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A precarious balance of incompetence

The way in which private corporations are going to collapse as the rising energy cost of energy bites is straightforward enough.  Business models that are based around a critical mass of consumers – from health clubs to subscription TV services – will experience growing death spirals as customer spending and customer numbers fall and as it becomes impossible to pass the costs onto the remaining customers.  But what about public services such as the UK’s National Health Service, where the state acts as the sole consumer?

Few people here in the UK, I suspect, would argue that public services are doing a good job these days.  NHS waiting lists are growing day-by-day, even as patients die in the back of ambulances because Accident and Emergency (A&E) departments are full.  And then even more patients die in their homes because the ambulances cannot respond to emergencies because they are stuck outside A&E.  Police no longer respond to crime – directing victims to their insurance provider rather than seeking to catch or deter criminals.  And even if the Police could do more, the courts have backlogs longer than the NHS waiting lists, and the Jails are already full to overcrowding.  Social care – for those without the money to pay privately – is severely rationed, leaving millions of older and disabled people to fend for themselves, where a decade or so ago they would have received some support.  The same goes for mental health support which, in practice is only available to a small minority who are considered neither too ill nor not ill enough to qualify.  Railway services – when they are not stopped by industrial action – are plagued by cancellations and rolling stock shortages which result in unpleasant overcrowding.  But there is little point opting to travel by road, because bus services have been decimated and private vehicles risk major damage from potholed roads which haven’t been resurfaced in more than a decade.

Sam Freedman from the Freed Speech blog shows how many of the problems coming to the fore today are the result of the severe austerity cuts introduced by Cameron and Osborne after 2010:

“The waves of cuts that were made between 2010 and 2016 were very deliberately targeted at the most vulnerable. The NHS and schools were ‘protected’, as were pensions. That meant that welfare benefits, local government, and departments like the MOJ, took most of the hit. The most vulnerable in society were made poorer. Services like children’s social care, the courts system, and local family support schemes, which were predominantly used by that group were cut back. This was, initially, a successful political strategy as it meant Tory voters were protected from austerity.

“But over time that loss of acute services, and the increase in deep poverty, has put pressure on universal services like schools, hospitals and the police…”

Following the cuts – and in the face of desperate government attempts to (fail to) respond to the consequences for police, courts and prisons, Freedman argues that the criminal justice system is trapped in a:

“… precarious balance of incompetence. If the police increase the number of people charged, which is necessary to restore public confidence and deter repeat re-offenders, then that will overwhelm a court system that already has a massive backlog, and a prison system that already doesn’t have enough places. Likewise significantly reducing the existing court backlog, which would increase convictions and give certainty to victims, would overwhelm the prison system.”

A similar running down of services – from which they never fully recovered – occurred under Thatcher in the 1980s… although she had the benefit of massive North Sea oil and gas revenues to pay her way out of the mess she caused.  Today’s government has no such revenue.  And with borrowing costs rising and debt-to-GDP now over 100 percent, far from being able to fund the long-term programs required to reverse the decline of public services, another round of austerity cuts is now inevitable – although the politicians will doubtless put this off until after next year’s election.

There are though, longer-term trends at work here.  Ironically, the introduction of student loans and tuition fees, together with the credentialization of key roles within public services under the last Labour government as a part of its attempt to massively extend higher education has made recruitment far harder by ending traditional career pathways.  For example, instead of on-the-job training in policing, nursing and teaching, a school leaver must opt to study for those roles when they choose a higher education pathway.  This may work when those professions are regarded as high-status and are well paid.  But with pay lagging behind alternative careers, with status downgraded and with the job itself increasingly stressful and overworked, there is ever more incentive for school leavers to choose courses with a broader range of possible careers after graduation than to opt for a course which would tie them to one career with one employer.

At the other end of the age spectrum, in the UK at least, a key reason for the so-called “great retirement” has been the over-50s choosing to leave professions altogether rather than put up with heavier workloads, more stress and lagging rates of pay.  As Emma Baigey at Factorial wrote back in March:

“The number of workers has declined by 545,000 in what has become known as ‘The Great Resignation’, a drop that has worsened inflation and limited public service funding.  These ‘missing workers’ now total over 9 million people aged 16-64…

“Yet, according to the Institute for Employment Studies, unemployment is not to blame. The issue lies in the number of people who have left their jobs with no intention of finding work. They are classed as ‘economically inactive’, meaning they are neither working or searching for work.”

This mass resignation was inadvertently enabled by George Osborne, who changed pension rules to allow people aged 55 and above to take private pensions early – a reform which was likely intended to bolster private investment rather than free millions of older workers from the “discipline” imposed by an increasingly punitive social security system.  Nevertheless, this is not simply a loss of “labour,” but a massive loss of skills and experience which, in many instances cannot be easily replaced.  Britain’s railways, for example, are short of hundreds of drivers whose eventual replacements take anywhere from 18 months to three years to qualify.

As with energy and water, the likelihood is that eventually – and long after it is too late – the state will become the provider of last resort when rising costs and falling revenues cause the franchised private providers to pull out.  But by then, public support will have gone the same way as it is doing for the police and the BBC… a problem not helped by the high salaries paid to managers which are ultimately funded by the taxes levied on the mass of people whose real wages are crashing in the face of inflation and debt-servicing costs.

Nor is there a viable political solution.  Indeed, the Civil Service – the bureaucracy which is tasked with turning policy into real reform – is itself beset with the same shortage of skills and experience as the other public services.  So that, even if the residents of Versailles-on-Thames were capable of formulating a viable policy, there is zero chance of it ever being implemented.

The problem in analysing public services and quasi-private utilities is that they don’t easily fit into the essential v discretionary framework.  Whereas a private health club, a restaurant or a discount retail store will go into administration if it loses a critical mass of consumers, it would be much tougher to allow hospitals, police forces and water suppliers to just go out of business.

Nevertheless, there is a strong argument that decades of mission creep have added layers of non-essential activities onto the essential core of most public services.  For example, it turns out that the main “benefit” of privatising Britain’s water and rail companies was access to private capital.  But a large part of the extra borrowing was used to pay dividends to shareholders rather than to improve services… with the borrowing costs simply added to customer bills.  A rational government at this stage would withdraw public subsidies from these monopolies, thereby forcing them into administration.  This done, the essential assets could be nationalised without the need to pay compensation (our venal governments – of both parties – are likely too wedded to doling out corporate welfare to do this).

This is a problem more broadly with failing public services.  We might hope that a rational administration would draw up a plan to reduce the size and scope of collapsing services while maintaining the core essentials.  But nothing in our experience of government over centuries would suggest this is going to happen.  Instead, services will be maintained on the basis of the supporters with the deepest wallets and the loudest voices… my ESG training trumps your cancer treatment every time.

In any case, we are already beyond the stage where rational planning might have made a difference.  Because the growing skills and experience crisis is self-fulfilling.  As government (national and local) borrowing costs keep increasing even as the tax take continues to fall, so the ability to fund services also declines.  Not only does this rule out the possibility of funding the necessary expansion of the workforce, but it rules out the improvements in pay and conditions that would be needed to attract new employees in the first place.  Why, after all, would anyone taking out tens of thousands of pounds of student debt opt for a course which leads to a stressful and overworked position on an obviously sinking ship – a ship whose older and experienced crew have already abandoned it?

As our economy is forced to contract, Freedman’s precarious balance of incompetence is likely the best we can hope for.  Not just in criminal justice, but in public services across the board.

As you made it to the end…

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