The future of public services isn't sharing info - it's upside down

One of the most inspiring visits I made for the government's Barriers to Choice Review last year was to Middlesborough, to meet people involved in the new Local Area Co-ordination scheme there.

Perhaps it isn't the most impressive name to use for something that has turned social care upside down in Western Australia, but it manages to combine higher support from care users and lower costs - which isn't unique, but is a sign that something important is going on.

LAC started in Western Australia in 1988, thanks to the social services director Eddie Bartnik. It is now used to support social care in other Australian states and has been successfully adopted in Scotland, Ireland, New Zealand, Canada and now England, starting in Middlesborough and Derby, as an approach to early intervention and prevention.

LACs are generalists who support practical, creative and informal ways of meeting people’s aspirations and needs, increasing the control and range of choices for individuals, their carers and families.  Their activities focus on supporting vulnerable people to build a vision for a good life that is individual to them, and to build the family, relationship and community networks that make it possible. 

LAC operates at individual, family and community levels and can help individuals, their carers and families to plan, select and receive a range of support and services to achieve their vision for a good life, enormously increasing the flexibility of services and providing users with much broader choices.

What is fascinating about LAC is that it is absolutely cross-service.  The first point of contact is someone who will focus - not on your needs - but on what you want to achieve, what informal support you might need to get there, who they know who might help.  Then they will coach you to a position where you are much more active in your own life.  Only if that fails, do they fall back on the traditional care support packages.

I was interested then because I had suspected for some time that there is a new kind of profession emerging in public services, which has many of those characteristics - asset-based, as they say in the jargon, cross-departmental, starting from where each individual is in their life at the time.

I mention this because I read a post yesterday from the very energetic thinkers in the iNetwork in the north west about the health and well-being 'timebomb', which also linked me to the ambitious joint statement by almost everyone in the health and social care field about integrated care.

I would disagree with nothing in either of these, but the success of Local Area Co-ordination seems to me to point in a different direction.  Not one that is basically about 'joint working', 'sharing information', 'co-ordinated care' or any of those phrases which imply that this is basically an information and co-ordination problem.

I don't believe that a social care system which now sends seven agencies to your front door can survive - and I don't believe it can survive, even if they share information seamlessly between them.

What Eddie Bartnik, and his UK vicar-on-earth Ralph Broad, have developed is the beginnings of a different kind of system altogether, which starts from hopes not needs, and which has a multi-disciplinary, semi-informal human face at the front of it.  Local Area Co-ordinators can still fall back on professionals if they need to, but often they don't need to.

The Barriers to Choice Review taught me that that sheer inflexibility of the current system, the multiplicity of agencies, must make way for something much more flexible - and I suspect that means the following:

1.  Turning services upside down so that informal solutions and social support is the first resort, not the last.

2.  Merging public services together locally, schools, health, social care, housing, and so on.

3.  Turning those hubs into catalysts for an enormous increase in local involvement and mutual support (co-production).

4.  Concentrating resources at the intractable problems, the small number of people and families who both slip through the cracks of the current system and involve most of the costs.

A new kind of liberalism has to emerge

I listened to Bea Campbell and Laurie Penny on the Today programme with a sense of nostalgia. Of course, I felt, we all used to be like that – we all used to enjoy those endless, repeated, circular arguments about the nature of men and women.

This particular argument will have been recognised by all of us who remember the 1970s and the brand of feminism that emerged from there – it is the central tenet of small-L modern liberalism: that anybody can be anything. That all human difference, and gender differences, are down to cultural stereotyping.

It was a useful thing to think, and it drove the kind of tolerant society we have now (where it remains tolerant), but it overstated the case.

We should not be imprisoned by our differences, but of course there are variations between the genetic make-up and pre-dispositions of men and women, and many sub-classes of those too. We refuse to be categorised – that is the core belief of liberalism – but the categories are there, and you can see them under a microscope.

I am a product of my own time, as well as everything else, so I accept the premise. I believe that individual possibilities are unlimited.

But there is a hidden danger here, and it is a danger for liberalism too. If we recognise no limits, no communities, no ideals, no institutions, no relationships, no belief systems, no common moralities, then we fling ourselves into a whole new kind of tyranny – and we will be undefended against the intolerant forces of fundamentalism battering on the gate.

Liberalism has been a liberating, but – let’s face it – also a corrosive creed. It allied itself with the power of money in the nineteenth century, aware that money would corrode privilege and power wherever it was. The power of church and aristocracy crumbled and fell before it, seeking out American heiresses to prop it up.

The danger for liberalism is that the power of measuring everything in terms of money just carried on corroding.  So does the power of individual self-determination.

The truth is that human civilisation and well-being depends on us setting limits to ourselves - in relationships, in behaviour, even just on the London underground.  When we limit ourselves to seasonal fruit and veg, for example - rather than satisfying our craving for strawberries which have to be flown in for Christmas - we lead a better life, paradoxically.

Because, in the end, we are moral beings and our shared morality is stronger – or it ought to be – than any of the forces unleashed by the great wave of liberalism over the past two centuries, money and self-determination.

Because, in the end, the argument put forward by Bea Campbell has been overtaken by science and genetics.

This is a crisis for cultural liberalism, and it needs to be rescued by political Liberalism. We are not in an entirely relativist world, after all. There are many ways of looking at morality, but not all of them are valid. We need to be able to defend the tolerant society we have created – and on the grounds put forward by Karl Popper when it was last under attack: because the open society “sets free the critical powers of man” (he meant also the critical powers of women!).

For me, this is a new kind of liberalism, beyond the kind of lazy relativism that we have been living with, and because it emphasises what we share – our humanity. We are not just isolated, self-determining individuals, who can’t communicate with each other without the support of the institutions of political correctness.

We are human beings, with a shared genetic heritage, diverse enough to be ourselves, but with enough between us to learn together, to love and to defend our tolerant institutions.

And if all we can do, when that tolerance is threatened by machete-wielding terrorists is to interview spokespeople for the security industry like John Reid, or with breathless horror devote our front pages to the terrorists' demands – with hardly a word about what we are defending – well then, the achievements of liberalism will be seriously under threat.

Amazing, Bea Campbell and feminism to John Reid and machetes in a few deft sentences...

The most important policy issue of the age (and nobody's talking about it)

"They must feel the thrill of totting up a balance book,

A thousand cyphers neatly in a row. 

When gazing at a graph that shows the profits up, 

Their little cup of joy should overflow."

Not me, of course, but Bert the Chimney Sweep’s satirical take on Mr George Banks’ view of what life is all about.

Mary Poppins was the first film I ever saw. My father took me there at the Odeon Haymarket in 1965 and I have only recently seen it again, and the satire was a bit more obvious to me now than it was before.

But Bert wasn’t pouring scorn on business. He was pouring scorn on the reduction of business to numbers, which then as now is the province of the City of London. Or that is how I put it in my book The Tyranny of Numbers.

Now, the news emerged today that Justice Secretary Chris Grayling is intending to privatise the courts system (though not the judges, thank goodness for small mercies). That means many underlings in the City are now letting their cup of joy overflow at the prospect.  Probably not terribly excited at the prospect of running the courts, but the prospect of the loans they can raise on the back of all that property is certainly a joy-overflowing business.

Now I have no ideological objections to privatisation. In fact, I think the obsessive argument around public-versus-private has held UK politics back for a generation. But, as I said recently in a blog post, the stated purpose of privatisation has subtly shifted, and debate doesn’t seem to have caught up with it.

In the heady says of selling off BT, the promoters could reasonably claim that privatisation was about getting a better service. That is certainly what happened.  But nobody claims or believes these days that privatisation will make services better, for example of the post office. Still less the court system.

Privatisation is now about ‘efficiency’. All across public services, systems are being retooled to suit this particular notion of ‘rationalised’ efficiency, which means wielding the IT systems to create economies of scale, borrowing from the assembly line to create faster throughput. It is about creating efficiencies by narrowing the objectives to a handful of numerical outputs.

The real issue is whether this style of efficiency is actually very efficient, and here we have the central policy issue of our age – which hardly anyone is talking about. It is this: are economies of scale possible in public services? (remember: you heard it here first!)

