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Listen to the February podcast in our monthly series, 'in conversation with' Nick C Jones, Director of PwC's Public Sector Research Centre.

For this recording, Nick C Jones is joined by Tera Allas, government advisor on economic and innovation policy. They discuss the findings of our latest Government and Global CEO survey, based on the interviews of over 1,300 CEOs as well as 50 government and public sector leaders across the world on the challenges and opportunities being faced.

 

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Nick Jones

Hello, I’m Nick Jones and I’m director of PwC’s Public Sector Research Centre. I’m joined today by Tera Allas, government advisor on economic and innovation policy. On the agenda today are the findings of this year’s Government and the Global CEO report. Governments across the world face the challenge of balancing the outcomes that the public wants, as citizens and employees, with what businesses need to create the wealth and jobs that societies need to prosper. No easy task in a climate of fiscal austerity for many.

Tera, in our CEO survey this year we interviewed more than 1,300 CEO’s in the private sector as well as 50 leaders in government and public sector organisations and one of the common concerns continues to be fiscal deficits, the need for more affordable government and for government to do better with inevitably less. From your experience working in government and around government, what really are the priorities for sustainably reducing costs?

Tera Allas

So one of the things that comes out very strongly in your survey and in your report is the importance of digital and that, of course, can be really transformative, in terms of delivering things to the end user at less costs and, indeed, in a kind of better way but I think it can also be a bit of a trap if all you do is put a sort of clever front end on to what is an existing old fashioned, maybe inefficient, bureaucratic process so it’s really key to re-design the whole system and the process to deliver much more streamlined services. And I would say that kind of theme, of streamlining and reducing complexity, is really something that applies to a much broader set of government activities rather than just digital. Having worked kind of up the coalface of policy making and also observed how the services work, there is an enormous amount of complexity in the system and often it’s quite costly and often it’s quite unnecessary so managing complexity much better is a critical theme and I think would lead to a lot of cost reductions. Now, as part of that prioritisation is, of course, critical as well and one of the things that I’ve also observed is that there tends to be a lot of sub-scale initiatives in government, so materiality is a real criterion to be used there in decision making, so for example, in last year’s Budget out of the 133 initiatives or policy measures, 4, only 4, actually had an impact of more than 0.1% of GDP so I’m not sure that that’s a kind of efficient and effective way of delivering policy. So streamlining, prioritisation and just making sure that things the government does are material would be my prescriptions.

Nick Jones

And of course that can help to not only reduce cost but improve productivity and deliver better outcomes at the end of it as well.

Tera Allas: Exactly.

Nick Jones

So, in terms of helping to deliver what business needs, one of the other aspects of our survey has been to look at their priorities of government and besides having a more competitive tax system, two areas particularly feature in terms of what CEO’s say. One is around having an adaptable and skilled workforce and the other, having an adequate physical infrastructure, so the necessities to do the job and to deliver wealth and, indeed, good jobs alongside that. What do you see as the priorities and the needs as far as a governmental point of view, how can government help and, indeed, how much can business shoulder more responsibility itself?

Tera Allas

So I think the answer is probably quite different for infrastructure and skills. On infrastructure, in theory, it should be relatively straightforward, certainly if you buy in to the IMF’s view which is that governments, like the UK government, can afford to borrow money to basically invest in infrastructure because, when you invest in infrastructure, you tend to get returns that are higher than what you are paying for your debt and therefore, overall, you’re actually not increasing the debt burden of the country. On skills it’s more complicated, partly because the evidence on what really works, in delivering the kinds of skills that businesses need, is still a little bit imperfect. I would say that, certainly, the experimentation that’s going in the school and education system at the moment is helpful because it gives us better data in the future to gauge what does work and what doesn’t work for better outcomes. I would say information for students and for parents about the choices they make is critical, so that they (sort of) align with what businesses are expecting and the kind of jobs there might be in the future. It’s, of course, also important that the skills that are being delivered by the system are (sort of) the skills for the future, as opposed to the past and that’s an area where businesses can shoulder more of the responsibility so the very first thing is that they need to really engage with the skills providers and the government on the skills agenda. It’s not enough to say that you need better employability, it really requires businesses to be much more specific about what they would like the government to do differently and some businesses are not always willing to provide that engagement which is a shame, because how can, otherwise, government really respond to their needs?

Nick Jones

Yeah and how can you have a more demand driven skill system if you haven’t got the demand levers in there and so the supply can respond to that, I guess, as well.

Tera Allas: Exactly.

Nick Jones

And I guess that (you know) some initiatives like apprenticeships and some of the ways of developing the further education skills that are needed come in to that area as well I guess?

Tera Allas

That’s exactly right and those are good examples of the employer ownership pilot of areas where businesses really are engaging really actively and whether also, putting some of their own money in, because I don’t think it’s realistic for any country these days to expect the publicly provided education system to do everything. The requirements of the (kind of) world outside are changing so fast that businesses themselves need to invest in (sort of) upskilling their people and changing the skills profile as and when things change. And the best businesses already do this, of course, they see the benefits in terms of motivation, innovation, productivity and growth - we just need other businesses to step up as well.

Nick Jones

And you mentioned their ‘engagement’ and that leads me to one other major finding from our survey which is the concern that business has around over-regulation which is a perennial concern for our CEO surveys, but one, if you like, that business can be a bit of a reluctant partner in terms of delivering that agenda of reducing the regulatory burden, so how do you see, given your experience, collaboration improving between business and government to deliver the outcomes and the value that we really want from the system?

Tera Allas

Well, you’re quite right to point out some of the challenges there, in fact, there can often be a tension between what citizens want and therefore their elected politicians might want to put in place, and what businesses want. For example, if you look at some of the surveys, citizens actually want more regulation in financial services, in the NHS sector for personal protection and so on. And so a smart government really needs to balance that out with the need for businesses to continue to invest and provide jobs and to grow. I think at the heart of this is finding some common goals and, you know, at a high level, of course, businesses and government want the same thing, they want a dynamic economy with good jobs, with the results of that shared fairly, but probably you need to go down to slightly more granular level, so, for example, you mentioned regulation and there’s where we’ve seen things really work, for example, the red tape challenge here in the UK, is when businesses engage at that granular level and say precisely what they would like to see done better or the kind of better regulation they would like to see in place of the old regulation. Another good example of collaboration that’s really worked is on the industrial strategy where the government and businesses build a real partnership and I think that’s been enabled by having just the kind of clear shared vision, a common goal about having a competitive UK in the future and an understanding of what that will take, both in terms of what the government’s role in it is and what the businesses role in it is and building on that platform. And finally I’d say the kind of relationships that people, human beings in the system, both from government and business, bring to bear, are really important. Having an open relationship and really putting effort in to understanding where the other party is coming from seems to be at the heart of really delivering these sorts of common shared goals.

Nick Jones

So something there about partnerships and collaboration really providing that platform for growth and for dealing with many of the common problems that both business and government face?

Tera Allas: Yes.

Nick Jones

Tera we could go on further but thank you very much for sharing your insights on our Government and the Global CEO report this year - thank you very much.

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