George Freeman is Minister for Life Science and MP for Mid Norfolk.
When the history books are written, great administrations are remembered for their defining achievements. The 1906 Coalition for its social reforms. The wartime Coalition under Churchill to defeat Fascism.
The 1980s Conservatives under Margaret Thatcher, who took a country brought low by the unions and made us a major economic and political power once again.
And I believe David Cameron and George Osborne will be remembered as the Conservatives who led the country back from the brink of Labour’s bankruptcy of both the public finances and public trust in politics whilst holding the UK together through referendums on Scotland and Europe.
But, as the Chancellor set out clearly in the Budget, we are only half way through the long road back to balancing the books. There is no room for complacency.
It is clear that the economic challenges we face as an ageing Western European political economy – of productivity, competitiveness and the structural deficit in our public finances – are far more profound and structural than many realise. Masked for too long by New Labour’s bloated public spending, the spiralling cost of welfare, the NHS, public sector pensions and low public sector productivity still threaten to engulf our public finances.
Along the corridors of Westminster, there is a difficult truth no policymaker can ignore: the structural deficit – that bit of the deficit which grows more quickly than the general economy – represents a “bonfire in the basement” of UK public finances. As we build the skyscraper of “UK plc”, the structural deficit soaks up money more quickly than we can generate it.
It’s driven principally by four structural liabilities associated with our ageing democracy: public sector pensions, welfare, debt interest, and rising healthcare costs.
Through painful reforms we have levelled off the rising cost of public sector pensions and welfare. Because of our economic credibility, the markets have kept our interest rates low. Health is the big one: with an ageing population and the increasing cost of medical treatments, we are looking down the barrels of a £30bn PA health deficit by 2020.
Yes, £30bn per annum. Those are NHS England management’s own figures. They have said £22bn is avoidable from greater use of technology and innovation and new working practises (including running the NHS on a much more efficient seven-day shift basis) – but we will need to put an extra £8bn per year in by 2020.
Which is why we are investing in a 21st Century NHS, backing the NHS leadership in implementing its five year forward view, and giving them the extra money they asked for.
In health and across the board the central question is: how are we going to unlock the sustainable high quality economic growth and public sector productivity and innovation we need to avoid our public finances being bankrupted by the rising costs of an ageing society?
I believe it requires our generation to think more boldly and urgently about deep structural reforms to the way we run our country, how we plan and deliver services, and how we use the assets on the balance sheet of UK plc to find new sources of growth.
The UK isn’t poor. We are the fifth-biggest economy in the world, with some of the most creative and ingenious people and fastest growing and most entrepreneurial businesses and sectors in the world. The crisis is in our public finances.
This means unleashing the forces of enterprise and innovation across our economy – in both the public and private sector – to drive growth and productivity.
We have to find new ways of stripping out the costs of delivering public services, tackling the low educational attainment and welfare dependency which hold back too many areas and releasing a new spirit of public sector innovation and joined up working to increase competitiveness.
This can’t be done by diktat from Whitehall. It needs freedoms, incentives and rewards for people in the public sector to deliver more for less. This is where I believe the Devolution Revolution being led by the Chancellor, Lord Heseltine and Greg Clark has the potential to be seen as one the defining legacies of this Conservative generation.
For years this country has run the most centralised and fragmented model of public administration of any country in Europe. In so many areas of local government, the effective running of local services like health and care, planning, road and rail links has been held back as they compete for money from different Government schemes.
This creates fragmentation, division, dependency and undermines local leadership.
The results are all around us. Planning split between County Councils, the Highways Agency and District Councils. Railway lines and stations run by Network Rail but trains by the train operators. GPs and hospitals are funded (separately, of course) by the NHS, but social care (which is what we need to keep people out of hospital) by county councils whose budgets are under pressure to fund the exploding NHS budget.
