Reform blog (page 4 of 6)
Welcome to the new Reform blog. This section includes articles by the Reform team as well as by guest authors. Some of these pieces are written following our events, setting out the details of the discussion and the policy implications while respecting the Chatham House Rule when it applies. Many of these pieces are about our research reports, both published and forthcoming, and some provide comment on important national events, such as the Budget. We hope you find them interesting and informative.
Reform roundtable on how local NHS organisations are responding to national initiatives and tighter budgets held on 27 June. Introduced by Alastair McLellan, Editor, Health Service Journal
Reform roundtable seminar on tackling tax avoidance through a General Anti-Abuse Rule on Thursday 21 June 2012. Introduced by Graham Aaronson QC, lead author of GAAR study into tax avoidance and responsible tax planning for HM Treasury.
By Lauren Thorpe
“It’s a game of cat and mouse. The Revenue closes one scheme, we find another way round it”. This is how an accountant this week described the tax planning practices adopted by his firm. A General Anti-Abuse Rule, currently under consultation by HM Treasury, would seek to target tax avoidance schemes that are found to be abusive, while at the same time protecting normal tax planning. Yesterday Reform held a roundtable discussion on “tackling tax avoidance through a General Anti-Avoidance Rule (GAAR)” with Graham Aaronson QC, lead author of the GAAR study into tax avoidance and responsible tax planning for HM Treasury last year.
This lunch could not have been more timely. Newspaper headlines have this week been dominated by cases of high profile tax avoidance. No tax law has been broken, but the use of complex and novel investment vehicles has been described as an error of judgement and immoral. This can be disputed, yet a tax rule focusing on “abuse” rather than “avoidance”, is being widely touted as a mechanism to prevent the ‘fancy footwork’ that some use to limit their tax liability.
There was a general consensus that a GAAR now seems inevitable, but we should not expect too much. Though a GAAR would represent a stronger approach to tackling tax abuse than currently in place, the lunch raised a number of concerns over the unintended consequences of any legislation.
There was concern that a GAAR could increase the complexity of our tax system further, contradicting the current UK tax policy objective of tax simplification. One strength of the UK tax system, though complex, is its rule-based and consistent application. Frequent changes to the tax system are a major concern to businesses and investors in the UK, and a GAAR would introduce an element of uncertainty into the tax system. Rulings on tax affairs would be determined by advisory panel on the basis of what is “just and reasonable”.
Those who believe that reducing tax abuse will improve the UK’s fiscal position will be disappointed. The last published figure for the tax gap (the difference between the tax collected and the theoretical amount that should be collected) is £35 billion. This includes £10 billion of tax avoidance and ‘legal interpretation’ and £4 billion of evasion (i.e. deliberate under declaration of tax liability) – in total just 2 per cent of annual Government spending. In addition to focusing on increasing tax revenue, the Government should continue to target Government spending reductions.
In spite of these arguments there was support around the room for a GAAR. The UK is one of few countries that doesn’t already have some form of anti-abuse rule in place, and many hoped it could pave the way for a change in culture and attitude towards tax planning. With a rule in place, individuals and tax planners could be less likely to participate in tax schemes that put them at the margin of what is considered acceptable. This would no doubt benefit society by rebuilding trust between business and the public, and reducing the opportunities to attack wealth creators – there was consensus that this harms the UK PLC and is contrary to the pro-business message that the Government seeks to deliver.
Reform roundtable on quality and value in health on 29 May. Introduced by Jim Easton, National Director for Improvement and Efficiency, National Commissioning Board.
Reform roundtable seminar on family finances on Tuesday 15 May 2012. Introduced by Lord Wilf Stevenson, Chair, Consumer Credit Counselling Service.
By Patrick Nolan
Earlier this week Reform held a roundtable event on Putting family finances on a sustainable footing. Lord Wilf Stevenson, Chair, Consumer Credit Counselling Service (CCCS), introduced the event, which was held under the Chatham House rule.
Many UK households are on a financial knife edge. CCCS research shows that 8 per cent of households in Great Britain spend more than half their incomes on total debt repayments and the average household pays nearly £200 per month in interest payments. 30 per cent of households have no spare cash at the end of the month and more families are turning to high cost credit. These challenges are not confined to a relatively small group of low income families; CCCS research has shown that families on higher incomes are struggling with debt too.
The upshot is that many families would struggle to cope financially if they experienced a drop in income, increase in expenses, or other changes in circumstances. And they are likely to remain vulnerable for a while. The labour market outlook is weak and prospects for real wage growth are not great. Concern has been expressed over food, fuel and utility bills, HMRC debt recovery procedures, and increasing rent bills and mortgage rates. Already 10 and 6 per cent of CCCS clients are in mortgage and rent arrears, respectively.
