It’s all about R. Lockdown critics don’t understand exponential mathematics

Quite early in the Covid-19 outbreak, policymakers told us that the critical thing to understand about managing the disease was something they called “R”. This is the reproduction rate: the average number of other people that anybody that catches the virus will infect. If it less than 1.0 the epidemic will fade away. More than one and the disease spreads exponentially. Discussion of R then dropped from view, with people focusing more on the absolute level of infection (usually given as cases per 100k). That’s a shame because R is central to understanding what has just happened here in UK, which also applies to most of the rest of Europe with small variations.

In those the dark days of March, R was a horrific 2-3. That meant the disease was spreading very rapidly through the population. For a moment people thought that might not be such a problem: that herd immunity would develop, and the disease would slow down as the number of potential carriers was diminished. But there are two major problems with this. The first is that if the disease spreads rapidly, then health services (and other infrastructure) become overwhelmed, and there s substantial collateral damage. And that is exactly what happened in the Spring. Hospitals started to fill up, requiring them to clear beds; people with other conditions suffered, and Covid-infected people were pushed into care homes to make room for others, with appalling results. The death rate across the country shot up, and not just because people were dying from Covid, though frightening numbers were. The second problem with the herd immunity strategy was that nobody knew whether, or for how long, catching the disease would confer immunity. It was quite an interesting example, incidentally, of how basing decisions on evidence is not quite as robust as it seems. What do you believe in the absence of evidence? In Britain people believed, absent evidence, that face masks were useless and that you would get long term immunity by catching the disease. There is no rhyme or reason to it being that way round. Too often people who ask where the evidence is are just sticking to their prejudices.

I digress. The only sensible response to an R of over 2 was strict lockdown, which was implemented in Britain on 23 March. This was remarkably successful (it is puzzling why some people suggest that it wasn’t). R came down to about 0.7, and the disease was beaten back to manageable levels in most places. But what next? The government eagerly implemented a general relaxation, while maintaining a certain number of rules on social distancing. By this time few people were talking about R, and it was hard to know what aim of it all was. I think it was felt that the relaxation would take the R back up to 1.0, but no further, thus keeping the virus at manageable levels. It is probable that a lot of faith was being put in the Track and Trace system to contain outbreaks as they occurred. And yet the system they built was not designed to achieve that level of rigour, which needs tough local leadership and timely data, both of which were practically designed out of the system from the start. The result was that R crept up to about 1.5. Much better than before, but also pretty useless in terms of managing the disease. If R is over 1, then the disease will rise up to overwhelming levels much more quickly than people will intuit, because of the exponential way in which the disease spreads.

The government’s next strategy was one of local local lockdowns. The hope was that these would reduce R to below 1 in areas were the prevalence had become high. Over the last few weeks two problems have emerged, though. First is that even with these stricter measures R is above 1, and health services are under imminent threat. Second is that R is rising scarily everywhere else, and to beyond 2 in some places. That meant that most of the rest of the country wasn’t in fact that far behind the hotspots. Just what was going on here will probably not be known for some time. Perhaps people in Tier 3 of the lockdown system felt bolshy because they were being singled out, and did not apply themselves properly to lockdown. Perhaps people in Tier 1 felt they could relax because they weren’t in trouble yet. Anyway, it is very clear that the regional response strategy has failed. And so we are back to national lockdown.

But schools an universities are still open, and weariness is creeping in as businesses fail and savings run out. The death rate is much lower than before (the rate of excess deaths remains negligible) and this is being used to suggest that we should just “live with” the virus. Some conservative newspapers (the Telegraph and Mail in particular) opposing lockdown, even though their recommendations would sentence many of their readers, more vulnerable than the average, to an untimely and horrible death, or perhaps just a long-term deterioration of health. Such critics have failed to understand the logic of R. It is not about choosing an acceptable level of disease and freezing it there: it is about stopping the disease before it overwhelms.

So how on earth do you live with the disease and retain a semblance of normal life? The only proven way is the Asian one (there are many variations, shown by China, South Korea, Taiwan, Japan and Australia and New Zealand). This requires the disease to be stamped out, mainly through strict lockdown, for inward travel to be heavily restricted, and for any outbreaks to be stamped on hard. For some reason Europeans, and not just the British, seem unable to do this (even the Germans are struggling). It’s even worse for the Americans. Asians, and interesting this includes Antipodeans of European heritage, seem much happier to comply with busybody regulations. Not all Asians of course: Indians struggle, as do Indonesians, Philipinos and a number of others.

Absent the Asian approach, thoughts turn to the use technologies that are not yet available. Vaccines may not be the silver bullet they are for diseases like polio, but they could still throw enough sand in the wheels of transmission to stop R getting above one. Mass testing, talked up by the Prime Minister Boris Johnson, offers ways of identifying infected people so that they can be isolated. That raises all sorts of questions.

Locally I have found the most informative source about the progress of the virus comes from the government’s interactive map. I have watched the infection rate steadily go up, with white ares (very low infections) moving to green, and green going moving to blue (over 100 per 100k); in my local patch it is 171. We’re keeping our heads down.

It’s all very depressing. The most important thing to understand about the spread of infectious diseases is that it is exponential. None of the lockdown critics I have heard or read seem to grasp that. And only a few understand that the critical thing isn’t the death rate but the stress on public infrastructure, including, but not limited to, hospitals. In the end it’s all about R.

Why localism is key to test and trace

Sometimes you have to keep banging away about something. For some time I have been complaining that the government’s system for providing tests for Covid-19, and then for its approach to contact tracing, suffers from a fundamental flaw of process design. I see this being occasionally mentioned by others, but the idea hasn’t caught on. So I will say it again.

This is relevant because the testing regime seems to be in a state of complete dysfunction. The government is not being transparent about what is going wrong, a an issue which is not unrelated, so I’m having to join some dots, based on a flood of anecdotal evidence from people at different levels in the system that have popped up on the news. The system has been overwhelmed by a surge in demand. Whether or not this should have been foreseen is one question, but taking a step back and looking at the outcome prompts another. This excess demand seems to have caused the whole system to fail, so that while testing capacity is very high (the government claims it is higher than in most other countries), all, or most, of the tests are taking far too long to return results, which completely undermines their usefulness. I have heard experts suggest that if results take longer than 48 hours to be returned, then they are of little practical use. That sounds about right. Results seem to be taking much longer than this in the official system, or at least that which serves most users (I think hospitals are linked to a different one, which might be working a bit better). The problem seems to be at “Lighthouse” labs where samples are analysed. The government suggests that this is just a numbers game: these labs have a capacity and demand is in excess of it, leading to delays – which is perfectly plausible explanation and doubtless at least part of the problem. There are other stories of staffing issues as these labs are losing temporary workers as the university terms start, and finding them hard to replace.

How to manage this? The first response is to stop people taking tests through the booking system, by telling them that they are unavailable, or only available hundreds of miles away. One story is that the only way that people living in the London suburb of Twickenham can get a test locally, rather than one in Aberdeen (in the north east of Scotland), is to say that they are living in Aberdeen. This is causing an immense amount of distress, which is feeding back in complaints to MPs. The government is now trying to impose some form of prioritisation on tests to give this more rationality. But that will be hard going, with goodwill in short supply. There is a least one new Lighthouse lab in the pipeline, and the government doubtless is placing its hopes on this. Alas any relief is unlikely to last for long. The whole thing gets much worse when the need for contact tracing is brought into the picture, where similar problems are emerging, though not, excess demand. The whole damn system is flawed.

