Guru of public sector reform

By Steve Schifferes
BBC News Online economics reporter

The PM wants an intellectual ally at No. 10

Tony Blair's new guru of public sector reform has strong views on the role of markets and the welfare state.

Professor Julian Le Grand of the London School of Economics is an academic who is not shy of controversy.

He first came to prominence by arguing that the middle class have captured many parts of the welfare state, and actually benefit disproportionately from free, state-funded health and education.

Now, as he prepares to enter No 10 Downing Street as a policy advisor to the Prime Minister, he has set out a compelling vision of the necessity of public sector reform.

The government wants to raise student fees to improve access

Professor Le Grand would like the government to give more power to the people who use public services, and give young people substantial assets to start up in life.

His appointment is a sign that Tony Blair will not be distracted from his drive to transform the public services by the opposition of the unions and other Labour Party members.

Shift in purpose

In his new book, Professor Le Grand argues that it was both inevitable and desirable that the provision of welfare services shifted away from a model which gave most power to the providers, such as doctors and teachers, and little to the patients or pupils who used the service.

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He says that in the classic welfare state, public servants were seen as altruistic "knights" who acted for the general good, while the recipients were passive "pawns" who had little say in what was provided.

Now he says that welfare systems must be designed on the assumption that providers act in self-interest, not altruism, as "knaves," while those who use public services must have more choice and more rights, must be treated more like "queens" than pawns.

Professor Le Grand says the logical conclusion of the drive towards more purchaser power is the greater use of markets in the provision of public services.

Reforming health and education

And he endorses the changes in the education system that have given parents more power - such as the publishing of exam results and the freedom to enrol in any state school that has a place.

But he wants to go further in encouraging strong schools to take more poor pupils - by using cash vouchers, and giving each poor family a voucher with a higher cash value.

This, he says, will give the better schools an incentive to take on more poor pupils, because they would get more resources.

Professor Le Grand also wants to provide greater incentives for consultants to treat more patients in the NHS. His solution is that they should be paid on a fee-for-service basis to do extra operations above their basic commitment to the NHS.

Professor Le Grand recognises that markets in the public sector will always be limited by the different levels of information that the public and professionals have, especially in health care.

And he is concerned to prevent "skimming" of services by the better-off.

But he will be a strong supporter of the Prime Minister's drive to put patients and parents in the driving seat including, if necessary, facing down doctors and teachers.

Asset-based welfare

Like Tony Blair, Professor Le Grand says he is egalitarian, but feels most strongly that the government should tackle equality of opportunity, rather than equality of outcomes.

So his most radical proposals are for the redistribution of wealth to young people

He would like to use the proceeds of an increased inheritance tax to give everyone a government grant of £10,000 when they start out at 18.

And he would give matching government grants to encourage people to save for retirement, and to put aside more for long-term care - funded perhaps by abolishing tax relief on pensions.

The government has already announced modest moves in this direction, through the "baby bond" for all parents, and the "savings gateway" which would match savings for those on low incomes.

But with planning for the next general election now in full swing, and other Labour intellectuals like Matthew Taylor of the Institute for Public Policy Research, and Michael Jacobs of the Fabian Society joining the government, if Labour win re-election, a third term could turn out to be its most radical.

Motivations, Agency and Public Policy: Of Knights and Knaves, Pawns and Queens, by Julian Le Grand is published by Oxford University Press. Professor Le Grand takes up his post as special advisor to the Prime Minister on 6 October.