Policy changes, such as the public sector wage freeze and reform of the welfare system, have increased pressure on some families. The Universal Credit will test families’ financial capability through paying benefits monthly and paying housing benefits to recipients not to landlords. Problems with debt can often be part of a downward spiral – with there being, for example, a link between problem debt and depression.
While it is relatively easy to point to problems, developing workable solutions and identifying the role that government should play in these solutions is harder. Developing solutions will require facing up to some hard questions, which will be the subject of future Reform events. These questions include, for example:
- Is the supply of credit to some vulnerable communities too high? What would be the best way to influence the supply and level of credit in these communities? Or, indeed, should government set out to influence this?
- Should interest rates of, for example, 4,000 per cent per annum be allowed (bearing in mind that an annual rate can be misleading for a loan with a term shorter than a year)? Or should interest rates be capped? Would capping interest rates restrict the supply of credit (including to people who can afford to borrow) and risk other charges or fees going up to compensate?
- How should financial products, lenders and debt management companies be regulated? Are current regulations sufficient, and is the only problem one of enforcement? What role should financial services (e.g., self-regulation through voluntary codes and kite marks) and employers play in improving standards and helping people make the right choices? How can confidence in financial services as a whole be improved?
- What should happen when people get into problems? Should the attitude towards debt forgiveness change? How can consumers be directed to the right sorts of advice?
But perhaps the biggest question raised at the event was whether the broader attitude to debt in the UK needs to change. A model of growth driven by consumption funded by household borrowing requires ever increasing capital gains on housing assets or increasing real wages. A “borrow now, pay later” model will always face problems when growth stalls or when the economic environment changes (e.g., when the population ages and dependency ratios increase). The big question is how to ensure sustainable growth in household incomes in the long term – simply borrowing more cannot be the answer.
Reform roundtable seminar on the Universal Credit on Thursday 3 May 2012. Introduced by Andrew Selous MP.
By Patrick Nolan
It is hard to overstate the importance of the Universal Credit. The proposal will directly impact on the lives of millions of the UK’s most vulnerable households and, at a static cost of around £2 billion, have a real impact on the welfare budget. Up to this point much of the focus and debate on this programme has been on broader design issues, such as the impact on incentives to work and poverty, how to treat childcare and housing assistance, and transitional assistance and passported benefits.
Yet with the migration of families to the new system scheduled to begin in October 2013 issues of implementation must come into sharper focus. As Michael Lipsky argued public policies are not just developed in legislatures or the highest levels of the civil service but in crowded offices and daily encounters of “street level” workers. Often the practical challenges of implementation determine the success or otherwise of a programme.
With this in mind Reform held a roundtable event on possible lessons for introducing Universal Credit from similar reforms in the State of Texas. Andrew Selous MP helped set the scene by outlining the Government’s approach to implementing the Universal Credit and a member of the consortia that implemented the Texan project outlined their experiences. The event was held under the Chatham House rule.
Texas set out to create an “integrated eligibility” process for its social services programmes in 2005. The underlying philosophy was similar to the Universal Credit. By combining the application process for a number of programmes decisions could be made in a simpler and quicker way. Yet this ambitious project made a number of early mistakes and the pilot programme was suspended. The contract for the project was withdrawn and one of the members of the original consortia, MAXIMUS, was awarded a modified contract and required to turn the project around. They did this and integrated eligibility has now been implemented across the whole State.
Potential lessons from the Texan experience discussed at the event included:
- Perform a detailed process analysis before selecting the delivery model, training methods, technology and staffing levels. The technology must be designed to support the business process. Robust forecasts of customer volumes and testing of assumptions around the use of different channels are required.
- Have performance metrics and reporting information in place. The right monitoring systems and reports must be developed (this can be surprisingly difficult) and there needs to be strong managerial accountability and legislative oversight. Good governance and transparent processes are essential.
- Focus on operations as well as technology and make sure there is direct communication with operators. There needs to be a strong focus on people operating the system. Communication between front line staff and technology staff must not break down.
- Manage change efficiently within the delivery organisations. Training and onsite support is important and once people began to use the new system in Texas they were required to stick with it, rather than returning to the old.
- Do not promise savings or change until the proof of concept has delivered reliable metrics. Savings promised often depend on the programme being delivered successfully; if delivery is not successful then savings may not eventuate. As well as the benefits of automation, there may be costs associated with the loss of “face time.”