What’s gone wrong? The designers of the government system are bewitched by the idea of scale economies. The unit cost of a large scale system operating at full capacity is generally very low. And because covid tests are basically quite standard, at first sight the building of such high volume facilities looks like a sensible way forward. When the government suggested that the system would be “world-beating”, this is doubtless what lay behind it, as many countries have gone for a much more artisanal approach. But that is only one aspect of process design. The problem comes from how you manage the whole process from end to end (i.e. from the moment somebody decides that they need a test to the moment they get the result). The more steps there are in the process, and the more disconnected their management, the less efficient the whole becomes. This can seem quite paradoxical. Each part of the system can seem to be operating well, but the whole can be dysfunctional, and doesn’t seem to be anybody’s fault. The problem is compounded by the the government’s preference for the use of mass-sampling facilities. People are sent to drive-in centres that are able to process large volumes. But these are often idle and simply make the whole process more disconnected. The symptoms of such a disconnected “silo” based process design are very familiar. Bottlenecks, queues, delays, lost files, and all the while managers working frantically hard at their own little section in the knowledge the the problems are all somebody else’s fault. And managers blaming users for making unreasonable demands. There is so much at stake in the overall design that nobody dares point out that it might be better to scrap the whole thing and start again. Instead they work on fixes that ameliorate the worst problems but make the whole process more cumbersome. In this case designing systems to prioritise demand.

What’s the alternative? It is to create local facilities that do the whole job end to end, or as much as possible. Best of all is if the testing function can be integrated with a similarly localised system of contact tracing, all accountable to a local director of public health, part of local government. Where possible staff should be able to cover multiple jobs, rather than specialising in just small parts of it. This is more or less how it works in Germany, among other places. Such a system cannot solve all problems. It may not be able to overcome shortages in critical supplies (reagents for tests, and so on), though managers are more empowered to find work-arounds. How would it cope with excess demand, as is happening at the moment? It is superior in several ways. Firstly because managers are likely to have a better overview of the whole system, problems are more likely to be foreseen. Secondly bottlenecks are more easily fixed. It is easier to recruit two or three extra staff in a local centre than a couple of hundred in a centralised facility. And where there are problems, they will not bring the entire country to a halt. And finally communication with the end user is likely to be far superior, as they are much closer to a knowledgeable, human interface.

These principles have been well-understood since the 1990s (when I used them to reorganise processing operations that I was managing). Alas the government, and those it appoints as advisers, are far too wedded to the imperial silo-based model and seem incapable of understanding that they are dealing with poor systems design rather than a few teething difficulties. Doubtless the silo approach works well in some contexts. But not here. But quite why the lessons of the 1990s are so widely forgotten in 2020 remains something of a mystery to me – my guess is that managers and politicians have been distracted and beguiled by new technology.

Henry Ford’s shadow: from France 1944 to Covid-19

A Sherman tank of the US Third Army in WW2

In September 1944 the US Third Army under General George Patton approached the Eastern French city of Nancy. Its vehicles, notably Sherman tanks, had driven there under their own power after landing in Normandy in July. And not by the most direct route: the army pushed south from Normandy before turning east. This journey of hundreds of miles, with rail networks unavailable, had taken a very low toll on the army’s vehicles, including the Shermans. The Germans were organising a counterattack. But their Panther tanks had to make the trip mostly by rail, subject to Allied air attacks, and a third of their strength broke down while driving the 30 or so miles from the railhead to the jump-off point.

This was a triumph of US engineering and industrial organisation. The Panthers had a much better gun and thicker armour than the Sherman, but that was no use if they couldn’t make it to where they were needed. American industrial superiority was repeated everywhere: air, land and sea. Robust, well-designed weapons were put into combat in overwhelming numbers. The Germans produced clever designs in all these fields, but their artisanal industrial organisation led to unreliability, limited production capacity, and often, as in the case of the Panther, designs that were hard to fix when they went wrong. The Americans outshone their German and Japanese enemies and their British allies. Only the Soviet Union could compare. The Russians could not match the Americans’ production quality or sophistication, but their designs were robust and factory output reached the battlefields in vast numbers. They didn’t need to last long when they got there. Only for lorries did the Soviets crave those vehicles made in Detroit.

It is often assumed that the way the Americans and Russians outproduced their enemies was just a matter of scale and resources. But that is not so: superior industrial organisation was necessary for those nations to respond with the speed that they did to the German and Japanese onslaughts. They also needed strong military organisation and tactics: and both nations also had these, though the German methods continued to outshine both until mid-1944. But the lessons of military organisation were quickly forgotten when the war ended, whereas industrial organisation was needed to win the peace. It is no wonder that the way their industry won the war so dominated public policy in America and the Soviet Union, and in Britain too, as it tried unsuccessfully to emulate American prowess.

And what was the American method, successfully used also by the Russians? It was the production-line, developed in the motor industry by Henry Ford. Its key features were the use of standardised designs (“Any color as long as it is black”), simplified as far as possible, high technical specialism in the workforce, segregating human tasks so that minimal skill was needed, and a highly centralised, hierarchical command and control structure. And above all it celebrated economies of scale, the expectation of which became the standard for business and political elites Small was regarded as necessarily inefficient. It is an approach suited to those with an imperial frame of mind, so it is not hard to see why it was popular with Russia’s Communist leaders, and even in post-imperial but backward-looking Britain. It is interesting that it took such hold in democratic America, but the scale of that country invited imperial thinking too amongst it is business leaders.

But the Henry Ford method has weaknesses. It is slow to respond to change, and becomes very inefficient where a feedback loop is needed between user and supplier, or any area where complexity is built-in. Bottlenecks, delays and queues become routine. Furthermore organisations built around the production-line mindset, especially outside the urgencies of wartime, become ossified, divided into fiefdoms that fail to cooperate. But leaders remain locked into its thinking. When things go wrong, the management response is to tinker, by adding bureaucratic controls that slow things down and promises that lessons have been learned that always disappoint in their results. That the Henry Ford method was failing first became apparent when Japanese manufacturing started to outcompete American and British firms in the 1960s and 70s. At first this was put down to “cheating”: underpaid workers doing excessive hours, and so on. But then managers started to realise that the Japanese had been adapting their manufacturing techniques using an idea referred to as “Total Quality Management” (TQM), which involved much more delegated decision-making, and organisation-undermining cross-departmental teams. This realisation came too late for most of British manufacturing industry, with the motor industry weighed down by mediocre management and bad industrial relations, often driven by demarcation disputes, a common outgrowth of Fordism. The new ideas were beyond the imagination of management and union leaders alike. America embraced the new ideas more successfully, notably by Jac Welch’s General Electric in the early 1990s.