I’m not claiming that economies of scale are somehow out of the question. They are obviously available. The question is how quickly they are overtaken by dis-economies of scale because narrowing the objectives impoverishes the services and creates costs elsewhere.

This is such an important issue because the whole future of our public sphere depends on the answer – and despite what you hear, there is actually very little evidence.

Coming up with a resolution to this means being able to look at two or three dimensions to a problem at once, yet so much policy assessment is still stuck in the days when people could only look at one dimension at any one time - cost-benefit analysis that only looks at the benefits, GDP that never subtracts, everyone will recognise the kind of stone age policy-making tools that are still used.

My side of the argument would suggest that the diseconomies very rapidly overtake the economies, because public services badly need an approach that is flexible and human enough to make a difference, once and for all.  The alternative is services New Labour-style - which maintain people in their need with constant, repeated rationalised interventions which make no real difference, and do so at huge expense.

That is the real issue before us.  Not public versus private, but big versus small, and rationalised efficiency versus effectiveness.

It explains why privatisation is actually on the way out, and for two inter-related reasons.  The only way profit-making companies can profit is by using these assembly line techniques, and they are not very effective - and therefore hugely expensive.  Yet if they don't use them, the profits are no longer available.

That is why so many private sector contracts are unravelling (see Serco for example).  There isn't enough money for them.

Privatisation is being squeezed between the horns of this dilemma - the available profit shrinking and the costs rising because their systems are so much less effective than they need to be.

That is the world that will face us by the next general election, and then what?  Certainly, it is Privatisation RIP, but what will replace it?

Down among the middle classes

I spent the bank holiday weekend immersed in the middle classes, camping in the Wye Valley. You could hear the great middle class call sign wafting across the campsite:

“I tell you what, you look after the children and I’ll faff around with the tent...”

I event ventured into the bastion of middle class life, Tyntesfield, the National Trust extravaganza outside Bristol.

The camping was lovely, the weather beautiful, the nights freezing and Tyntesfield was fabulous and magical. It comes to something when you can recognise something extraordinary in among the bric-a-brac, and I recognised a lifebelt from the German cruiser Bresslau, which escaped to Turkey in 1914 and was eventually mined in 1918 at the entrance to the Dardanelles.

How it got to be next to live next to a broken down bath chair in a National Trust property in England was anyone’s guess. The staff didn't know either.

It was a weekend that reminded me of some of the pecularities of the middle classes which I set out in my new book Broke: Who Killed the Middle Classes – their combination of law-abiding respectability with the assumption, unless proved otherwise, that all their neighbours are feckless. 

Goodness knows, I felt it myself.  It explains some of the reason why the middle classes are so suspicious of themselves, and increasingly so as they embrace a fashionable marketing-led bohemianism.

Tyntesfield was a revelation too.  Just one teasel on each vintage chair was enough to prevent people from sitting on them.  No signs ordering you around, no roped off areas, just restraint and tolerance.

This seems to me to be the central truth about the middle classes now, which alone is worth their survival, though - as I said in my book - their survival as a class looks increasingly precarious.  Despite their suspicions, despite everything else, they are the force behind the increasing and almost unique tolerance of UK society.

Despite their reputation, the middle classes have actually presided over a period of unprecedented tolerance in British life, embracing a society that – despite the difficulties – is more and more diverse and multiracial, more and more tolerant of the peculiar way that people live, if they are not harming anyone else. And if this was not led by the middle classes, who was it led by?

I have wondered occasionally whether the National Trust might be a more effective political bastion for the middle classes than either Labour or the Conservatives, and said so in one of the first blogs I wrote here.

My admiration for the National Trust and its imagination and extraordinary volunteer-led good sense and good organisation.  It is an inspiration for the public sector (or it ought to be).  But I digress (and will again)...

The three lies of modern IT systems

I've rather belatedly realised there has been yet another IT catastrophe, this time at the BBC.  I don't know the details, so I can't go on endlessly about how it fits into my uber-theory of IT cock-ups (basically because the systems that fail so expensively are really designed to take power away from people, not to enable them to do their job better).

There is another uber-theory, of course, which is that big mega-organisations like governments and mega public service broadcasters are staggeringly bad at specifying and managing IT projects, because they always over-complicate things.  Perhaps we should be grateful that they only threw away £98 million.

More about where IT works and where it patently doesn't in my book The Human Element.

But as I was listening to the news about the BBC's digital sharing failure, I happened to be logging onto the website of yet another quango, using the same one of the variations of passwords I always use - and being asked for permission to plant cookies on my computer.  It made me think how little we consider these apparent trifles.

After all, if I had said to myself - well, actually, now you mention it, I would prefer not to have cookies, I would have been excluded from their 'digital by default' services.

I don't actually have any choice.  Rather as those companies which warn people with serious nut allergies that their products might contain traces of nuts, they are not actually being helpful - usually they don't - they are saying they can't be bothered to make sure.

So, since this is a bank holiday weekend, and the weather is brightening up (fingers crossed), here are the three lies of IT:

1.  We are asking permission to embed cookies in your computer.  It actually means: 'we will have nothing to do with you unless you let us plant our spy machines in your home'.

2.  People are free to choose whether they accept our rules or not.  Not actually.  If you are confronted with agreeing to rules and conditions on a page from one of the semi-monopolist corporates that now dominate our lives - Microsoft or Google - then, unless you sign, you will be excluded completely from modern life.  Probably arrested at airport security for good measure.

3.  Our passwords are designed to give you security.  Really?  How many passwords do you have now?  How many offices have you been where people keep their secure passwords on post-it notes above their screen?

I was 55 last week, so this may be may age speaking, but I find the reliance on passwords increasingly irritating.  I have to juggle six of them just to get into my two children's homework.  Of course, we need to keep identities secure, but there is a limit - and once you make passwords complex enough to keep you safe, then you increasingly need to write them down and render them insecure.

I offer this up as another Boyle's Law.

What I find especially irritating is that all the organisations we all deal with assume that they are the only one we deal with in the world.  In fact, every store, service, quango and government department we use loads us down with more passwords and usernames.

It isn't sensible to use the same password for every organisation - and I don't - but I have recently been refusing to accept new passwords (from the bank and the tax credits megalith) and feel better every time.

They always sound a little hurt, but it doesn't seem to make any difference to accessing them.  Of course it goes onto your records...

Outrage in the local currency world

Ever since 1992, when I saw green dollars in action in New Zealand, I’ve been fascinated by the idea that we should be able to conjure money out of nothing, by using our social networks.

My complementary currency heydays are now behind me but, during the 1990s, I found that I had got to know almost everyone involved in the idea of new kinds of money in the world – from Michael Linton in Canada (LETS and Community Way) to Heloise Primavera in Argentina (Global Barter Clubs).

I still think these ideas are important, and especially now that the Eurozone is grinding to a halt because big single currencies don’t work very well – they share the same fantasies as the gold standard, that money values are objectively real.

What Greece, Italy and Spain urgently need to do is to organise a range of regional currencies to operate alongside the euro to solve the basic problem – lots of people wanting to work, lots of work to be done, but no means of exchange to bring the two sides together.

But that’s another story. The complementary currency story has moved on somewhat since those days, thanks to bitcoin for the internet and time banks in public services, and my colleagues at the New Economics Foundation are in the midst of a fascinating pan-European project bringing together some of the most innovative new projects (ccia)

But the currency world has been thrown into some disorder by an important article in an academic journal called, of all things, Journal of Cleaner Production, which reviews all the evidence and says they don’t work.

It urges reformers to abandon the idea and concentrate instead on changing the way conventional money is created (97 per cent of it is now created in the form of loans by banks).

Well, having looked at the article, I’m not sure the argument is so clear cut, for the following reasons:

1.  The author (Kristopher Dittmer) only looks at the prevailing models, like LETS and the German regional currencies, and these are only in the early stages of development.

2.  He acknowledges the role that time banks play in rebuilding social networks, and points out that they don’t rebuild local economies – which they are really not designed to do anyway.

3.  He doesn’t look at the new generation of complementary currencies emerging from Latin America, which concentrate on poverty reduction by supporting small enterprises.