Addressing the issues above would be a challenge even in the best of times. Yet the current environment poses extra difficulty. The Universal Credit must be delivered in a period when public money is tight, other important welfare reforms are taking place and concern is being expressed over labour market outcomes. The timeframe for the implementation of the Universal Credit is very tight and the Public Accounts Committee has already expressed concern over the “oversight of the interaction of benefits that are based on means-testing.”
Yet the lunch also highlighted the broad support for the goals and objectives of the Universal Credit. The policy window is open. A simpler system that works better for recipients is a valuable prize. This makes a focus on delivery issues all the more important. The Universal Credit will not work unless the delivery is right, and this requires a constructive and honest debate on the challenges of implementation.
Reform roundtable seminar introduced by Dame Julie Moore, Chief Executive, and Dr David Rosser, Medical Director, University Hospitals Birmingham NHS Foundation Trust, on Tuesday 1 May 2012.
By Thomas Cawston
Despite the advances in medical science and clinical best practice, poor quality still persists in parts of the NHS. The challenge of how to maintain and improve quality will exercise policymakers for much of this Parliament, with the long awaited Francis Inquiry on Mid Staffordshire hospital due to be published in October. While there is no single and all-encompassing solution to better quality, there are proven tools, such as the effective use of data and technology. To explore these issues we convened a lunch with Dame Julie Moore, Chief Executive of University Hospitals NHS Birmingham Foundation Trust and the Medical Director, Dr David Rosser. The lunch was held under the Chatham House Rule, but these were the headline points.
University Hospitals Birmingham has high quality outcomes. The Trust has reported a 16.9 per cent reduction in 30 day mortality, the equivalent of 100 lives saved per year, a reduction not seen in the rest of England. Key to this achievement has been UHB’s philosophy of reducing errors. Rather than connecting errors to outcomes and focusing on significant mistakes and errors in clinical practice, the Trust took the view that all errors are important. Consequently IT systems were designed to reduce all errors.
One of the key programmes that UHB has introduced has been the Prescribing Information and Communication System (PICS), a decision support tool for front line clinicians. The system has over 4,000 registered users, manages 25,000 new prescriptions and 125,000 drug administration events a week. Clinicians use the tool through 450 handheld tablets. Each and every decision made by clinicians working in wards is run through an “error filter”, which screens the decision made, such as changing a patient’s therapy, ordering tests or discharging. The system automatically records the decision and either confirms the order, warns the clinician of the potential error, requires the clinician to re-enter their password in the knowledge they take responsibility for the order, or stops the order. Medication errors were cut by 66 per cent, preventing up to 450 individual errors a day.
However information systems alone are not sufficient to improve quality. The Trust had to combine measuring data on clinical performance with rigorously enforced clinical accountability. This requires strong leadership to shift the culture towards excellence and hold senior clinicians to account. UHB addressed poor performance in its hospital by effectively managing clinical teams that were not meeting the necessary standards. Unfortunately, in this it is the exception rather than the rule. There is no “quick fix” to achieve better quality, but for doctors and nurses responsibility must accompany power.
The freedom to pursue excellence has been important, while my impression is that central diktats have been a distraction. Rather than waiting for the National Programme for IT in the NHS to bring IT to the Trust, UHB went alone in investing in a purpose built in-house system. Commissioning and quality incentives have not been able to drive improvement by providers. Too often the system has failed to generate the incentives for Trusts to invest in effective IT systems. UHB had to take responsibility on itself to deliver better quality. All of this means that we need a permissive system that allows more experimentation, that encourages high performing trusts to excel, that encourages new entrants to challenge existing models, and that recognises and deals with failure when it occurs.
Reform roundtable seminar introduced by Alastair Levy, senior expert in government reform at McKinsey & Company, on Monday 23 April 2012.
By Nick Seddon
Developed countries around the world have reached a day of fiscal reckoning, as a number of authors put it in Reform’s recent anthology, The next ten years. If one sentiment unified that collection it is that radical change is needed in the economy, government, public services, health, welfare and pensions, and the role of the individual. It’s either that or terminal decline. “Unless policy is re-focused on improving economic efficiency for the economy as a whole, and within the public sector,” wrote Rupert Darwall, “the big question facing Britain is whether Britain is going to have one lost decade or two.” In order to gain political support for tightening budgets, the Government must demonstrate success in improving the performance of public services – i.e. show it can do better with less.