But the world was moving on, as Baumol’s law started to diminish manufacturing industry’s economic importance, just as it had done to agriculture a century before. Service industry became critical, and services are less easy to fit into a standardised mould. At first management thinkers adapted their manufacturing techniques, arguing that services were just another product. But by the mid 1990s thinking had moved on to an idea that was centred on a service mindset, where manufacturing products were seen as just another service. This was Business Process Reengineering (BPR). The user experience became central to business organisation, delegated decision-making critical, and layers of hierarchical management were dismantled. This was catching on just as I was taking responsibility for a mediocrely performing organisation administering savings plans. I used it to reorganise everything, doubling productivity and improving quality of output too (actually, that was linked). This was a heady time in management thinking, with optimistic “both and”, and “win-win” ideas taking hold. In Britain the most eye-catching business using BPR was Virgin Atlantic, offering a superior travelling experience at a reasonable cost. It even infected Tony Blair’s New Labour, who took on the heady optimism of leading business people, with the idea of “Stakeholder Capitalism”. Mr Blair’s subsequent period in office showed that he had no idea about what all this actually meant, however.

But then things turned darker. The rise of the internet was the most eye-catching aspect of this: but there is no reason that this should have undermined BPR thinking. A bigger issue was the rise of cheap labour in Asia, which new technology could help tie into longer supply chains. Meanwhile managers were bewitched by the idea of “Shareholder Value”, which quickly pushed away the fuzzier and more inclusive thinking of Stakeholder Capitalism. This legitimised management and shareholder greed and corporate empire-building.. The customer experience was given lip service but not priority. Ryanair replaced Virgin as the airline success story.

And Henry Ford made a comeback, with a twist. That was that businesses embraced outsourcing (Ford wanted his organisation to do everything itself), which improved communications technology now enabled. But hierarchical management, standardisation, deskilled work (preferably done by robots) and economies of scale reestablished themselves in the way managers thought about organising work. New technology, it was thought, could make up for Fordism’s defects (more recently with high hopes being placed on artificial intelligence). Conservative ministers in Britain accepted this without question as the remade public services by reorganising and outsourcing to firms that embraced the new Fordism.

Which brings us to Covid-19. A lot of the way Britain has organised itself to meet the challenge reflects Henry Ford thinking. This particularly applies to testing, but also to PPE procurement and the contact tracing system, which has been outsourced to one of the usual large-scale suppliers. And the weaknesses of the Henry Ford approach have become evident. Queues, delays, bottlenecks; promises made by management that cannot be kept; bureaucracy being added in to try and make a broken system work better.

But some countries never fell for Henry Ford ideology. Service efficiency is legendary in Switzerland partly because they never embraced large-scale thinking, and they know instinctively how organise and delegate decisions so there are no delays and queues. Germany stuck with its artisanal, delegated approach, with much of its modern industrial prowess driven by medium-sized companies, which Forders would dismiss as being sub-scale. In German Covid contact-tracing is done by small local and professional multi-functional teams who carry out their own tests; in Britain newly recruited tracers helplessly sit by their computers waiting for referrals to come through, while their German counterparts are kept busy, using local knowledge to solve problems. British political and business elites fail to comprehend. It is probably too much to hope that Henry Ford’s ghost will be one of the casualties of Coronavirus.

The Coalition at 10: the wrong turning on public services

Ten years ago, when the Conservative and Liberal Democrats entered coalition, there was a certain energy about the way the new government wanted to approach public services. Gone would be the lumbering, heavy-handed nanny-state of “New” Labour. In would come something more focused, less costly and with a greater community involvement. The Economist enthused about the coalition’s apparent radicalism. In 2020, almost nobody remembers this energy. If the verdict is not entirely negative, the Coalition’s record on public services was more failure than success. It is as well we try to understand why that was.

The energy came from a meeting of minds between the Conservative modernisers led by the Prime Minister, David Cameron, and the “economic liberals” from the Lib Dems, led by his deputy, Nick Clegg (often referred to as “Yellow Bookers”). Neither faction had a secure grip on their own party, but there seemed to a meeting of minds across the coalition’s leaders. Alas neither leader had a strong grasp on how to manage public services, and most Conservative ministers had their own take on how things should be done. The left has made its principal line off attack on “austerity”, and blamed lack of funding for the coalition’s failures. But problems went much deeper than this.

At the start, though, it is clear that something needed to be done. After 13 years Labour’s public service policy was both bogged down and bloated. Labour’s strategy had been borne out of a tension between Tony Blair, who favoured business-friendly and market-oriented approaches, and Gordon Brown, who favoured top-down discipline and expanded budgets. Mr Brown won, mostly. The result was mountains of guidance coming down from on high, a highly complex system of numerical targets, and in the case of the NHS, a massively over-engineered commissioning system (“world-class commissioning”) supported by the biggest and most complex transfer-charging system in the world (“payment by results”). It was a job-creation scheme for management consultants, whose output was blather designed to incorporate as many as possible of the favoured buzz-words, and a slow atrophy of decision-making. Labour had achieved a lot in their 13 years, raising health spending and driving up standards in schools, but by 2010 the whole system was looking more than tired.

Unfortunately the Coalition found that sweeping out the nonsense was easier than replacing it with something better. The first thing to fall by the wayside was any idea of community engagement. Mr Cameron had promoted this through his idea of a “Big Society” which overlapped to a degree with the Lib Dem idea of community politics developed in local government. But Whitehall, both politicians and civil servants, jealously guard their power and nobody wanted to make concessions to interests not represented in Westminster’s lobbying industry. I had a sharp experience of this when local parents in Wandsworth tried to set up one of the government’s new “Free Schools”. This fitted the template of bottom up initiative promoted by Conservatives before the election, but the local, cross-party activists were quickly bundled out of the way, and the contract for the new school given to one of the well-connected academy-school groups. The Big Society was very quickly forgotten.

The next mistake was an obsession with structure over substance. The most costly mistake was a massive reorganisation of the NHS, which destroyed morale, but, to my knowledge, had very little benefit to show for itself. The minister in charge, Andrew Lansley, was given a free hand, and then sacked. Much of the new structure has shown itself to be useless or worse in the face of the pandemic, though that may have been as much to do with policies implemented after 2015 (such as cutting resources for public health), and hospitals have shown themselves to be in good shape organisationally. Another clear mistake was the energy put into the “acadamisation” of schools to take them out of local authority control. This proved to be a succession of costly errors. First managers of the new academies started overpaying themselves, then ministers found that academy chains were making the same mistakes that local authorities did. A huge amount of energy was wasted, and yet the country still suffers from the phenomenon of “coasting schools”. In both health and education the government would have been better off trying to make Labour’s structures work better.

A further mistake arose from a wrong-headed approach to outsourcing. There were two big problems. The first was a policy of divide-and-de-skill borrowed from the private sector. The idea was to divide services into separate functions, define their objectives, and then seek to meet these using as many untrained and inexperienced staff as possible. This may look fine on paper, but it is a complete misunderstanding of what public services are. Public services should be about solving problems, and especially the more complex ones, which will otherwise keep coming back at you. The private sector is not interested in solving people’s problems: it just wants people to keep coming back for more. Solvi8ng problems requires different services to be integrated, not carved up, and it requires highly skilled professionals to craft solutions around services users’ needs. The disaster that deskilling entailed is especially evident in social services and criminal justice.

There was one case where the government wanted to solve complex problems, using a people-centred approach implemented by skilled professionals. This was the troubled-families programme, which was to focus on 100 families that generated a totally disproportionate amount of impact on public services. Alas this fell foul of the second big problem: the idea of “payment by results” – the same words as Labour’s NHS transfer-charging system but with an entirely different use. The idea was to pay organisations more if they achieved measured results. Unfortunately, in the case of troubled-families, there was no good numerical basis of measuring success on the sort of timescale needed, so it simply led to the usual perverse incentives. Furthermore this type of remuneration ruled out smaller social enterprises that were unable to manage this type of financial risk, but which were more likely to embody the kind of public service ethos needed.