This is important because, as the eminence gris of the movement Bernard Lietaer (one of the original designers of the euro) says, what we really need to do is to experiment with city regional currencies that can provide loans for productive enterprise.

This is what the network of community banks do in Brazil, and they now – rather unexpectedly – have the enthusiastic support of the Brazilian central bank. That is what the new currency started by French Prime Minister Jean-Marc Ayrault will do in Nantes.

I could say more, but I don't wnat to try the patience of my readers (if there are any). But the issue here is not whether we are going into a multi-currency world rather than a single currnecy one – bitcoin and Facebook will see to that.

The issue is whether we can, at a local or regional level, create our own money - and provide productive loans in it - to claw our own way out of recession. And I think we can.

Why aren't homes being built? Because we can't afford them

Well, isn’t it extraordinary. The IMF just went ahead with their advice to the UK government without even reading my blog about house prices. Can you believe it?

There they were advising George Osborne to kickstart the economy (I might have told him that), with an early start to infrastructure projects, schools building and similar.

But then they fell into the usual mistake about house prices. Barriers to construction must be removed or the Help to Buy scheme will simply boost prices. As I explained earlier, it isn’t barriers to construction that are boosting house prices – or even the housing shortage (though it doesn’t help) – it is too much money in property.

As much as 70 per cent of UK bank lending goes on property projects, and every pound stokes up the next bubble and unbalances the economy even more disastrously.

The real reason why there are 400,000 outstanding planning permissions for housing units is not because there are barriers to planning or to building homes – it is that people can’t afford them.

And here is the problem. When speculation and bonuses push up the price of homes beyond the ordinary middle classes, then prices will rise, but homes will remain unbuilt outside London and the south east.

If society becomes so unequal that the majority can’t take part in normal life, even normal middle class life (as I said in my new book Broke) then the economy begins to seize up.

What happens is that the economy adapts, and this is the scary part.  It changes so that the opportunities only require rich people to take them up.  It isn't just the socially excluded who get excluded them, it is the previously affluent middle classes too.

As yourself why so many of the great British brands are luxury brands which most people can't afford - from Aga and Aston Martin to Burbery, Barbour and Bentley (why are they just As and Bs too?).  Because the UK economy isn't for the likes of us any more.  It's for the mega-rich.  We exist on the crumbs that fall from their table.

Why is a Tory Chancellor skewering the middle class?

Since I work for myself, I don't often put myself onto London streets before 9am at the earliest - and I am certainly not mad enough to drive.  The whole business of driving inside London in the working day reminds me of the mythical frog in the frying pan.

I have no idea if frogs will actually fry if the heat increases slowly, but London traffic seems to fit into this metaphor.  Wasting time in jams that would be quite unacceptable if we met them for the first time, just gets lazily accepted because they increase slowly.

Which is basically what I think about house prices, especially now that they are into acceleration mode again - with record prices in London, East Anglia and the south east.  London prices up nearly ten per cent this year alone, with the average price in London over half a million pounds.  Only two regions still have the good fortune to have falling prices.

My own home is a small semi worth just under half a million, which is ridiculous considering it cost about £800 when it was built in 1937, with a mortgage paid off in about 15 years, and costing about ten per cent of the average salary.

This is the ultimate frog-in-the-frying-pan phenomenon, and now boosted so egregiously by the government's Help to Buy scheme.

It happens slowly enough for the house-buying public not to notice what is happening - but the result is just the same.  Government mistakes since 1980 are in the process of pricing the middle classes out of existence.  I've explained whose fault this was in my new book Broke: Who Killed the Middle Classes, and the strange story of why it happened.

But what I find extraordinary is that a Conservative Chancellor can carry on the mistake - creating a property bubble, subjecting the lives of home-owners and rents to a lifetime of indentured servitude in jobs they don't want, just to pay the costs of a roof over their heads.

Why does he not see that making homes easier to buy at existing prices will push them up, and even further out of the reach of the next generation.  There is only one way forward if there is to be another middle class generation, and that is to find ways to bring them slowly down.

Yes, there is an argument about why house prices rise, and why those prices accelerate. Politicians like to say that it is a shortage of homes, and there certainly is a shortage and it doesn’t help.  But if it was only about housing shortage, you would expect massive price rises in the late 1940s, whereas – after a burst after the war – house prices stayed completely steady from 1949 to 1954.  The graph of house price inflation follows the rise in mortgage lending.

In our own day, planning permission has already been given for 400,000 unbuilt homes in the UK, yet prices still rise, as they have done in places like Spain, where there is little or no planning restraint.

Politicians get muddled about this because building houses sounds like a tangible thing they feel confident to tackle (though they usually don’t), whereas they don’t feel confident about mortgage supply at all. Yet that is the other side of the process: inflation is about too much money chasing too few goods, and the main reason for the extraordinary rise is that there has been too much money in property, both from speculation and from far too much mortgage lending.

Sometimes this came from people’s rising incomes, which translated into rising home loans. Sometimes it was lenders lending on increasing multiples of salaries.  Sometimes, more recently, it was bonuses and buy-to-let investors. 

But most of the time, it has been a catastrophic failure to control the amount of money available to lend, and which has fed into all the other trends to create a tumbling cascade of finance, with its own upward pressure on incomes and debt until the vicious circle now seems quite unbreakable. 

It was a roller coaster that terrified and thrilled the middle classes, as they saw the value of their homes rise so inexorably, but which is now undermining the very basis for their continued existence.

Amazing really that this process is continuing, as yet another government sacrifices the next generation to help this generation onto the housing ladder - and especially amazing that it is an admirer of Margaret Thatcher at the helm as it happens.  No wonder UKIP is threatening the Tory heartlands.

The secret history of helicopter money

If you really want to see a property bubble at work, then get into a time machine and go back to Tokyo in the late 1980s and early 1990s.  It was a fearsome business, impoverishing more people than it enriched and funding Japan's aggressive business expansion around the world as the bubble inflated land prices.

Grandparent mortgages - paid off by the generation after next - and hugely expensive tiny sleeping tubes: that is what happens when property bubbles get out of control (so watch out, George).

They also eventually pop.  Japan's zombie economy was the result, and all the slightly breathy excitement about 'recovery' in the UK rather ignores the likelihood that we are in the same zombie position as they are.

One radical Japanese solution has been what they call 'helicopter money', which is where the central bank or Treasury simply creates the money - the way it used to be done - and it is distributed straight into the economy to get demand moving.  This is what Adair Turner has been advocating here, and there was a fascinating discussion posted yesterday between Turner and other economists which came to the conclusion that it was worth trying.

Now, here's the odd thing.  Here are influential economists discussing the practicalities of helicopter money creation - but where are the politicians?  It is as if they are somehow above the practical business of creating money, as if it was somehow impolite to discuss how this is normally done (the banks create it in the form of loans) and how it could be done.

It is as if politicians were the unreformed men who avert their eyes at the grubby business of household work - wiping bottoms, stenching blood, washing dishes, holding up the sky.

This matters, partly because politicians ought to discuss a practical solution to our difficulties.  And partly because, if it isn't discussed - then how can the details be properly debated?  For example, where should the new interest-free money go?

To the banks?  We tried that with quantitative easing and they just sit on it, or use it to fund bonuses - which raises house prices.

To people directly?  That is what they tried in Japan, and they just spent it by paying off debt.

To provide very low-interest loans to small businesses?  We have no infrastructure capable of lending it locally - the banks have proved themselves unable to do so.

To the Green Investment Bank to provide very low-interest loans to sustainable energy infrastructure?  Maybe, but would it have the economic impact?

To community banks and community development finance institutions?  Experience in the USA suggests that they can use it effectively within about a month.  But our CDFI network is probably too small still to take all of it.

Would it be inflationary?  Yes, unless we also prevent banks from creating money (this is another discussion).  But it matters very much how much work the new money could do before it creates inflation.  Or, to put it another way, it only creates inflation when it reaches the rich.  So it makes sense not to let it trickle down, but let it bubble up.  Don't helicopter it; plant it.

The other odd thing is how faulty the economic history is around this forbidden, whispered aspect of economics.  Commentators point out that Milton Friedman suggested something similar in 1948.  He certainly did, but because he was still under the influence of the great American liberal Henry Symons - the doyenne of the original liberal Chicago school of economists.

