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After nearly four years of silence on the issue that divided the Blair and Brown governments, Ed Miliband has set out the direction he wants to take Labour on public service reform.

It is a radical one. His Hugo Young lecture marked a departure from both Labour’s statist point of view and its more recent embrace of ‘new public management'. We have already heard about his Theodore Roosevelt inspired anti-trust approach to markets - breaking up large concentrations of uncompetitive market power in banks, energy companies and elsewhere in the economy. Now Miliband has signalled that he wants to take the same approach to breaking up concentrations of power in state institutions.

The language of power to the people is strong and the policy nuggets are good. But this is clearly still a work in progress. Jon Cruddas' speech went much further in fleshing this out. He was very clear that a future Labour government will not have the money to spend on public services that its predecessors had. And he argued that Labour should drop its institutional conservatism and instead follow the collaborative, small scale, localist and mutualist route mapped out by Michael Young as long ago as 1948; but that is ignored by Labour’s mainstream because it didn’t fit with their Fabian managerialism. Cruddas identified the key features of this power shift as devolution to cities; co-operation as the mode of public service production; and collaboration to achieve whole system change.

Labour should be under no illusion about the size of this task. This is a challenge as big as Clause 4, and in some ways even bigger. With Clause 4 the issue was whether to drop a theoretical commitment to public ownership that the Labour Government had no intention of enacting in practice. Confronting Labour’s institutional statism is different. This is about Labour’s culture and practice, not just its constitution. Centralisation, mass universalism and deliverology have been hard wired into Labour practice for decades.

If Labour is to build on the promising start that Miliband and Cruddas have made, then further substantial work will be needed in three related areas: the reform narrative; the theory of change that will need to underpin this; and the policy mechanisms that can enable people power.

The narrative for reform needs to be more compelling in two respects. First, Labour needs to be crystal clear about the fiscal and demand pressures facing public services. Politicians cannot promise to spend more or deliver new solutions - instead they have to be open and honest with voters about the need for a new social settlement, in which citizens and the state will have to share responsibility for generating the social productivity that can tackle loneliness, provide better social care and improve public health and wellbeing. But as importantly, this narrative needs to be rooted in modern times. This is not about harking back to a sepia tinted Britain of social solidarity and sacrifice. It is a recognition that the new social, economic and technological forces driving change in society all pull in the opposite direction to centralisation and mass standardisation. A new global picture is taking shape in which urbanisation, city led growth and local innovation are the dominant characteristics. Horizontal organisations, small firms and social networks are increasingly what define our work and social relationships. And vertical, bureaucratic organisations are struggling to keep pace with this.

Labour will also have to develop a credible theory of change. Merely stating an intention to decentralise power and to invest in the networks and new social institutions that could collaboratively produce public services is not enough. There needs to be an appreciation of the barriers that stand in the way of this, and of how systemic a change this would be. Everything mitigates against change of this type, from the form and culture of Whitehall spending departments, to the Treasury frameworks for revenue, growth and risk. A strategy for change would have to be based on reforming central government, changing Treasury spending frameworks, opening up policy making and pursuing devolution to city regions as an economic and fiscal priority.

At the same time, Labour will need to develop new policy mechanisms to enable its power shift. For example, shifting the focus to prevention will require re-profiling expenditure. The Scottish and Welsh Governments have both taken some steps in this direction. But a future Labour government would have to go further. This is partly about longer term funding settlements, but it is also about creating an investment and business case for demand management. And for city devolution, it may have to look at different models for sharing risk between central government and cities that are more akin to PFI deals than the tame substance of the Coalition's City deals process.

Miliband's new public service approach is very welcome. But the real test will be in how much Labour recognises that it will need to work with social networks, local government and civil society organisations to open up government and deliver this power shift to people and places.

Ben Lucas

RSA, chair of public services


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