The coalition’s record was not all bad. The reform of university funding stood outside other reforms and was based on the recommendations of a commission appointed by the previous government, not to mention being led by two of the government’s more intelligent ministers – Vince Cable and David Willets. It secured additional resources for universities, allowing them to expand their intakes, including to more disadvantaged students. It compares favourably with the zero-fees approach used by the Scottish government, which forced universities to restrict access to the disadvantaged. Gradually people understand that the loan finance system works like a graduate tax, though the more recent imposition of high interest charges undermines this. That leaves plenty of problems with universities their financing, but it was a major step forwards.

Other bright spots on public services included improving school provision for disadvantaged pupils, through the pupil premium and better accountability, and a much stronger focus on mental health. But many big problems, like social care, were left unsolved.

After the coalition ended in 2015, the Conservatives doubled down on all the worst aspects of the coalition’s policies, with an almost vindictive cutting of public money. This came just as the longer-term problems stored up by earlier policies started to come back, with an increased crime rate, for example. In 2016 the new prime minister, Theresa May, tried to reverse this, but was quickly overwhelmed by the Brexit nightmare.

Labour’s top-down approach had got stuck, but the Coalition and the then the Conservatives on their own, looked for the answers in the wrong places. Readers of this blog will know what I think. Public services must become people-centred, allowing complex problems to be solved by crafting solutions across the boundaries of existing agencies. That cannot be achieved using a structure answerable to Westminster, or even at regional level (Scotland and Wales have just as many problems), but by devolution of power and accountability to a much more local level. This should be standard Lib Dem policy, though was not pushed in coalition; a few more Labour people talk about it nowadays, though it looks far from the way current Tories approach things. I would like to think it could be the basis of a Lib Dem-Labour-Green coalition, but I’m dreaming.

The Coalition’s failure shows just how hard our political system makes the effective management of public services.

Why Dominic Cummings is doomed to fail to reform state inefficiency

I was rather shocked by a story on the radio news last weekend. It was announced that the NHS was about to spend £40m to sort out the login to its IT systems, as staff are wasting lots of time with separate logins to a dozen or more systems. My first reaction was: “Why on earth has it taken them this long to get round to fixing this, if it costs just £40m?”. It was followed by a more depressing thought: they will spend their £40m and still fail to achieve it. And then: “What on earth possessed them to press-release such an embarassing story?”.

It is no wonder that the Prime Minister’s chief of staff, Dominic Cummings, has such a low opinion of civil servants and public sector management. The quality of management is appalling. It always has been. One of my earliest memories was just how awful the nationalised gas, electricity and telephone industries were in the 1960s and 1970s. It was worse than even I knew, as the government had lost control of their finances, so that these industries simultaneously drained the public purse and were starved of investment. And the vast scale of wasted resource on nuclear energy development only emerged long after it happened, with nobody accountable as usual. I do remember Harold Wilson (the PM of the time) having to cancel an absurdly ambitious development of a new bomber for the RAF. Things have only got better since then because the state has shrunk. One of many current fiascos is the Universal Credit system: a fatal combination of a visionary minister with a weak grip on reality (Ian Duncan Smith), and civil service project management skills.

It is not all bad. The London primary schools where I have served as governor are as well-managed as any organisation that I have seen, though some of the regulations they have to navigate, and the “guidance” from national and local civil servants can be mind-numbing. There are other pockets. These might give us some clues as why such poor management happens – it is nothing to do with being part of the state as such – and indeed many large monopoly private businesses can be just as bad. Partly it is about accountability and incentives, and partly about complexity. Alas it is impossible to get these right in many areas. Health services are mostly too big and complex (our NHS isn’t particularly inefficient in global comparisons, though I imagine few others have the nonsense over IT logins); the secrecy required for national security institutions is the enemy of accountability; and so on.

Mr Cummings wants to address this by a massive shakeup of the civil service, as advertised by his blog, which I don’t read, as it sounds too much like an ego-trip, but this article in the Economist gives more detail. The general idea is to change the culture, to allow in more mavericks as well as engineers and scientists, ensure proper accountability for failure, and to prize competence and the ability to get stuff done, as opposed to just being “a safe pair of hands” (i.e. staying out of trouble before handing the job to somebody else). As somebody who has had a career in management, and experienced the public sector at first hand through my two decades as school governor, I really get this. The serial incompetence of the public sector really annoys me. But with all my experience in management I can see at least three sorts of problem with Mr Cummings’s approach.

Firstly management isn’t just about getting stuff done. There are two types of skill required to be an effective manager. 90% of the attention goes on the first type of skill: task-orientation. Success is generally achieved by picking a small number of priorities and concentrating on them. This seems to be Mr Cummings’s obsession, and he is in line with most people who pontificate about effective management. But there is a second type of skill: risk-management. This is about looking for trouble and heading it off. What most people don’t seem to appreciate is that it requires opposite skills to task-orientation. Task orientation requires focus; risk-management requires the opposite – the ability to step back, gather data from all directions and think about the things that are not priorities. You also require strong judgement as to which potential risks to take seriously and which just to keep a wary eye on – but without that broad horizon it doesn’t work. Some of the worst management disasters (including in the British public sector, notably in the NHS) have occurred from areas outside management’s top three priorities. In theory the incorporation of good risk-management skills is perfectly compatible with Mr Cummings’s idea of maverick managers constantly challenging each other. In practice this is unlikely. In his recent blog he has said “I’ll bin you within weeks if you don’t fit”; this does not sound like the sort of culture that welcomes effective risk management.

Secondly there is a clear implication that decision-making is centralised. If you don’t trust public servants in generality, then you are unlikely to delegate much of importance to them. Mr Cummings is as likely to have as low an opinion of government ministers as civil servants. This would certainly be justified in most cases: good management skills are not a requirement for political advancement, and most politicians have had little aptitude for running things. That’s a recipe for everything coming back to Downing Street. And given that the name of the game in Downing Street will be prioritisation, that means that most of the stuff that is referred to it won’t get looked at properly, because it won’t be in No 10’s top three. This will result in either gridlock or things being waved through when they should be challenged.

And the third type of problem is lack of consultation. One of the most tiresome things for people who want to get stuff done is listening to a wide variety of interested parties who might be affected by what you are trying to do. Managers of Mr Cummings’s sort like to short-circuit such time-wasting and have a good chuckle when people complain. Consultation is hard work, and most of the concerns people raise are about making sure their lives don’t get changed too much, sod the bigger picture. But not only is it good for risk management, but it is also good politics. People get less angry if they have been consulted about things, and it is useful to know who the big trouble-makers are likely to be, and whether there are easy ways to head off some of the trouble.