The other history which is never mentioned is that we did all this in the UK once before, almost exactly a century ago, under the Chancellorship of David Lloyd George.  At the outbreak of the First World War, and to avoid a run on the banks, Lloyd George issued £1 and 10 shilling notes direct from the Treasury and continued to do so until 1919.

The first ones were rushed out within days, printed on postage stamp paper and were known as 'Bradburys', after Sir John Bradbury whose signature appeared on the bottom.

There are huge conspiracy theories around all this, thanks - it seems to me - to the failure of mainstream economists to discuss the way that money is created.  There was nothing very special about the banknotes, which simply mimicked Bank of England notes in smaller denominations.  But it did set a precedent for the Treasury to create money directly, if necessary, and to do so free of interest.

Incidentally, if you want to know where money usually comes from, you could do worse than look at the new book by my colleagues from the New Economics Foundation, together with a preface by Sir Charles Goodhart, formerly of the Bank of England.

Prevention is the word that will save the NHS

The influential NHS blogger Roy Lilley asks precisely the right question this morning. Why is the Accident and Emergency service not like the Fire Service?

If the incidence of fires has dropped by 40 per cent, and it has – as we know thanks the review by Sir Ken Knight – what can the NHS learn from that? The answer lies in the neglected word ‘prevention’. The Fire Service has been devoting increasing energy and ingenuity into preventing fires.

Partly the success is down to smoke alarms, which are now in 86 per cent of homes. Strictly speaking, this isn't prevention exactly, it is early detection – but it still helps.

As Lilley says, the real problem is people with Long Term Conditions, who account for 70 per cent of the costs of primary care. It so happens that the NHS is at its very least effective here, trying to maintain patients in their conditions at huge expense for the rest of their lives – rather than helping them find ways of managing and improving the conditions themselves (I write as someone with chronic eczema, when the mere thought of NHS dermatologists now makes my skin creep).

I’ve written about this before, and regular readers (if there are any) will know that there are lessons to be learned from:

• Flexibility, and the power that patients have to vary the way they are treated and the arrangements around that, as I said in my review on barriers to choice. 
• Co-production: the People-Powered Health project at Nesta calculates that this aspect of self-care and mutual support would save the NHS at least £4.4 billion, and may save as much of a fifth of the cost of treating long-term conditions.
• System thinking, and the way that the public services need to be seen as a whole system rather than an alphabet soup of overlapping and conflicting jurisdictions. 

But here lies the real difficulty and the real reason why the Fire Service is different from the NHS. The Fire Service is vertically integrated and is the only agency that deals with putting out fires, while navigating the health an social care system is a full-time job in itself.

That means that investing in effective innovation in one area of public health will accrue to somebody else’s budget. It is a recipe for waste and stagnation.

Now, say what you like about the health reforms – and I have – but putting the doctors and local authorities in charge of paying for the NHS (the new CCGs) does provide a structure that has some motivation for innovating.

The trouble is that they can still load all the costs on the local foundation trust's A&E service. We also need to find ways that the big hospitals can reach out into the neighbourhood and stem some of the demand that floods through in ill-health – and this is a perfect project for hospitals and CCGs combined.  Both need to invest and both stand to gain.

Either way, prevention has to be the new buzzword in public services. It is the pathway to a solution to rising costs and struggling effectiveness – but it means structuring the system so that it is flexible.

Cuckoos and the economics of orchards

Years ago, I interviewed the former economics adviser to the Jersey government for the New Statesman, and he explained to me how the island's tax haven status had been like a cuckoo in the nest.

Financial services are so profitable (and I might add, so safe - you can get bailed out) that other forms of enterprise become economic.  First the agriculture runs down, then the tourism, then - with over 500 banks on the island - nobody else can afford a home.  It is the same process that is happening, much more slowly, in London.

But there was a story in the Evening Standard this week which made me realise that there are the other forces working in the same direction - monopolistic supermarkets making small farming uneconomic, competing with Chinese wages and Far Eastern-style employment standards.  The result is the bizarre story that de-regulating migrant Bulgarian and Romanian workers in the UK could lead to the end of British orchards.

This was what the Home Office Migration Advisory Committee told Home Secretary Theresa May.  The idea is that the migrant workers will be able to work elsewhere in the UK economy shortly, and will abandon fruit-picking.  Prices will rise, the supermarkets will reject UK fruit, and there go the apple orchards.

It is tempting to ask who picked the fruit before the Bulgarians came to do it a few years ago, but there is a deeper problem than this.  It means that supermarkets are using their semi-monopoly position to force fruit producers into lower than economic prices - just as they have done with milk.

But there is a bigger issue too.  What else can't we afford to do in the UK?  We can't afford to train many of the staff in the NHS, which is staffed by recruiting direct from training colleges in developing countries.  Now, apparently, we can't imagine how we might use our existing orchards to grow fruit - except by importing the poor and desperate to do it for us?

The cuckoo in the nest syndrome again.  It isn't what I would call the 'balanced economy' that the coalition promised in 2010.  Nor is it the kind of economy that spreads the benefits much further than financial services.

And what will become uneconomic for us next?  Growing wheat?  Making screws?  Making ships has pretty much disappeared already.

And all because monopoly power undermines realistic pricing.  That, and a fetishistic over-emphasis on the doctrine of comparative advantage, which suggests that - because we have banks and speculators - it isn't worth doing anything else.  If the British Disease used to be poor management and the closed shop, it is now the way our rulers cling to speculation and financial services as if it could feed us.

Well, I for one will continue to eat local fruit - and if the supermarkets can't stock it, I will be buying it elsewhere.  The fact there is now an elsewhere, in the burgeoning local food movement, is one of the hopes for the economy and the future.

Call centre menus: reach for your hatchet

During his research into the ruthless side of the modern economy, the journalist Simon Head discovered a fascinating paper, published in 1997, about a customer relationship management IT system in action. 

It was written by two researchers at Xerox’s Palo Alto Research Centre in Silicon Valley, and they describe a corporation called MMR, a thinly disguised version of Xerox, and their IT system called CasePoint, which was designed to automate the conversations between customers and agents. The idea was to cut the cost of sending technicians out to repair Xerox machines. It would all be done automatically by call centre staff over the phone.

CasePoint didn’t work. Call centre staff were supposed to take down exactly what the customers said and the system would feed it to the experts to come up with solutions. The call centre staff were only allowed to ask questions exactly as they were worded on the screen. 

The trouble was, when it came to the point, the customers used ‘unauthorised’ language of their own which the system couldn’t understand. By the end of the trial period, the researchers couldn’t find one example where CasePoint had done its job properly. That is what tends to happen when human beings are excluded from systems.

The trouble was that, when the managers and software designers were told this, they decided it was an irrelevant detail and that they should carry on with the system regardless. They wanted to see how far they would rely “exclusively on machine expertise as a substitute for agent knowledge”.  The answer was: not very far.

This is the dream of IT consultants: a machine that can have a conversation with a human being without them knowing they are talking to a computer. In fact, most people who have been phoned by a computer will tell you that, the more like a human being the machine is, the more unnerving the experience. 

Computers show little signs that they will ever be able to confront a human personality with their own. Maybe they will one day, but I doubt it: all they can do is to fake a personality, usually with some marketing or processing intent. Until they go beyond this into genuine artificial intelligence, their failure to do so can only be hugely expensive.

CasePoint is an extreme example of what happens when IT takes over functions it shouldn’t, where it deliberately excludes closer human contact.  More about this in my book The Human Element.

But it is also an example of the great unchallenged nonsense of a 'shared back office' service.  The key assumption is that customer-facing systems can be automated entirely - what the government calls 'digital by default'.  It also assumes that untrained system operators will just service requests, find a place for each query on the software, and hand it back to automated back office systems - or, failing that, experts.

There is very little evidence that this idea, embraced by government and consultants alike, saves money.  Of course automation often seems to save money, but consultants very rarely subtract - so they fail to see the diseconomies of scale until it is too late.  

Only when the costs mount, as the systems thinker John Seddon explains, does anyone wonder (and often they don't even then) whether the automation has made the system frustrating and inflexible, and therefore wasteful - because some people have to come back again and again (what Seddon calls 'failure demand').

