational form of localism in the UK they would surely need to consider not just devolving power (“from Westminster to the City Hall”) but de-nationalising party politics. To create a stronger physical and psychological link between local society and local state, local administrations need their own political identities. One of the most radical ways of doing this would be for national state to ban the local candidates standing under national party names (in the UK this would include Labour, Conservative and Liberal Democrats)

The immediate result would be that each local party would have to find a new and distinctive name for their candidates to fight a local election under. Who knows, maybe new local parties emerge (and decline) based around new grouping that more accurately reflect local needs rather than national tribal politics? Of course though local politicians of new local parities could still be active grassroot-members of their national political party and no doubt still keen to campaign for them at the UK general election. Additionally, if there are concerns that the British electorate would lose its ability each year to “give the westminster government a bloody nose” or to “issue a protest vote” in between general elections, then an annual national plebiscite could be held! Something along the lines of ‘on a scale of 1 to 10, how happy are you with the government’s performance to date’ and ‘on a scale of 1 to 10, how happy are you with the opposition’s performance to date’

However, one final word on this. There is more chance of hell freezing over than the de-nationalisation of party politics in the UK. Firstly party politics is highly tribal and like British soccer teams the fans show irrational levels of loyalty and passion for their star players. Secondly the star players themselves would never want to tell their fans to diversify their focus away from tribal party loyalties – for a start there is a big risk the fans wouldn’t come back at general election time and they are seen as their troops who help win general elections.

In short the path dependency of the current UK party political system prevents innovative transformational change to enhance local democracy. Still, it’s a neat idea for any radicals out there!

Increasing risk-aversion

At the weekend Prime Minister Cameron faced the UK media over the ongoing judicial investigation into the power of the media (namely Rupert Murdoch’s media empire) within the UK. Following recent evidence given by Rupert, and son James, Murdoch at the Leveson inquiry there is increasing scrutiny around the role of government ministers, their handpicked advisers, and independent civil servants decision making roles. Specifically the focus is on the approval process for Murdoch’s bid to own outright 100% of the biggest UK TV broadcaster: Sky.

Prime Minister Cameron has had to fend off accusations that he and senior ministers were too close to Murdoch, and such relationships compromised any future impartial decision which would have allowed News International to fully own Sky broadcasting. No one in the UK is arguing that important Government decisions shouldn’t be taken with due diligence and the upmost of integrity by decision-makers in the state – society benefits from good decision making. If decisions are taken in the interests of the few (in the state) rather than the many (in society) then inevitably the state should face intensive scrutiny with little or no benefit of the doubt.

However for those of us beating the drum for greater innovation within, for and by the state such forensic scrutiny of past decision making could have a very nasty unintended consequence upon future decsion-making: fear. For sure technical processes, codes of conducts and accountability mechanisms within the UK government machine are likely to be sured up (not a bad thing in itself) as a result of the fall out from such scrutiny, but it will also enhance a culture amongst officialdom to default to the status quo. Why would a career official try something new or even just pick up the phone to bounce a new idea off an external expert? There will be increased fear about taking responsibility for anything that is either new or involves risk. Yet we know many of the challenges facing the UK over the next decade require radical transformational change not more of the same.

Those who have spent time working at the heart of the UK central government will know how challenging any kind of change is, never mind transformational. The ‘tie-brigade’ all have careers to maintain and mortgages to pay, and while public servants in the UK are motivated by a desire to serve public needs, they are even more motivated by loss-aversion to their own personal wants. Put simply: they are human! The survival instincts of those running the state can run counter to the interests of society, as all good public choice theorists and avid viewers of the 1980s BBC series Yes Minister would point out. Such survival instincts will only be heightened by (quite justifiable) forensic scrutiny of the state decision making.

And this all simply accelerates a mutually destructive cycle between state and society: the state becomes both more secretive and static, while society demands greater openness and action from the state. In short a breakdown of trust. Ironically trust is really the only commodity that can prevent an ever more negative relationship between state and society. This is where politicians and senior officials need to cast off their personal survival instincts and embrace both courage and boldness: they need to actively demonstrate they are on the side of society not the state. Can they do it? Yes. Will they do it? good question!

Open to innovation

Last month at the Stanford Graduate School of Business, marketing Professor Kate White of the University of British Columbia shared some brilliant studies done in Calgary showing that “communication that cognitively makes sense to people makes it easier for them to understand how to recycle – and therefore more likely to do it.” For those fascinated by the potential of behavioural economics to support society make better decisions that are in the long term interest of all, it is well worth watching on YouTube.

For avid readers of the SSI Review and addicted viewers of Ted talks, such brilliant insights – ranging from the small scale practical to the transformational paradigm shifts – are it seems increasingly accessible and implementable in civil society. However, it would be interesting to know how open state policy makers are to Professor Kate White’s ideas, moreover does such a person with active solutions see the state as an ‘opportunity’ to mainstream the ideas from their research or as a ‘barrier’?