We all want to see ‘integrated’ services and ‘sustainable’ development, but our system of fragmented Government makes it almost impossible. With pressure across the whole of the public sector to deliver ‘more with less’, it’s now urgent.
The PIP saga brings it to light all too sharply. Shouldn’t we be driving efficiency in the ‘back office’ of Government before implementing cuts to the front line? Before we even think about cuts to any service like disability support, libraries or rural buses surely we should be merging the back office administration behind government first?
Take the issue of healthcare, one of the main drivers of the structural deficit. My region of East Anglia has one of the highest proportion of elderly residents in the country. We are on the front line of the fight against the epidemics of chronic disease and dementia generating such huge health demand.
We need to diagnose earlier and empower patients to manage their condition better from home to prevent chronic disease, but our system makes it almost impossible with medical records still on paper and cardboard, healthcare uncoordinated, and too many patients being pushed from pillar to post in a system which is not joined up.
This is repeated across planning, highways, rail, housing, and benefits. Across Government we fragment spending and reward those who fail. If, in the public sector, you deliver more for less we typically reward you by giving you… less. If you deliver less and need more, we typically cave in and give you more.
Is it any wonder we see such low public sector productivity? We’re rewarding failure and demoralising the innovators.
Last year, the Norfolk and Suffolk police forces made 100 front line police redundant because the management couldn’t agree to merge their call centres.
Imagine if we rewarded those who deliver more for less? Imagine if in Norfolk we pooled all the Health and Care budgets and allowed local leaders freedom to re-organise services, with the incentive to retain and reinvest 50 per cent of any ‘savings’ into the front line? Or if the Norfolk and Suffolk Police (and while we’re at it fire services) merged their back-offices?
Imagine if the entrepreneurs who have started 1,500 high growth companies in Cambridge, including eleven companies now valued at $1bn, were to be able to raise mutual infrastructure bonds to fast-track investment in 21st Century road, rail and digital connectivity.
What if the fifty railway stations in East Anglia were all in one company and renovated, developed and made into 4G rural enterprise hubs with flats and shops? Imagine if East Anglia piloted and pioneered integrated health records and digital health to provide better patient management of chronic conditions?
But we no longer have to imagine. Thanks to the radical devolution programme from this Government, East Anglia now has the opportunity to reform the way it delivers its services: to reduce the cost of Government and unlock the value of assets locked up in the silos of a fragmented and centralised 20th Century model of Government.
To take East Anglia from being a sleepy rural retirement and commuter backwater with 19th Century infrastructure to a thriving modern hub of high-tech small companies, spinning off the ‘Cambridge phenomenon’ and driving a ‘Rural Renaissance’ of sustainable decentralised growth.
Over 30 cities and county clusters have now signed Devolution deals. Under the inspired leadership of the Chancellor, Lord Heseltine and Greg Clark, we have seen the start of the most radical devolution drive in recent memory.
It started with urban regeneration but is now extending to key services like health. Control over the £6bn PA health budget is now in the hands of Greater Manchester. Sweeping new powers for other regions and cities is now under newly elected Mayors.
I believe radical devolution to unlock much more entrepreneurial city and city-region leadership will come to be one of the defining themes of contemporary Conservatism: a central element to the long-term solution to the challenges Britain faces over the coming decades, and the key to unlocking the major economic reforms we need.
It builds on a noble tradition, reconnecting today’s Conservative radicalism with the Victorian philanthropic ‘municipalism’ and civic leadership of our Victorian forefathers like Joe Chamberlain, unleashing the local leadership too long held back by Whitehall.
The last Parliament was all about rescuing our economy from the brink of public finance collapse. This Parliament is about putting in place the major reforms to allow our economy to succeed in the long-term.
As the Budget made clear last week, it is only this generation of Conservatives – led by a Prime Minister and Chancellor committed to a new model of devolved economic leadership empowered to tackle the structural weaknesses in our economy at source – doing the radical thinking required to tackle the major challenges we face if we are to thrive in the modern world.