And the most obvious times when we encounter this phenomenon is the 'Press button 2' syndrome.  Which is why the story of the retired IT manager timing each stage through different call centres is so fascinating - six minutes for each of the four levels at HM Revenue and Customs.

But what really amazed me about the story was what he said:

"In an ideal world, he said, companies should just offer different phone numbers for different services."Isn't that what we had only a few years ago?  There is a good reason why we don't - because people's queries often don't fit the boundaries set down (as we find so often pushing buttons).  

I even remember Simon Hughes' campaign for the London mayor proposed 'One Number for London' as its main policy demand - about the least exciting political demand I have ever come across.  If he had won, and the One Number was up and running - how many different options would people have to go through now?

No, it only works if there is a human being, sensible, flexible and empowered enough to make things happen, at the other end.  That requires IT support at their end, not push buttons at our end.

Because, after all, as C. S. Lewis put it, in the mouth of Mr Beaver: "Take my advice.  When you meet anything that's going to be human and isn't yet, or used to be human and isn't now, or ought to be human and isn't, you keep your eyes on it and feel for your hatchet."

Google: is there anybody in there?

The day the hapless Google head of northern Europe was battered by Margaret Hodge for their "devious and unethical" approach to paying tax in the UK - or not doing so, in this case - my Google blog (which you are now reading) ran into trouble.

Thousands of hits are being recorded by their counting machine from the Far East, routed via a porn site called 'topblogstories'.  The same thing is happening via a slimming website in the USA.  Much as I would like it to, my blog has never generated hits in the thousands per day bracket before, and - since these hits are not showing up under any of the posts - something has gone wrong.  It doesn't really affect the blog, but it is disturbing.

But how do you ask Google's advice, still less ask them to do something about it?

Needless to say, this particular problem does not appear on their rather short list of online problems.  No UK telephone number is shown.  There is no email address for customer service.  There is a website with a phone number in the USA, but there are voluminous messages of disgust from people underneath because the calls are never answered.

There is a UK office number, but if you don't have an extension number, there is nobody to speak to.  I tried dialling 0 and was just held on the line ringing out hopelessly and pointlessly for half an hour before I gave up.

There is a feedback button which allows you to send a message about problems, but the response says they don't guarantee to reply to everyone.  That's an understatement - I've sent ten messages so far and no response.

Now, I'm a good Google customer.  I use their email system and their blog system and I even earn a tiny amount of money from adverts on the site.  But Google apparently has such contempt for me that they fear any kind of contact.

I'm forced to ask the question - is there anybody there?  At the heart of this global beast, is there anything at all - any human being, any heartbeat, any interest at all in their customers?  Or is it just an empty echoing, soulless shell of conceit and arrogance?

The great Anita Roddick used to say that global corporations were like dinosaurs, unable to feel any emotion except greed and fear.  Is this Google now?

No doubt they would say that this is just the future of business, as their de-humanised machines strip us all of our information and sell it back to us.  This is the new virtual world.  Not a bit of it.  This is the result of monopoly.  It is because they have no competition, and the competition authorities on both sides of the Atlantic have been asleep on the job.

When the three American giants were first castigated over here for their tax avoidance schemes, the two monopolies ignored the fuss completely.  It was only Starbucks, which has competitors, which reacted.  The truth is that when competition authorities snooze and allow companies like Google to build up a monopoly position, then the customers are more than taken for granted - they are completely ignored.

So once I sort this out, I'm finding a better way of organising my blog and my emails.  It may take a bit of time - certainly longer than it would if there was a proper UK competitor for Google, even a small one - but I will do it.

And of course, I'm writing this diatribe on a blog hosted by Google, the great absentees.  Will they censor it?  Of course they won't - because there is nobody there to read it.

Government responds to the Boyle Review

This time last year, I was preparing to start work on the government's independent review into barriers to choice in public services.  My pencils were sharpened, my only suit pressed, my plans not quite formulated.

I eventually reported to the Cabinet Office and Treasury in January, and the result has become known - rather embarrassingly, but this is the way they do things in government - as the Boyle Review.  It received an unexpectedly enthusiastic response from the Cabinet Office ministers, and from Danny Alexander at the Treasury who had been so involved in commissioning me.  I went away relatively confident that the government broadly agreed with my approach and proposals.

Before I go on, let me just say what that approach was.  The core of the review was to get out there and talk to the users of services, and find out about their experience of 'choice' - and check what I heard with a major poll - and reach some conclusions:

• First, that the bureaucratic barriers to choice remain powerful if you are less confident or articulate; and if you want something slightly out of the mainstream then there is inequality present in the scope of choice available to everyday people across the UK.
• Second, people, especially the disadvantaged, need information and advice on what choices are available to them, yet often this proves problematic. Some people do not easily have access to the internet and this makes it even harder to find out what choices are available, and they also want face to face advice to make sense of it; 
• Finally, the kinds of choices people think they are getting are often not what they are being offered in reality, and there is a need for more flexibility in the way services are delivered.

The last one was really key to it.  Competition has a place in public services - there is no reason why people should put up with poor services - and so does online information.  But choice needs to be so much more than that, if it is going to provide people with the services they want - it needs to provide a series of levers that allow for service flexibility.  

I called that 'broad choice' to distinguish it from the narrow, formal choice that the system has been struggling to provide so far.

So I'm pleased that the government's 'initial response', published today, is so positive.  I'm glad they use words like 'enlightening'.  I'm pleased they have supported seven out of ten of my recommendations - though this slightly obscures the full truth, which is that some of these were happening anyway and some have been agreed by especially careful wording and are not really quite what I meant, as they must know.  Such is the world of government, and I understand that.

I am pleased that they agree with my proposal about publishing information comparing the performance of schools achieving the best outcomes for free school meal children.

 
I'm glad they have accepted the 'co-production' recommendations about social care assessments, which are now in the Care Bill - more on that another time.

I'm particularly glad that they have agreed that there will be an advisor to the Prime Minister who will "champion broad choice across public services and work across departments and services to tackle barriers to choice."  

I take this to mean that they accept my basic premise that choice needs to be broadened out if it is going to be (a) meaningful and (b) effective.  It rather depends on who they appoint, of course.  I know who I want them to appoint (and I'm not going to ruin their chances by naming them here).

Where I am disappointed, it is because the whole thrust of the review, and so many of the conversations I had with service users - not to mention the poll findings by Ipsos-MORI - suggest that, for a good third of people using services, online information simply isn't enough.  So, although online information is important, face to face contact is absolutely vital if everyone is to get the kind of choices they need.  

I proposed a way forward which evidence suggests would also save money: extending the growing role of peer support volunteers into giving signposting and choice advice.  This is what they say:

"We will explore how to take this recommendation forward including expanding existing programmes; improving awareness of peer support programmes and looking at how we work with mentors and volunteers."

That isn't a no, but it isn't quite a yes, yet.  I am assured that they are looking at the best model for taking this forward, so we shall see.  But this is a vital reform, merging the co-production and the choice agenda, which would do more than anything else to bring choice - broad or narrow - to the whole population.

I won't be the only one to detect a defensive note in the response.  This reveals, perhaps, how nervous some departments were when the review began.  But there is no need to be defensive.  The government was brave enough to commission me to see what was really happening on the ground - people's real experience of choice.

The difficulties I found won't be solved overnight, and everyone understands that.  But my impression is that the narrow choice agenda, which requires a huge infrastructure of watchdogs and competition institutions, may have got as far as it is going to for a while.

I believe in choice, and choice beyond simply encouraging competition - not just because it is good for service users, but because flexibility is good  for public services too.  Sclerosis is expensive.  

Whether my review will turn out to have found a way to revitalise the choice idea depends on what happens next.  Watch this space...

More on my review (please ignore terrible picture of me) in Civil Service World interview.  See also coverage back in January.

The great paradox: concentrating on cutting costs drives them up

Down in the forest, something stirs.  Shhh now, don't scare it away.  Something is emerging from Labour's policy review, at least according to John Harris in the Guardian.  It seems to include a combination of three approaches - or is it four, I can't quite grasp which.  And they are as follows:

1.  Balancing the budget over a decade, involving an approach to austerity that Harris quotes insiders as calling 'brutal'.