Let’s explore this further. The Department of Resources Recycling and Recovery (CalRecycle) is responsible for waste management and recycling in the state of California. CalRecycle’s vision is to inspire and challenge Californians to achieve the highest waste reduction, recycling and reuse goals in the nation. They have been doing lots of great stuff and the state has an impressive recycling rate of 65%. But they’re keen to do more. So, what mechanism could firstly incentivise Kate White herself to transfer the research into operation to help CalRecycle pursue its vision, and secondly why would the Director of Calrecycle take on the risk and hassle of outsourcing something they do (say their waste management & waste prevention poster designs) when their existing path is already yielding impressive results?

Well, some form of state ‘challenge’ could potentially provide the answer to both questions. CalRecycle saves waste management costs if waste is reduced – this is the main outcome the organisation wants to achieve. So Calcycle could ringfence 10% of its total budget as an incentive fund to people and organisations who can prove their intervention has reduced the amount of landfill waste produced in a given city or county. Now would Kate White, perhaps together with a team of entrepreneurs, now see a potential new business opportunity that could both make money and have a positive social impact? If the answer if yes, then such a mechanism which aligns state incentives with the development and application of social innovation outside of the state would have win-win benifits: both the state and society would be better off.

In the UK the coalition government has been pushing hard to open up more state service provision to non-state providers, however such moves have proved challenging for the incumbents to drive through as outlined beautifully this week in this FT analysis article. It appears the British, rather than focusing on ‘outcomes’, are path dependent on closed state monopolies simply because the stability of such institutions provides a psychological reassurance regardless of  whether it crowds-out social innovation and regardless of the inevitable ‘less for less’ path dependency such managed decline will result in. Far better for the state to embrace new demand-side reforms of their service provision so that supply-side provision is opened up to the mass of innovation and resource that currently exists, or could be activated, in society.

A more strategic state

Yesterday in the UK saw the publication of an excellent report by a Westminster Parliamentary committee called the Public Administration Select Committee into the importance of ‘strategic thinking’ by those running the state. There is lots of good thinking in the report itself and its recommendations are well worth a read, especially the call for a ‘national strategy statement’ each year prior to the annual UK budget statement (forcing the UK Treasury to justify annual tax and spend policies based on the long term strategic interests of society, rather than the state treasury’s narrow interests)

Rather boldly though, given the committee chairman Bernard Jenkin MP is a member of the majority party in the ruling UK coalition government, the report stated that at present (and under prior administrations) “Government policies are not informed by a clear, coherent strategic approach, and that poor strategic thinking also undermines clarity of presentation to the public.” Coming from a British politician that is right in the strike zone for a Government.

The consequences of this lack of coherent strategic thinking, at the heart of the state, has had direct consequences for the shape and direction of UK society. A brilliant editorial in the UK wide newspaper, The Daily Telegraph, explained that the state has wasted a golden opportunity to undertake a fundamental review of what the state should and should not be doing, with the cost now being that “what drives the policy is not a desire to rethink the role of the state from first principles, which is what it should be, but an ad-libbed attempt by the Government to salami-slice budgets in an attempt to live within its means”

How can we get the state to think more strategically about the society we all want? Well firstly we need to make sure key state actors want to think strategically! The most candid and insightful bit of oral evidence documented in the report came from a former senior civil servant who used to run an actual ‘strategy unit’ for a past British Prime Minister. According to Gill Rutter  “there is only any point in working in a strategy unit if there is demand for strategy …If they [politicians] felt it was necessary to have an underpinning clear narrative that they were judged by over the longer term, there might be more demand to think in that way in Government”

This is crucial. The state must have an “underpinning clear narrative” about where society is and where it is going otherwise it will never be able to help strengthen it. We know that without a state purpose, society is more likely to drift than strengthen. So, perhaps central governments such as the UK should actively consider breaking down the barriers to the development of a clear narrative and coherent strategy: what the Jenkin report called “departmental silos”

In Westminster the secretaries of state (i.e. home affairs, education, health) all sit in their own distinct organisations based along a busy street leading from the Houses of Parliament up to Trafalgar Square called Whitehall, yet rather than collaborating on a single narrative and common goals they and their many civil servants compete against each other to maximise their own agendas and spending resources. Well, there is a simple first step here to strengthen the coherence of the Westminster government: take all the secretaries of state out of their departments and put their desks all under one roof. Encourage them to work (and commission work from departments) together in the strategic interests of society, rather than in the narrow interests of their departments.

Compensating pupils in poor-performing state schools

Last week the highly intelligent UK Universities Minister, David Willetts, made an interesting speech in London where he argued that bright students from poor-performing schools should be admitted to university with worse exam results than other pupils. For those of us interested in a stronger society this makes absolute sense: a state helping individuals fulfill their potential to the benefit of society.