Yet the Government is struggling to make real progress. Yesterday Reform held a roundtable lunch seminar with Alastair Levy, senior expert in government reform at McKinsey & Company, on the subject of “Reforming government: global perspectives”. Alastair has advised governments in over 30 countries on their reform programmes and published a number of articles, including Better for less: Improving public sector performance on a tight budget. Top politicians and civil servants, leading business people, and press, discussed lessons Britain can learn from its international counterparts on reforming government and implementing a coherent programme of change.
The event was held under the Chatham House rule. Alastair outlined some of the ways in which government leaders around the world have navigated the complexities of achieving far-reaching reform - and the need for multiple approaches to change to be deployed in parallel to make this happen. The ensuing discussion was held under the Chatham House rule.
Two broad themes emerged. One was broad agreement with and analysis of Alastair’s points, leading to concerns about how the UK stacks up in practice. Some argued that the Government consistently underestimates how hard reform is. Another concern was with the failure to formulate and stick to a clear and firm strategy, with an associated failure to prioritise (“pick your fights”), and to manage and be open and honest about the trade-offs and tensions (such as between local and national power and responsibility). While the data and transparency agenda was welcomed, some worried about accountable for delivery. Communications have confused people about whether saying something is the same as doing it.
The other broad theme was around Civil Service reform. The need for a stronger centre of government (the “tight” of “tight and loose”) is paramount in a time of radical reform. Ministers can only govern through the Civil Service and will do so better if the culture of the Civil Service is supportive of the reform effort. Ministers need to be clear about what the Civil Service is being asked to do so that it can be equipped and managed according to clear aims and objectives. Getting more for less – departments capable of leading major change while also being changed and reduced in size – requires a high-performance workforce with strengthened skills and capabilities. Reform has argued for years – and some around the table took this line – that the structure of the Civil Service needs to change so that civil servants are personally accountable for performance.
To finish on the structural point, this is Tony Blair writing in A Journey:
“I have described a journey. At first we govern with a clear radical instinct but without the knowledge and experience of where that instinct should take us in specific policy terms. In particular, we think it plausible to separate structures from standards, i.e. we believe that you can keep the given parameters of the existing public service system but still make fundamental change to the outcomes the system produces. In time, we realise this is wrong; unless you change structures, you can’t raise standards more than incrementally.”
Reform roundtable seminar introduced by Carl Lygo, Chief Executive Officer of BPP, on Tuesday 24 April.
By Dale Bassett
The ongoing controversy about AC Grayling’s profit-making £18,000-a-year college reveals, in the eyes of critics, all that is wrong with the private sector’s growing role in higher education. But for almost 40 years, business and law school BPP has been showing what’s possible. The company was granted degree-awarding powers in 2007 and designated a University College in 2010. While universities across the country trebled their tuition fees, BPP set theirs at a market-beating rate of £5,000 a year. Given the Government’s intention to increase private sector involvement in HE, Reform asked BPP’s chief executive Carl Lygo to lead a discussion, held under the Chatham House Rule, on the merits of profit in the university sector.
The discussion revealed the extent to which the private sector is involved in higher education and the number of different routes to market; this is not just about private colleges offering their own provision. Joint ventures and partnerships with traditional universities are allowing private companies to improve universities’ value for money and spur innovation. Service providers are doing everything from managing real estate to providing access routes for international students. From back office shared services through curriculum development to the front line of teaching, the private sector is boosting diversity and quality in the higher education sector.
The strong brand of UK higher education is undoubtedly an attraction for companies looking to invest in the sector. It was agreed that there is significant foreign capital that investors are keen to bring into the UK HE sector. But the barriers to investment are such that the UK is missing out on lots of this potential investment. The market is such that it is not straightforward for private investors to inject large amounts of capital into the sector.
This comes to the heart of the problem that currently exists in UK higher education. While everyone around the table agreed that greater private sector involvement and thus diversity in the sector is in principle a good thing, the lack of a level playing field is having negative consequences for investment, for private providers and for traditional universities. In the absence of a Bill to follow up from last year’s White Paper, it remains extremely difficult for new institutions to obtain degree-awarding powers. Publicly funded universities, meanwhile, remain subject to caps on fees and student numbers, as well as regulatory requirements tied to public funding from which private institutions are exempt.
Government, then, must help to level the playing field. Removing caps on places and fees would allow traditional universities to compete with their private sector peers who have no restrictions in these areas. Private universities could be given the same access to government student loans as their public counterparts – with the quid pro quo that they are subject to the same regulatory framework. These changes would allow for a much more effective market, with public and private institutions competing on the same footing. The result would be more growth, investment and diversity in the sector, to the benefit of students and UK plc.