2.  Growth led by house-building.

3.  Re-thinking how the public sector fits together, with an emphasis on prevention - which is a success for my colleagues at the New Economics Foundation who are among those pedalling exactly this.

4.  Turbo-charged localism.

My first thought about this, apart from the fact that it will divide the Labour Party, is that it appears to be an attempt to borrow the coalition's rhetoric and make it work rather better.  Perhaps even along the lines the Lib Dems might attempt if they had a free hand.  Hence the controversy.

My second thought is that turbo-charged localism is not, never has been, and probably never will be, something the party of Beatrice and Sidney Webb will be able to carry out in practice.  But, hey, perhaps I will be surprised.

But what really interests me is how balancing the budget and reorganising the public sector might fit together - and could still be made to fit together by the coalition.  Because to genuinely reduce the cost of public services, you really need a big idea about how they might work differently - you need a diagnosis and a prescription.

The coalition has a diagnosis - they understood the disastrous effect of targets - but no prescription that really fits it.  New Labour had a prescription but a faulty diagnosis.

Without the diagnosis, public service reform just becomes public service cuts, and they often lock in costs elsewhere in the system.  I have written before about how historians covering these years will regard our main story as the looming crisis in public services, and the race against time by empowered service professionals to come up with the ideas they need to re-configure them.

But it is worse than that.  Without a big idea behind spending cuts, any government gets impaled on the horns of a dilemma described so powerfully by the systems thinker John Seddon:

"The truth is counterintuitive: focusing on costs drives costs up. It doesn't take a rocket scientist to work out that we'd be better off if we could design a service that meets people's needs, quickly, effectively and once."

There is the great paradox which has eluded successive governments.  If you focus on cutting costs, the costs will rise.  If you try and provide a more effective service - which might well not be digital by default - then costs will fall.

Seddon is an important figure in all this.  He is the presiding genius over a whole range of related ideas that, taken together, would completely transform the effectiveness of our services.  Before the election, I took him to see Vince Cable, hoping they would hit it off (they didn't really get the chance).  After the election, I organised a debate at the Royal Society of Arts with him under the title 'The New Efficiency'.

He remains a kind of king-over-the-water for the kind of service manager who is most frustrated by the direction of public service reform over the past decade. 

Seddon's frustration with Whitehall is expressed in a wonderful monthly e-newsletter which has become required reading in local government circles because it is so enjoyably rude.

He isn't right about absolutely everything - this isn't a hagiographical blog - but I have come to believe that he represents the wave that is about to break over public services.

Perhaps Labour will run with this approach, and the related approaches I describe.  Perhaps they won't.  Perhaps the coalition will realise, at this late stage, what needs to happen.  I don't know.  But the wave will eventually break, sweeping the whole caboodle of lesser ideas - Lean, digital by default, payment-by-results - into history.

To save Europe, the euro has to go

As a blogger, I would like to claim that I am immensely prescient.  The truth is usually otherwise, unfortunately.  But there is one exception, which I can't help mentioning.  This is what I said in my first Lib Dem conference speech in 2001 (actually, it was my second, but we draw a veil over the first):

"There is a fundamental problem at the heart of the euro that makes me fear for the future of Europe. And it’s this: single currencies tend to favour the rich and impoverish the poor.  

They do so because changing the value of your currency, and varying your interest rate, is the way that disadvantaged places are able to make their goods more affordable. When you prevent them from doing that, you trap whole cities and regions – the poorest people in the poorest places – without being able to trade their way out...

That’s the danger of the euro as presently arranged, and don’t underestimate it. It means success for the cities that are already successful. It means a real struggle for the great Lib Dem cities of Liverpool and Sheffield. It means a potent recruiting ground for the next generation of fascists in the regions that no longer count."

I can't say I convinced the hall or won the day, and there are obvious elements which date this - Lib Dem Liverpool, for example, and the fact that I was talking about Britain in the euro, which never happened, thank goodness.  But I was right, and the plight of Greece and other countries in southern Europe make it all too clear.

Apart from celebrating a rare moment when I called it correctly, my reason for writing about this now is that UKIP and an imploding Conservative Party are not the only reasons why the European Union is a key political issue.  The truth is that Europe is facing its own crisis, and that crisis stems largely, but not entirely ,from the euro.

It was, and is, a Napoleonic project, dangerously centralising, naive in its economics and potentially terrifying in its effects - as the rise of the Far Right and other weird peculiarities suggest.  It transforms the EU into a colonial project, demanding abject agreement from economies that cannot work with an interest rate set to suit the German economy.  It is bound to fail and, until it does, it threatens to bring down the European Union with it.

I have often wondered whether it was historically inevitable that the UK would eventually leave.  We always find ourselves resisting Napoleonic projects.  We always resist ultramontanist ones too and any other centralising directives from Rome - or Brussels, as we call it these days.  We follow the Reformation path and it may be inevitable that will repeat Henry VIII's secession.

I am not in favour of the European Union because I believe in the central control of the continent.  Or even because it is a de-regulated trading bloc - though it is this aspect of EU rules that the UKIP tendency usually objects to (and even leaving the EU wouldn't rid them of regulations governing electrical goods or the shape of vegetables).  

I am in favour of the Union because it has kept the peace of Europe for two unprecedented generations.  A European war is unthinkable now, but it wouldn't be unthinkable without European institutions that can settle disputes.

That is the moral case, the Liberal case, for Europe - and the celebrations in August 2014 are an opportunity for putting the case again.  

But we can't assume that the European Union can be a Liberal institution, because that is now in doubt.  These issues are tough ones for Liberals, because I don't believe the Union can survive as the policeman of a single currency.

The euro might survive, but not in its current form as the only currency for most of the continent.  We don't have to go back to national currencies, though regional ones would be useful - and may emerge by default from the struggling cities of southern Europe.

Either way, the sooner the great straitjacket can be loosened and the Napoleonic yoke lifted again, the better for all of us.  Then maybe the Union can survive.  But not otherwise, and - if it doesn't happen soon - the UK will have left it, and that would be tragic for both sides. 

How privatisation ran out of steam

The word ‘privatisation’ has a chequered history. It was actually coined as ‘reprivatisation’ by the Nazi Party in the 1930s, as a way of handing over government functions to loyal party officials. The phrase was then borrowed by the great management writer Peter Drucker in 1969, proposing that governments use the talent in other sectors to deliver some of their objectives. “Government is a poor manager …. It has no choice but to be bureaucratic,” he wrote.

That was the basic idea that was taken up by Conservative thinkers in the 1970s. Sir Keith Joseph’s Centre for Policy Studies produced a pamphlet in 1975 which set out the case: “There is now abundant evidence that state enterprises in the UK have not served well either their customers, or their employees, or the taxpayer, for when the state owns, nobody owns and when nobody owns, nobody cares.”

It was a powerful proposition.  But it wasn't until their second term that Margaret Thatcher's ministers grasped the sheer power of the privatisation idea. It was obvious to anyone who tried to use them that the nation’s telephone boxes were largely out of order, and so the privatisation of British Telecom in 1984 was a popular move. As many as 2.3m people brought shares. 

Three years later, the Treasury had earned £24 billion from privatisation, and the sale of British Gas provided four per cent of public spending for 1986/7. The idea of privatising state industries had spread to France and the USA and Canada. Even Cuba and China were testing it out. 

The merchant bank Rothschilds had set up a special unit to organise privatisations, under the future Conservative frontbencher John Redwood, and Conservative theorists were muttering darkly about selling off the Atomic Energy Authority and the BBC. In fact, selling nuclear power stations was the thin end of the wedge. No amount of spin could disguise the fact that they weren’t economic.

The original impetus to sell BT was partly to find private investment for telecoms and partly because of Drucker’s original idea that private companies were more efficient.  

Privatising public services would break those bureaucratic straitjackets, and get a new entrepreneurial energy about the place. They would focus on customers. Things would happen. There would be enterprise and imagination. The human element would weave its magic.

But it didn’t happen. The early privatisations led to dramatic increases in effectiveness but, after that, things slowed down. Private corporate giants turned out to be as inflexible and hopelessly unproductive (at least as far as the customers were concerned) as the public corporate giants: they just provided considerably fewer jobs. 