If there is both evidence and acceptance that going to a poor-performing school disadvantages your life chances (i.e. from university entrance to future job prospects) surely the state could go further in correcting that disadvantage by pricing it in from the start. The UK has recently introduced a pupil premium (extra money for the most disadvantaged pupils) but according to the Independent Institute for Fiscal Studies (The pupil premium: assessing the options – March 2010) it is nowhere near big enough to equalize the life chances of a bright child from a disadvantaged background in a poor performing school with that of an average child from a middle class background in a high-performing school. Researchers from the University of California found similar results based on US funding data back in 2005 (Equalising opportunity for Racial and socio economic groups in the US through educational finance reform)

Of course it would be great to turn around all poor-performing schools, and a lot is now being done in the UK (by parents, teachers and politicians) to push through transformational reform, but turning around poor performing state schools is often done over years not over night. For all of that time pupils are still flowing through poor-performing schools limiting their life chances in society, relative to pupils in other schools. This is unfair and makes society weaker.

The state should compensate pupils who have to attend poor-performing schools, perhaps by factoring it into future tax rates. Say for pupils today entering one of the bottom 10% ranked state schools in the country for that year, they could be guaranteed exemption from ever having to pay the top-rate of income tax over their lifetime. This provides a more proportionate state reward for those pupils in society who have to take on the greater risk of a poor education but still go on to achieve success in the labour market.

Perhaps such state compensation could have positive externalities for society. Firstly this mechanism may incentivize disadvantaged pupils to really push on if they get a break in life and work that bit harder than their peers from better schools to achieve an income that qualifies them for the tax exemption. Secondly this guaranteed compensation scheme may just encourage entrepreneurial parents to both send their child to the poor-performing school and then to get actively involved, and investing, in turning around that school with the teachers so their child gets a double advantage (a guaranteed lower tax rate for a life, and a rapidly improving school to improve your later earning potential).

Could you see those competitive and highly driven middle-class parents in the UK, many of whom pay for private education or simply move out of the area with a poor-performing school, now choose to invest their time and money in turning around their local poor-performing school because it could favour the long term life chances of their child?

Re-thinking philanthropy and UK tax relief

The UK Chancellor recently announced a change in the UK tax system where wealthy philanthropists will have their tax relief capped at a quarter of their income from 2013. This should raise much needed cash (say £50m – £100m) for the state to invest into schools and hospitals. However many groups in society, especially arts and heritage charities, will potentially lose many millions of pounds as philanthropists choose not to donate as much as before.

According to the loveable British media, you’re either for or against this ‘charity tax’. Those for argue it’s only fair that everybody pays their fair share of taxes to the state (regardless of wealth) while those against say it will hit good causes working in society hard in already austere times. For those of us passionate about a stronger society this argument back in London is both dumb and dull.

The starting point (or ‘first principals’) for good public policy design is to ask: “where are you trying to get to?” not “how do we manage vested interests?” So, trying to maximize revenue for a state treasury or for society’s charities is really a secondary issue for strategic policy designers (note: this is not about thinking innovatively, it is about thinking strategically)

The primary issue for UK policy makers over the next decade is how do you build a stronger society and a growing economy. Start from this step and, instead of getting lost in issue after issue; a whole range of new opportunities and possibilities present themselves. For example the UK Chancellor could insist that the wealthy pay their fair share of taxes, but he could also challenge them to see if they can spend that money more effectively than the state could on achieving key outcomes both the state and society are aiming for (i.e. reducing youth unemployment, increasing social mobility, improving social care, improving parental support, strengthening social cohesion).

If they’re not up for the challenge, then they hand over their taxes to the Treasury but what’s to lose from giving them the choice? Remember, many wealthy philanthropists have resources beyond money (think entrepreneurial drive, leadership skills, access to assets) that might also be unlocked to boost society’s overall capacity through such a state-led challenge.

Why should the spending of taxes be 100% monopolized by the state? Strategically, what we’re really interested in is that stronger society and that growing economy so there will always be state conditions (mandated at the ballot box) on the size and aims of taxes (so forget about a new yacht!) But, the current assumption that the state should be the sole spender? …that doesn’t have to necessarily follow.

The State’s new role could be to inform the wealthy what the key outcomes are, how much they are expected to spend on behalf of the state (instead of giving it to the state), and to support society in holding them to account on what they are achieving with that spending. If their spending achieves better results than the state celebrate them, if they take advantage of this trust expose them. (Also if you’re asking ‘what about everybody else?’ good question, but a similar principal could apply: why couldn’t a % of an individual’s total tax payment be optional? Say for those paying 20% income tax, they could have the option of paying the full amount to the Treasury or spending 5% of their tax on a cause that will boost their community outcomes)

If I were a philanthropist in the UK today I would stop focusing on the cap, and start to ask questions about the Treasury and how effectively they are spending your money to build that better society. If you could do a better job for society then the role of the state is to help you not stop you.