In my recent post on Boris Johnson’s government I suggested that his and Mr Cummings’s approach would lead to cronyism. This is what happened to the academy programme driven forward by Mr Cummings at the Department of Education. Doubtless Mr Cummings views this as a success because he pushed it through further and faster than anybody thought possible. But it achieved little in advancing the quality of education. It was not in fact over-centralised – but the rather extreme model of delegation he adopted meant that the unscrupulous made hay. And his impatience for consultation meant that academies were run by a small number of politically well-connected organisations, and not the sort “bottom-up” local groups that the policy was supposed to empower. And it created a huge stink, which meant that he and his minister were moved on earlier than people though they would be. Now this failure may be because of the lack of competence of education department civil servants (I have certainly seen that claimed by an initial enthusiast disillusioned by the results) – but that was a factor that had to be managed rather than bulldozed through. In the end Mr Cummings and his boss Michael Gove were responsible for a classic public sector failure themselves.

So what should the government do about poor public sector management? Most approaches have drawbacks, which is why the problem is so persistent. Delegated management and accountability – part of the formula with schools – can work very well, but won’t for large, complex monopolies. Holding managers to measurable targets, the big idea of former Labour reformer Gordon Brown, often has perverse results and leads to poor risk management. Outsourcing, favoured by many Tories, has often disappointed: because the process itself needs to be well-managed and not treated as an exercise in buck-passing, and because it often means carving up processes in ways that make the whole harder to manage. Labour claim to have new ideas to improve accountability to service users; these should not be dismissed, but scepticism is warranted. I think regional and district devolution of political responsibility is an important part of the solution, but it could take a long time before this shows results. Politicians are likely to misuse their new-found powers at first, and the centre is also likely to implement it in such a half-hearted way that the benefits will be hard to obtain.

In some ways I wish Mr Cummings luck – especially with the country’s appalling defence procurement processes. But his ideas are both strategically and tactically misconceived and he may well end up making things worse rather than better.

Knife crime requires local action and resources, not national grandstanding

England is suffering a serious epidemic of knife crime, with a high proportion of teenagers amongst both the victims and perpetrators. A few months ago a teenager was a murder outside my local Tube station; some fresh flowers marked the spot as I walked past it this morning. Many others are similarly finding the epidemic is coming uncomfortably close to home. Two further murders over the weekend have provoked a national political kerfuffle. But much of it misses the point.

The biggest problem in English politics is that too many decisions are taken by the UK government in London, with a weak regional layer (comprising a few city regions based on large conurbations such as London and Manchester), and local government that lacks powers by comparison with any other large country. A striking aspect of this is that different public agencies, such as police, health services, schools, social workers and so on, do not cooperate as much as they should. Each of these agencies reports up to a politician in Westminster, who grandstands to national media agencies according to a news agenda that is set nationally. Leaders of local agencies don’t have the power or incentive to make local cooperation work, and they are liable to have their funding squeezed anyway to make way for for headline-making projects. Any yet so many problems are complex, and require just such local coordination.

It isn’t so bad in Scotland, which has devolved government and Scots-level media, though there are issues there with local government being hollowed out. Wales, which also has devolved government, doesn’t seem to be any better run than England. I don’t know enough about that country to know why, but my impression is that Welsh politicians are quite conservative, and have used their powers to resist reforms that have been taking place elsewhere in the country. But I think the Welsh are slowly learning the implications and responsibilities of devolution the hard way.

Knife crime has complex roots. A lot of it is related to youth gangs, many of which feed on the trade of illegal drugs. Too many teenagers are drawn into these gangs, apparently to make up for the lack of any other community to belong. Gangs find the use of knives is the most cost-effective way of asserting themselves. Many young people feel that they need to arm themselves for their own protection, as well as status. What lies behind this, and has led to the rise youth crime, after a long period when it fell, is, to my mind, the hollowing out of local public services. The Labour government of 1997 to 2010 pumped quite a lot of resources into local institutions, especially after its early austerity years. They did not really believe in local empowerment, and their efforts were clumsy and inefficient. Many of the resources went into the pockets of expensive but superficial management consultants; many agency managers spent time in interminable inter-agency meetings that were slow to take responsibility; anybody involved in public services had to wade through reams of waffle worth nothing more than an education in buzz words. Some reforms, such as those to the probation service, suffered hugely from political grandstanding. There was a tendency to nanny and lecture people rather than empower them.

But for all that a lot of good work was done, which, in some areas at least, achieved a lot. Schooling improved and its scope widened to early years and providing beyond the school day and term time; they were encouraged to work with other agencies. The police established neighbourhood policing teams, which gathered local intelligence, and had the time to deal with antisocial behaviour and work with other agencies. Youth crime fell sharply.

Then came the financial crisis and the push to make cuts to government resources. This went up a few gears with the Conservative Liberal Democrat coalition government of 2010 to 2015. Incoming ministers rightly bridled against the inefficiency of Labour’s public services, and felt that they could do better with less. They drove through drastic cuts. At first this seemed to go quite well. There was indeed a lot of waste to be stripped out, and statistics, including those for crime, appeared sho little if any damage. But they too followed an over-centralised modus operandi. The Lib Dems did try to moderate this – and they helped the creation of city regions to better coordinate agencies in the bigger cities – but it hard not to be overwhelmed by the Westminster way. The cuts were driven from the top by the Treasury on national departmental ministers. Furthermore many ministers followed a flawed model of outsourcing to save money, which fragmented services further and focused them on inward looking performance targets. The big idea for many of the outsourcing agencies was to de-skill services, reducing their ability to deal with complex problems. Experienced, problem-solving professionals were replaced by junior box-tickers. They became unable to facilitate solutions by working with other agencies, so problems were passed on rather than solved. This became even worse after 2015 when the Conservatives governed on their own, and drove the fiscal squeeze though even further. Childrens Centres and youth facilities were closed down; neighbourhood policing was eviscerated; probation and prison services engaged in a battle for survival with little time to help solve society’s wider problems. The epidemic of youth crime followed.

At last England’s political class realises that there is a problem, and is starting to panic. But once again they are reaching for national solutions, or using the crisis to advance national beefs, like police powers. A popular solution is to create a knife-crime “czar”. Others call for a national strategy driven forward by the Prime Minister. All these are tried and tested approaches which rarely acheive more than short term gains on narrow criteria. What is depressing is that it isn’t just politicians that are calling for this sort of approach. One of the leading advocates is Sir Bernard Hogan-Howe, the former head of police in both London and Manchester. But people like Sir Bernard are part of the problem, not the solution. He was one of the leading advocates of the hollowing out of neighbourhood policing to make way for headline-grabbing specialised regional and national squads.

A few more perceptive commentators point to a more successful approach. Glasgow used to have a huge knife-crime problem – but a coordinated and devolved multi-agency approach reversed it. This is referred to a “public health” approach, to which some politicians are paying lip service. Whether or not this nomenclature is helpful I am not sure. But what needs to be done is to push resources into regional and local multi-agency teams, with the power to rebuild the local institutions that have been so callously swept away and make them work properly. Unfortunately this will not be quick, though it would help with a lot more than knife-crime. The problem was many years in the making and it will take many years to solve.

That is not to say that there are not national aspects to the problem that could do with a bit of a national shove. One of the developments are the “county lines” developed by city gangs going into small towns and rural areas, and connecting the problems in both. But even here we should note that it is in such small towns and rural areas that local institutions are at their weakest, where austerity and economic trends have combined to suck wealth out of local economies. The city gangs are pushing at an open door.

But our over-centralised way runs too deep. Even those who advocate a more decentralised approach rarely seem to understand its full implications. It will take more than this panic for people to understand just how dysfunctional our governing institutions have become.