Often the costs remained much the same. Most privatised services are as sclerotic, inhuman and monstrous as their predecessors were.

By the time New Labour was privatising, and experimenting disastrously with PFI contracts that locked in costs for a generation, the supposedly efficient private utilities are largely in the grip of the same illusions about efficiency as the public sector, with phalanxes of call centres, targets and standards, and had become as inflexible as any nationalised industry. 

“We are committed to a market economy at the national level, and a non-market, centrally planned, hierarchically managed economy within most corporations,” wrote the Observer columnist Simon Caulkin at the time.

So Peter Drucker was wrong. As it turned out, big companies and big contracts tend to become bureaucratic too. The point wasn’t that private was better than public, it was that small was better than big, because small allowed for the human element.  Ownership wasn’t important, at least in its strict sense. 

Even so, it was Drucker who provided the clue. Anyone can be an entrepreneur if the organisation is structured to encourage them:

“The most entrepreneurial, innovative people behave like the worst time-serving bureaucrat or power-hungry politician six months after they have taken over the management of a public service institution.”

And so it proved.  

So if privatisation isn't the answer - and most sane people regard it as a recipe for sclerosis and corroding standards for the Post Office - what is?  How do you provide the kind of flexibility and human-scale imagination to make organisations work?  It certainly isn't the profit motive - nobody who phones a BT call centre these days could believe that.  It isn't public ownership either, at least not by itself.

I tried to answer the question in my book The Human Element.  Mutualism certainly provides a clue, but is probably not enough by itself either.

I got another clue from the chief executive of a major health social enterprise I met while I was carrying out the independent review for the Cabinet Office.  He told me he was delivering health and social care services across a wide population, but still on a small scale compared to working in the public sector.

He also told me he had felt he had to leave direct employment by the NHS in order to re-discover the values of the NHS.  Of course, he is still delivering NHS services and in a highly flexible and responsive way - but he has the room for manoeuvre to use his imagination and the imagination of his other staff, and of course the imagination of the people he is delivering services to.

This seems to me what Karl Popper meant when he talked about “setting free the critical powers of man”.  The very heart of modern Liberalism.

Will Post Office privatisation set free the critical powers of the people who work there?  Believe that and you will believe just about anything.

Lawson, Chamberlain and the Great Tory Faultline

Nigel Lawson is one of those strange, very successful individuals, who is often right in small things but has been staggeringly, stratospherically wrong in big things.

He was wrong about encouraging people into debt to buy homes (see my book Broke), wrong about the house price inflation that would result.  He was wrong about Big Bang and about personal pensions.  He has been horribly wrong about global warming (carbon dioxide levels hit 400 ppm for the first time this week).  Now he is wrong about Europe and Britain's future.

Here are six reasons why he is wrong that we need to ditch the EU and throw in our lot trading with the Far East:

1.  Long distance trade is going to get increasingly expensive as energy prices accelerate.

2.  Our biggest markets are in continental Europe and it seems bizarre to lock ourselves out of those privileges for the uncertainties of China.

3. It isn't clear why we should be any more successful trading with the Far East outside the EU than we are inside the EU.

4.  To trade there, we particularly need manufacturing industry which - thanks to the high pound caused by the North Sea Oil era - we no longer have, at least not on the scale we need.

5.  Given that, if we are intending to concentrate our trading efforts in financial services, then it will unbalance the UK economy even further and corrode our own real economy.

6.  Trading primarily with the Far East will mean reducing wages to their level if our own services are going to be competitive, and this will exacerbate our economic problems.

But despite all this, the interventions of Lawson and Lamont this week will have a familiar ring about them for political historians, because the Conservative Party has always been split three ways on trade:

(a)  Free trader internationalists looking for regulated markets (Kenneth Clarke, Damian Green and the pro-Europeans).

(b)  Turbo-capitalism aficionados, looking for extreme de-regulation - not actually free trade in its traditional sense (see my blog on this) (Nigel Lawson).

(c)  Mildly xenophobic nationalists, tariff reformers and Little Englanders (the UKIP tendency).

Most of the parliamentary Conservative party comes under the heading of (a) but daren't say so.  A fatal division seems to me to be emerging that could not just sink the coalition but looks remarkably like the disastrous intervention by Joseph Chamberlain in 1903 on what was then known as tariff reform, a kind of Fortress Empire policy that later inspired Oswald Mosley, and closest to (c).

Chamberlain's campaign split the ruling Conservatives, and the government was held together entirely by the tenacity and skill of the Prime Minister Arthur Balfour, who kept his hands very close to his chest indeed.  It was at this point that one of Balfour's closest allies described himself as having "nailed his colours firmly to the fence".

The chaos that ensued allowed the Liberals in with a landslide victory in 1906 so complete that it was able to lay the foundations of the welfare state.

Here are a few lessons we might do well to learn from that.  First, there is nothing in common between (b) and (c) except a scepticism about the EU.  Lawson and UKIP are actually pedalling very different political philosophies indeed, and this will become clear as UKIP sets out its stall.

Second, the Liberals won against Chamberlain by uniting the nation in favour of the old Liberal version of free trade, because it underpinned national prosperity, affordable food and world peace.  That is how any defence of the European Union needs to be cast.

Train fares, Legoland and the reason prices rise

Two things have made me feel poorer than I really wanted to yestoday.  The first was a tweet by Steve Richards, the political columnist:

"On train to York. The ticket, not paid by me, is £249, second class. Can't get a seat."

Rather a familiar scenario that one.  Of course, he has an open return, but we all used to get open returns not many years ago.  A second class open return really isn't the height of aspirational luxury.

The second happened when I took my six-year-old to the barber's shop in Crystal Palace and found myself idling away my time reading the Sun, and there was an advert for their Saturday paper promising that they will be giving away two free tickets to Legoland in Windsor, worth - and here's the rub - £91.

Now, again I know there are cheaper ways of inserting your family into Legoland.  You can book online and in advance and get ten per cent or so off the price.  Perhaps a little more.  I don't understand the complexities of the pricing system any more than I understand the complexities of rail ticket pricing.

But I admire the non-technological simplicity of Lego.  My children have wanted to go to Legoland for months and talk about it most breakfasts (reminded by the Rice Krispies packet).  But there is no way I'm going to go there if I can't get the family in for less than £150, and this seems unlikely.

I started this month writing about house prices and the rents the result, and the news today is that you need a salary of over £38,000 to rent a one-bedroom flat in London now.  If house prices rise in the next 30 years as they have in the last 30 years, the average UK house - not London house - will cost £1.2m, as I explained in my book.

But the way that the financial elite have pushed up prices for everyone is far more widespread than simply a roof over the head.  Because some business expenses run to £249 tickets to York, then the price rises that high.  Because some families will pay £150 just to get into Legoland, then that is where the prices rise to.  There are reduced price options for ordinary people - for the moment at least - and rules that allow us to afford to squeeze into these privileges, but that is what it is.  Concessions.

It is strange that the world of foreign exchange trading and Big Bang, and all the privileges given to the financial elite, were given in the name of fighting inflation.  That was the central objective of Margaret Thatcher's government.

Yet, in practice, the rapidly increasing gulf between us and them in our society is now fuelling inflation - until the point where many of us could no more afford a home in the neighbourhoods we grew up in than fly to the moon.

Inflation caused by too much money sloshing around the financial world - and by the blind eye turned to monopolies by successive governments.  The rest of us live on concessions, as long as we are allowed to.

I rather set the cat among the pigeons with my Comment is Free piece in the Guardian this week called 'Why everyone needs the middle class'.  There were more than 800 comments on the end of it, so I know this is just at the beginning of a wider debate.  But I am trying to construct a political narrative that can attract right and left - because that seems to me to be the only way of making anything happen.

It is the only way that, paradoxically, we can rein back some of those accelerating prices, and break out of the little box made for most of us marked 'concessions'.

A six-point plan for a Liberal populism

Years ago, I happened to come across a set of statistics that related to self-employment, broken down by parliamentary constituency.  I had always believed there was some correlation between independence and Liberal-mindedness, and here it was in black and white: most of the top ten constituencies for self-employment were bastions of political Liberalism too.

