“Playing the Targets Game” 1 st March 2005

1. The ESRC and Oxford Executive Government Group “Playing the Targets Game” 1st March 2005 Targets before targets : The experience of controlling the Nationalised Industries in the Old Public Management Era By Christopher Foster

2. Apology Paper based on: • Old reading • Recent reading for another purpose • My own experience Therefore does not do the topic the justice it deserves

3. David Walker’s Criticism of my book • My book tries to answer what some may see as the prejudiced question “Why are we so badly governed?” • DW does not, I think, dispute my account of changes in how we are governed • He rejects my central thesis because “there is no ready evidence..that policymaking (and outcomes?) in pre-Blair history” was better

4. Response of some senior Civil Service Discussants • Most said that whether the process of policymaking was reasoned, well-evidenced, made intelligible to parliament and the general public, and was therefore democratic, was as important as outcomes • One said that public acceptability mattered more than outcomes,meeting targets as we understand them now

5. The 1970s’ Watershed • Recurrent Economic Crises always induced Public Expenditure Cutbacks • Yet after each one PE resumed its growth as % of GDP • Mid-1970s PE Crisis seemed much more serious. “The Party is Over” • Yet even then changing attitudes was slow

6. Targets before Targets Yet there always were targets; • Broad military and diplomatic targets • Munitions in FFW • Aircraft Production in SWW • In peace-time, getting rid of rationing • Macmillan’s 300,000 houses a year • The first 1000 miles of motorways

7. Underlying Power Problem • 20th Century War allowed governments to have the power to achieve certain outcomes • In peace a dichotomy between government departments and other bodies for which ministers were responsible; local authorities and statutory bodies

8. Mid-19th Century Foundations of pre-1980s British State • The failed attempt to have freestanding public bodies – the Poor Law Commissioners • The proliferation of specific grants to LAs in the late 19th century: • Control • Sharing burden between tax and ratepayer • Equalisation Except in education most replaced by block grants from 1880s

9. Legal Underpinning • LAs: while almost everything they did since 1835 had to have a statutory basis, their statutory duties were facilitative, not prescriptive • Ditto NIs and other statutory bodies • Though in the 1980s the law was used try to turn LAs and SBs into agents, financial controls more effective These considerations important for target-setting.

10. Development of the Public Trust Concept • Reaction against independent Commissioners led to re-affirmation of doctrine of ministerial responsibility: e.g for Prison Commission • Except for public trusts: • Mersey Docks and Harbour Board, 1856 • Port of London Authority, 1908

11. Establishing the Framework • Keynes and the Liberals’ advocacy in the 1920s • Herbert Morrison and the Socialisation of Transport: the LPTB • The Nationalisation Statutes of the late 1940s

12. Nationalised Industry Performance • Tracked in a series of studies. Pryke and Dodgson’s were the most thorough • After initial Hawthornden boost productivity improvement deteriorated • Remedies available were: • SCNI reports • Guidance on investment criteria • Organisational change • Board changes Pointless to set targets

13. Pitfalls of Railway Policy • Requirement to break-even taking one year with another was Target • Rail deficits appear and increase from mid-1950s • Major re-organisation, new chairman and rail closures under Marples has no lasting effect Conventional remedies exhausted

14. 1966-8 Railways Policy • Intention to subsidise railways insofar as road decongestion justified it. Replacement target. • Hence CBA mechanism set up to review unremunerative lines and services • Required accounting changes which BR refused to deliver • No mandatory change in the law to impose new target thought feasible • Changing the chairman did not work

15. Aftermath • BR bankrupt again in early 1970s • At last found a chairman in 1980s who took efficiency seriously and had weight to overcome internal opposition • Treasury attempts to devise other statutory criteria • As with other NIs, privatisation and regulation promised better target-setting • But that not without problems

16. Conclusion • Legal difficulties and NI hostility at top prevented development of management univariate targets (subject to requirement to meet profit/loss constraint) • Ditto LAs • Instead a culture of multivariate targets grew up but not backed as in 19th century by matching financial incentives • Satisfactory target-setting depends on a combination of outcomes, most valued and appropriate law