Child Maintenance: an epic failure that should be a lesson to government

Last week The Economist published a short article about the failure of Britain’s reform of child maintenance collection. The article highlights the human consequences but does to point to any wider lessons. And yet our political class needs to see what was wrong-headed about the idea, or else we are destined to keep repeating the mistake.

The original reform was in 1993, when the Child Support Agency (CSA) was set up. The problem it was designed to solve was that of absent parents (usually fathers of course) not contributing to the maintenance of their children. The idea was to replace a haphazard and costly system enforced by family courts with a centrally enforced system run by the new agency. Single parents lost the right to chase ex-partners through the courts for arrears; the agency would do that. But the CSA soon became overwhelmed, and it was closed in 2012 with arrears then amounting to £3.7bn. A new agency, the Child Maintenance Service, then took over. They are now close to writing off nearly £2bn. In many cases no serious effort has been made to collect the arrears at all. Apparently the new agency doesn’t even try unless it is provided with information by the partner to whom the money is owed – a tall order for often very stretched people. The government’s legal obligation to collect has been tossed into the bin, to the benefit of shirking parents, who may only have had to shrug off a standard letter or two, if that.

This is often what happens to attempts to reform public services. Reformers see a messy system involving a lot wasted or duplicated effort, and dream of something much simpler and more rational. They hope to achieve greater effectiveness at a lower cost. But the reform involves sweeping away the human efforts of, and information possessed by, many thousands of people and replacing them with a void. Failure is nearly inevitable.

This is just one example. Right now we are witnessing the slowly unfolding calamity of Britain’s Universal Credit (UC) system. Even now, many people assume that is simply a good idea delayed by cack-handed implementation. They can’t see that the whole idea is deeply flawed. The Conservative/Liberal Democrat coalition government of 2010 to 2015 seemed particularly vulnerable to this sort of mistake, with not just UC, but a misguided set of reforms to the National Health Service, the trashing of the probation services, and a deeply flawed idea of “payment by results” for outsourcing public services. The Prime Minister of the time, David Cameron, seems to have been particularly susceptible to such half-baked schemes (most notoriously “the Big Society”), and, to be honest, his coalition partner Nick Clegg, wasn’t really any better. They were both products of a political system that did not value true administrative experience.

The previous Labour governments of Tony Blair and Gordon Brown do not have such a dire record, though Mr Blair was as susceptible to the same sort lightweight thinking – for example launching the ill-directed Academies reforms of schools. Instead Labour liked to smother its reforms in layers of bureaucracy and masses of meaningless verbiage that had the effect of reserving things to an elite class of bureaucratic waffle-merchants. (You will sense some bitter memories coming through here: I bumped into this as a school governor, as well as my interest in the NHS in the vain hope of getting a job there). The Labour government’s flagship identity card system was heading the same way as UC before the Coalition sensibly killed it. The problem was similar: excessive centralisation of decision-making in Whitehall, with political leaders too easily seduced by lightweight ideas from political think tanks, made flesh by armies of overpaid consultants. Implementation was always somebody else’s problem. Ministers and consultants alike would move on to their next job before the consequences became apparent.

And it’s not just in Westminster where such disasters occur. The Scottish Government under the SNP has been trying to centralise local services and wipe out the human interfaces by which such services work. The reforms to the Scots police services were the most notorious. Northern Ireland has its own example of astonishing incompetence with renewable energy schemes, and doubtless there are examples in Wales too. The problem infects the entire British political class. I can’t see much sign of this changing. Instead I see hopes (as usual) being placed in new technology. But Artificial intelligence and machine learning will not solve the core problem that centralised institutions do not understand the problems they are trying to solve because too much of it is outside their remit.

So what direction should we be taking? Services should be drawn around the needs of individual people, allowing solutions to be tailored that will actually solve problems rather than perpetuate them. That means drawing together services related to physical health, mental health, education, social services, policing, justice, housing, benefits and so on. And that means two things in particular: empowered intermediation, and decentralised authority. In turn these almost certainly mean devolved political accountability.

By empowered intermediation I mean capable professionals meeting with services users (physically and not through IT interfaces), establishing their needs and making arrangements with the necessary service agencies to take things forward. There are plenty of examples of such intermediaries: social workers, teachers, and general practitioners. But the tendency is to disempower them, and to replace them with less skilled people with narrower briefs. The hollowing out of probation services is a particularly dire example of this. The Department of Work and Pensions (DWP), responsible for both UC and the child maintenance fiasco, is no so far down this culture of de-skilling that it probably needs to be abolished.

The need for decentralised authority is easier to see perhaps. In order for service providers to respond to the generalist intermediaries, they need the power to adapt flexibly. That is impossible in highly centralised administrative silos, which pin managers down to tight procedures and inflexible budgets.

That this leads to the need for greater devolved political accountability is also an obvious step. Attempts to make decentralised agencies accountable through the use of Key Performance Indicators, and the like are clearly a mistake. It is much easier to game the indicator that solve the underlying problem, which often makes things worse in the short term. This is where political accountability for the overall results should come in. But there is a trap here. It is tempting for politicians to think that political reform is the key step, and not the much harder job of re-engineering of public services into models that interact positively with users and collaborate productively. In fact devolved political administrations can get trapped in their own conservativism and become captured by local vested interests. British devolution to Scotland, Wales and Northern Ireland cannot be seen as an outstanding success.

And yet the failure of our public services is becoming more apparent. For now “austerity” gets the blame. I live in hope that people will start to understand that the issue is much deeper.

 

 

Tax or efficiency: making sense of the politics of the NHS

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Radio 4’s Moral Maze on the NHS yesterday didn’t start well. The first witness raged at the institution’s inefficiency and how people were using its supposed moral integrity to justify it. Tens of thousands were dying as a result, he said. His interlocutors provided no real challenge. I switched off. This is symptomatic of the very poor quality of political debate about the NHS here in Britain. I don’t suppose debate in other countries about healthcare is any better.

There are two things that are not well understood about the NHS. People on the right fail to appreciate that the NHS’s inefficiency is a function of the complexity of healthcare, and not its “socialised” funding model. People on the left fail appreciate that the effective state monopoly of healthcare means that we get less of it than people really want.

It was the first point that the Moral Maze‘s witness was running foul of. The only evidence he quoted was that private hospitals in the UK spend much less on administration and management than NHS ones. But these private hospitals only offer a narrow range of services to a select few clients, and so are much simpler to run. International surveys consistently show that the NHS is less wasteful of funding than pretty much any other nations’ system. These systems have the complexity of operating insurance records and administering claims; they do not prevent expenditure on ineffective treatments or wasteful breakdowns of communication between different parts of the system.

I know something about how this happens. Apart from being an accountant, the core of my professional career has been as a general manager whose mission was been to manage systems as efficiently as possible. In that role I have been responsible for some pretty dramatic improvements in productivity. At one point I even looked for a career in the NHS, though nobody in the service was prepared to take the risk of taking on somebody without a track record in health services, or at any rate not without the kind of hard-nosed bullying persona that many in the NHS seem to think is what effective management is about. I have thought quite a bit about how you might make the service more efficient.

That there is monstrous waste is not in doubt. As a patient you spend a lot of your time waiting around, and then repeating yourself to the myriad different people you are handed on to. A lot of the NHS is in fact very efficient; the problem is fitting the various bits together so that the right treatment is delivered to the patient at the right time. And that’s before the question of how to ensure that less people need healthcare services in the first place.