I thought this was rather important and happened to come across the Lib Dem leader a few days later (I won't say who in case this seems like a criticism, which it isn't) and told him about it.  He wasn't nearly as enthusiastic about this revelation as I was.

"We don't want to be Poujadist about it," he said.

Now Pierre Poujade, for those who weren't politically aware in the 1950s (I certainly wasn't), led a populist revolt in France by small shopkeepers and eventually found himself elected to parliament (Le Pen was his youngest elected deputy).  Poujadism has become a byword for the kind of xenophobic, anti-intellectual populism, based on a squeezed lower middle class, that most terrifies the political establishment.  Not for nothing did Poujade call the French National Assembly the "biggest brothel in the world".  There is a sort of UKIP whiff about it all.

Fear of Poujade and his kind makes the conventional political parties - with their technocratic graphs - particularly vulnerable to movements like UKIP, when they are intelligently led.

But I've been asking myself whether it might be possible to construct a populist Liberalism capable of taking on the Poujadists and beating them.  Here is my six-point plan for doing so.

1.  Take a deep breath, make a pot of tea and do a great deal of talking - preferably to some regular users of public services - claimants, parents of children in failing schools, and/or people with long-term health conditions.  Take notes.

2.  Accept the full truth: many, if not most, of our public institutions have been hollowed out by poor management, bone-headed IT systems and centralised targets - and are only kept alive by the courage and devotion of frontline staff.

3.  Order the collected writings of Ivan Illich (see photo above) and read them, and imagine what kind of policies one might hammer out if he had been right - and institutions really did have the opposite effect to their declared purpose.

4.  Take a second look at the euro, and ask yourself again whether the same interest rate can possibly suit every part of the continent of Europe - and (be honest now) whether it might actually have encouraged the Poujadists after all (difficult, that one).

5.  Take a blank sheet of paper and work out an emergency plan for providing people with the energy, healthcare, education and support they would need if conventional channels suddenly became impossible.

That's 5.  But you said a six-point plan?  I know, but I haven't worked out the sixth point yet.  Please give me a hand, anyone who happens to stumble across this.

The key difference between conventional politicians and populists is not hatred - you don't have to hate to be a populist.  It is the understanding that our institutions are no longer effective.  These are the very institutions so beloved of conventional politicians who play their tweaking games and look at their wholly irrelevant statistics - unaware that the statistics machine has become disconnected from the frontline thanks to Goodhart's Law.

What I'm saying is that the essence of populism isn't xenophobia, it is scepticism about our institutions, just as UKIP tend to be a little sceptical of the EU (I put this gently).

That is the key central truth of populism.  It is also their strength.  It enables them to portray themselves living in the real world, rather than in Westminster - where things still seem to work - as realists in a world of illusion.  It is also a strength because it is largely true.

And if you don't believe me, read my book The Human Element.  Or if you can't face that, try Harriet Sergeant's brilliant account of gang life in Brixton, and see the reality of these expensive institutions, paid for by taxpayers on the ground, but achieving so little when it really matters.

Because, it seems to me, that unless Lib Dems do this - or somebody else with an enlightened outlook - then the Poujadists will get the edge.

Whatever you do, don't mention the word 'class'

This morning, I had a go at setting out some of the strange experience it has been writing on class.  You can read it on Lib Dem Voice:

http://www.libdemvoice.org/opinion-can-the-middle-classes-get-some-political-clout-34450.html

There was I trying to weave a new political narrative that could potentially unite most classes behind it, and the interest and support has been wonderful - but the abuse has been extraordinary too.  I got 750 comments on my Comment is Free article for the Guardian earlier in the week, some of them supportive, some of them downright insane.

Part of the problem seems to me that any mention of class on a book cover seems to absolve some people from reading the book before coming to a conclusion about it.  I have heard from people from every part of the political spectrum - some of whom fundamentally disagree with the thesis that we are heading to a controlled and struggling proletarian society, controlled by a powerful mega-wealthy elite at the top.  Some of whom agree, but don't mind as long as the middle classes get wiped out.  Some of them, well, don't let's go there...

The real issue is why the mainstream political parties no longer represent the middle classes - we already know they don't represent the working classes.  The coalition got the rhetoric right back in 2010 with the ambition to 're-balance' the economy, but seem unable to find any effective levers they can agree on to do so.

Mainstream policy still seems to be designed to recreate the conditions of the last bubble, and to allow the very wealthy to hoover up even more money - apparently on the grounds that the City pays quite a lot of tax (a recipe for increasing inertia and dependence).

The ineffective banking oligopoly still rides high.  There is still no community banking infrastructure as other countries have.  Local government has been set free by the Localism Act and other measures, but many of their leaders are still waiting hopefully to be bailed out by central government or external investors - rather than acting to make their local economies work.

It is all very frustrating.  And into the middle of this spins a populist force, with no apparent interest in the economy - but riding the frustrations caused by its failure - and encouraging the mainstream politicians to look elsewhere at our fraught relationship with Europe as the source of all solutions.

"So stupid in politics," said George Bernard Shaw of the middle classes.  But imagine they did grasp how they are being priced out by the elite, and decided to act politically - to hammer out a series of policies that genuinely promised a sustainable income and a roof over the head for the next generation.

What would happen then?

Towards a bit of human-by-default

There is a point in the film Gandhi when the man himself says that: "When I despair, I remember that all through history the way of truth and love has always won. There have been tyrants and murderers and for a time they seem invincible but in the end, they always fall - think of it, always."

I'm not of course accusing the Government Office for London (GOL) of anything of the kind, but I must say I did think of Gandhi when I walked past the site of their plush offices at the north end of Vauxhall Bridge, to find the whole building gone.

For those of us who suffered under their boneheaded rule - especially in the voluntary sector during the Blair years - the demolition of their building is a much-deserved fate. If they had acted like a regional office ought to, drawing down powers from central government and spreading it around, then maybe I would have felt a moment's regret. In fact, they went the other way, taking powers from local government and inserting their own miserable brand of utilitarian targets.

This is what I said in a speech on the subject in Coventry in 2006:

"This is the world the voluntary sector has stumbled into by accepting the task of delivering government services – or should I say delivering outputs.  It’s a delusory world where nothing is quite what it seems. Where outputs are more important than achievements. Where every charity has targets imposed by funders who have their own miserable yoke of targets to deliver as well.  Big fleas have little fleas upon their backs to bite them.

And each time the bites are passed down, they get tougher and more intransigent. So while the mandarins at the Treasury can be relatively relaxed about the standard of proof they require before acting, those Whitehall targets descend via funder to funder.  Until they reach the bottom flea – the poor charity which has to make something happen on the ground – by which time they have become a gradgrindian nightmare which bear no relation to reality.  

“If you can’t prove it, we can’t pay for it,” one of our time banks was told by their funder, the ultimate beneficiary of the Stalinist systems that emanate from the Government Office for London.  But they can’t prove it. How can they prove it? All they can do is desperately mould the reality into the targets."

Never in the field of human government has one agency frustrated so much.  The sad thing is that, although the coalition has grasped some of the problem with targets - the inflexibility, the failure of target systems to deal with variety - they haven't actually followed that insight through.  We have payment-by-results, which turbo-charges the target effect.  And we have 'digital by default', which - although it isn't exactly about targets - it also fails to deal effectively with the variety of humanity, because it reduces people to a set formula that may work sometimes but often won't.

The cognoscenti will realise that I am relying here on the approach pioneered by the systems thinker John Seddon.  I wonder if he ever encountered the terrifying GOL inaction machine.

All of which brings me to an amazing blog which pedals a similar view called systemsthinkingforgirls, including this particular post called Human By Default, the antidote to digital by default, which the anonymous author defines as:

"human services that are so human that they work well for all humans”.

I absolutely agree, and I tried to say something similar - at rather greater length - in my book The Human Element.  Human beings are much more flexible than systems and they have a great advantage: they can make change happen by building relationships.  Any digital by default policy that excludes this where it matters will redouble long-term costs.

Perhaps someone should put up some kind of memorial to inhuman systems on the site.  If only I could be sure that GOL-style target culture was actually dead.