This failure to get things to fit together is a familiar problem. Understanding this was at the very heart of what I tried to do as a manager. My technique was quite simple in principle: to make processes as simple as possible, and focus them on what the customer needs. A simple idea that was quite revolutionary in the 1990s, when it was usually labelled as “business process re-engineering” (or BPR).  It went against a production line approach borrowed from manufacturing, where workers would specialise in a single task. The technique required fewer specialists and more generalists. Or, to put it another way, it required workers to specialise on the customer that they were serving, and not in a particular functional skill.This usually entailed not just the retraining of workers, but a redesign of information technology.

BPR is now largely played out in the world of commercial services, with automation and artificial intelligence taking over. But the BPR revolution never really got going in healthcare. No doubt this was partly down to the vested interests of those that worked there. But I have to realise that there is a much deeper reason. The complexity of health services requires the use of specialists to a much greater degree than in pretty much any other activity that I can think of (another notoriously inefficient sector, defence systems, is comparable). Healthcare is crying out for patient-centred treatments, and yet this is very hard to do efficiently because you need to involve so many specialists. The field is riddled with what economists call “information asymmetries” which undermine all attempts to put consumers in charge using market mechanisms.

Which is why nobody does it well. And why trying to restructure the NHS to make it more efficient is always likely to fail. The Coalition government’s attempt to do so by putting general practitioners in charge is generally regarded as a costly failure. The current trend in the NHS towards “integration” is a bit more promising, but pitfalls abound. Trying to bring market mechanisms into play helps solve some problems but creates others.

But if this line of criticism of the NHS – that it is inefficient because it lacks market mechanisms – is misplaced, it obscures a more valid critique. It is that the NHS restrains the level of health spending, meaning that people get less healthcare than they want. If you could wave away the information asymmetries with a magic wand, and find a way of allowing poorer people to meet their basic needs, how much healthcare would we buy in a market ststem? Lots. Healthcare promises longer life and less pain. It is an unmatched consumer proposition. Everybody wants more of it. Britain tends to spend less on healthcare as a proportion of its income than other high income countries. And much less than the most unrestrained healthcare market: the United States.

One example gives a good illustration. A number of very expensive tailored cancer treatments have been developed by pharmaceutical companies. These don’t prolong life by very much, or at any rate there is no convincing base of evidence base of this. So the NHS often bans them; the money will secure greater benefits if it is spent on other people. But if you are the cancer sufferer that could benefit, and you have the money, you might want to have it anyway. The NHS does not allow you to pay extra (co-payments in the jargon), because it is deemed morally wrong that a patient “in the next bed” with the same condition does not have the same treatment. In principle you could transfer to a non-NHS facility in the UK or elsewhere. But this is usually impractical, and brings with it additional costs. This is such a difficult problem that politicians try to camouflage it with special slush funds. But this is just an extreme example of a more general problem. Lots of us would happily pay a bit extra to get better treatment.

The obvious solution is to ramp up overall spending on the NHS to the sort of level that a perfect market system would lead to. But that means much higher taxes, and the evidence that people are willing to pay that much is weak, to say the least. Most people say they are happy to pay a bit more tax for a better NHS, but this willingness melts away when you start raising the amount. The problem is that there is  no personal link between the taxes you pay and what you get. It always seems as if the money is benefiting somebody else.

This, of course, is precisely the dilemma that the current government is stuck in. It has announced plans to increase NHS funding but it is unclear about how it is to be paid for. The Labour Party are little better. They hope a lot more tax revenue will be available from rich companies and businesses; but they also want to end “austerity” in many other parts of public services, limiting the amount available for health.

What’s the solution? I think taxes should go up. I also think we need to find acceptable ways of allowing people to spend more of their own money on healthcare within the NHS system. And we shouldn’t just give up on the idea that healthcare should be delivered much more efficiently. As regular readers of this blog will know, I think that means more localised management and more integration with other public services, and a stronger focus on the needs of users. Alas I hear very little of such ideas in the cacophony that is the political debate on the NHS.

British regional policy needs more government

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I found this week’s Bagehot column in the Economist interesting. It complains that Westminster is brain-dead, but that elsewhere there are signs of innovative thinking. This helps to raise the question of how to address the imbalance of Britain’s (and especially England’s) imbalance towards London. But it betrays some rather stale thinking.

The article itself is lightweight. It shows enthusiasm after a visit to the University of Warwick, and witnessing its projects promoting industrial innovation, and in particular the efforts of Kumar Bhattacharyya to push back against the idea that Britain’s future lies in financial services and not manufacturing. It contains no hard analysis. This is less disappointing for a political column that it was for an article a few months ago about what to do about the developed world’s “left behind places”. Towns and rural areas left behind by changes to the industrial economy. In spite of the promise of its headline, this article had very little to say about solutions. It instead seemed to encourage the further expansion of already thriving urban centres, on the grounds that this would clearly be good for productivity. This was another symptom of the the stale, conventional thinking that dominates the Economist’s journalism.

But the issue is an important one. The gap between London and England’s southeast, and other regions of England, Wales and Northern Ireland is problem for everybody. It is an obvious problem for the struggling regions, from Cornwall to Tyneside. It is also a problem in the prosperous regions, where the cost of housing is exacerbating social divisions. If economic prosperity could be distributed more evenly geographically, then it would be easier to distribute it more evenly between the classes and generations. Scotland, incidentally, is something of an exception, and a revealing one.

This has been obvious for a long time, but efforts by governments to do something about it have at best been only partially successful. Two things have been tried: money, and relocation of government agencies. There have been various initiatives to pump money into the poorer regions, a number of which are under the banner of EU aid. These clearly help, but the beneficiaries too often seem to be large corporations headquartered elsewhere, who simply manage to funnel the money back again. So many English regional towns are dominated by national and international brands at the expense of more local ones. The relocation of government agencies manage to disrupt local labour markets (the jobs tend to be quite well paid and put local businesses under pressure), but a bigger problem is that they fall victim to government efficiency drives which shrink them.

Where the Bagehot article is clearly right is that there needs to be more going on locally in these regions that central largesse. Centres like the Warwick Manufacturing Group clearly help. At the centre of thriving modern economies is brainpower. Universities and research are clearly part of this – as experience in other countries shows. But two points need to be made: political structures are vital, and we need to think about tomorrow’s economy rather than today’s or yesterday’s.

The lack of interest in political structures was a big disappointment in the Economist’s analysis. Political structures clearly affect the way economics is distributed geographically. Countries that are both quite large and politically centralised, like Britain and France, have more uneven economic geography than those that don’t – like Germany and Scandinavia. I think this is for two reasons. One comes from network theory, which I have advanced before. Humans can manage only a couple of hundred connections with other humans efficiently, so at the heart of any organisation, however large, there is a small network of people within it, and people that the organisation does business with. Large organisations simplify management to reflect this, which means concentrating power geographically. When government power concentrates, corporate power tends to concentrate with it, as government has such an important effect of modern business. Superficially this looks efficient – the trap that the Economist falls into, because the concentrated power centres are efficient in themselves – but that is at the cost of hollowing out elsewhere. Scandinavia may not have a centre that compares with London or Paris, but you can hardly say it is not prosperous.

The second, and overlapping, reason that centralisation of government is bad for outlying regions is the sheer dead weight of government decision making. In England most decisions involving significant money find their way back to the Treasury in London. Decisions get stuck in queues, and when they come to be taken, risk aversion prevails unless huge political capital is expended. Human progress generally demands risk-taking. The fairly obvious idea that rail links between northern British towns should be drastically improved is bogged down in Westminster politics. If the north of England was an independent country it would already be finished.

So it is not surprising to see that developed countries with devolved political structures usually have better distributed wealth than ones that don’t. Switzerland, a small country with highly devolved politics reeks comfort and prosperity almost wherever you go. As I have already alluded, it is no accident that Scotland, with its advanced level of political devolution, is the one British region that has been able to push back against the gravitational pull of the southeast. It doesn’t always work. Political devolution allows regional governments to choose incompetence; Welsh devolution has an unconvincing track record. And what of distribution of wealth within regions?

The idea that political devolution needs to be part of any solution is very gradually taking hold in Britain. Most politicians play lip service to it. But there is long way to go to change the political culture. But we also need to think about how the economy is to develop. This is the biggest gap in the Bagehot article. It bangs on about manufacturing. Manufacturing still dominates the way most economists and policy makers think about economics. But we need to move on. Manufacturing is going the way of agriculture. There is only so much stuff we can consume, just as there is only so much food we can eat – and in both cases you can argue that we consume too much already. Consuming more stuff is not what will make our lives better (though it will for an important minority of us). The more productive manufacturing becomes, the less important it will be to the economy as a whole – the paradox outlined by the economist William Baumol.

Before I develop that argument further I must qualify it. Manufacturing is still important. It is changing radically in ways that mean that we should produce more locally, and rely less on global trade. This is partly technological, and partly because the economics of importing from less developed countries changes as they, and especially China, develop. There is plenty of scope for innovation and Britain needs to keep up it. Manufacturing innovation based in Warwick, Sheffield and other places needs to be kept going. But it won’t be enough.

What we need to think about is services. The health economy will grow in relative terms, and not just because of demographics – prolonging life and reducing pain is what people want to spend money on when they get more of it. Public services such from social work to law enforcement also need to grow – or get radically better at solving problems rather than pushing them around the system. And there is care for the elderly. We shouldn’t just be sponsoring research into manufacturing into the regions, but into all these other things and more.

And it will not be lost on my readers that this means more government and not less, which has been the prevailing wisdom of most of the last 40 years. But it needs to devolved and better at its job.

The quiet revolution in Britain’s schools.

I’m going to start 2018 on a hopeful note. I am privileged to be chair of governors at a primary school in Lambeth. This morning I attended the opening session of an INSET (staff training) day for my school’s “cluster” – a collaborative group of schools in the south Brixton area. I was a good note with which to start the year.

The area that the schools serve is a challenging one. Tulse Hill, where the event was held, gets into the headlines for the wrong reasons (recently: a fatal stabbing and hit-and-run death involving several vehicles, none of which stopped). It is dominated by large interwar and postwar housing estates, which are home to a lot of poor people. These are from diverse communities, generally referred to as “minorities”: African, Afro-Caribbean, Pakistani, Portuguese, Latin American, and so on. My school is in the middle of an estate that had the reputation of being one of the worst in the country. Nearly half the children at the schools speak a English as a second language. Nearly a quarter qualify for the pupil premium, a standard of poverty that manages to exclude a lot of struggling families. These challenges continue. Benefits cuts is making housing unaffordable to the poor, who are moving to outer London. They are encouraged by developers who want to demolish the old housing (and any non-housing property they can find) and replace them with modern homes, to be sold to better off people. The area is increasingly devoid of local jobs, services and even shops. The Labour council are enthusiastic partners in this process. So the school rolls are falling and the demographics are changing – though the rolls could bounce back as the housing developments mature. Many families are trying to manage in very challenging circumstances. They live next door to increasing numbers middle class families who are demanding in a different way.

Our meeting was appropriately diverse: the teachers, and a few governors, forming veritable United Nations. The schools themselves are diverse. There is one secondary school, which is an Academy, and four Church of England primaries, three non denominational primaries (including my school), a Muslim primary, and a specialist nursery school. There was a lovely buzz as colleagues, compared notes within and across the schools. Their achievements are astonishing. SATS test results are well above the national average in spite of the challenges (though in line with the rest of the borough – their achievement is not an isolated one). If you read about schools in the papers these days, you hear of pessimism; teachers leaving; budget cuts, and so on. The financial pressures are real enough, with falling rolls local making things worse for most  schools. The positive attitude of leaders and staff in these schools is quite humbling.

What makes the achievements of these schools so impressive is that so many people outside London would consider them to be impossible. I routinely read people who claim that multiculturalism has failed; immigration places impossible challenges on public services; and that austerity has made life impossible. While there is certainly truth to the last of these claims (some services are becoming impossible, compounded by an appallingly designed new policy on nursery funding), but even here I am not finding the despair that I hear so much about elsewhere. Just be clear, I am saying this out of admiration for the positive attitude of management and staff in the face of challenge, not because I think squeezing funding from schools is a good idea. In fact the opposite: these schools have shown themselves to be such good managers of public resources that it seems a good idea to give them more so that they can achieve more.

None of this is new. I have mentioned the remarkable progress of London schools often, and tried to draw political conclusions from it. Instead, I want to talk about something else. There is a common management ethos in this diverse range of schools (shared, incidentally with another nearby school where I am a governor) that deserves much more attention that it will ever get. This was excellently articulated by the keynote speaker at our event, Mary Myatt. It was evident that she was preaching to the converted.

Mary’s mantra is “high challenge; low threat”. She says that the key to success is creating a work environment where people can and do experience high levels of challenge while not feeling threatened. That, of course, applies to the relationship between pupils and staff, as well as to between staff members. She enumerated many aspects of this idea, but one is especially important: inclusivity. Nobody, but nobody is left out. There is no child you cannot help. There is no awkward parent you don’t give a hearing to. There is no negative colleague that you don’t try to persuade. And if you do that, it is amazing what you can achieve with the team you already have. Mary is not shy about using a word that makes this all possible: love. “Professional love” she calls it, because you have to accept the tension of being demanding and compassionate at the same time. This well describes how the two schools I have been involved with have overcome challenge after challenge.

It is striking how different this is from a conventional wisdom that is still very widely held. The most effective way to challenge is to threaten; good performance is achieved by excluding the awkward; hard targets matter more than the stuff that can be waffled; and what has love got to do with it? I find it quite astounding that so many people thought that Donald Trump was an effective manager and were happy to give him a shot at America’s top job. Many people on the left and right seem to think that anger and confrontation is best way of dealing with challenge and opposition. Think of all those trolls, so mch the face of modern dialogue.

A further thought struck me this morning. The leaders who are carrying forward this revolution are predominantly female. Most of the schools where the achievements have been so striking and durable are primaries, and this is a very female dominated workplace – though I have been happy to observe slightly more balance in recent years.

The quality of management of the first school I was involved with, which became Outstanding when I was Chair, and has simply got better since, is I think the best of any organisation public or private that I have been involved with. My current school is on the same journey and its management has made phenomenal strides. It used to be said that excellent management was impossible in the public sector. Many schools are proving that is nonsense. They deserve more attention.