Cameron needs to refocus his efforts
THE reformist credentials of this government are looking increasingly shaky. The only area where real change is taking place is education: Michael Gove, the secretary of state, and his uber-competent team, are pushing through a revolution, liberating state schools from local authority control, allowing new schools to be set up by outsiders, improving standards and finally beginning to turn around a 40-year collapse in standards. They are the only success story; other ministers should look and learn.
In other areas, reform is in retreat. The shake-up of the NHS is mired in chaos – the whole project looks doomed. And if it isn’t eventually ditched, the electoral consequences could be disastrous: the government has failed to sell its changes and voters hate them. The coalition should quietly have intensified and expanded the NHS reforms launched by Labour, which were far more radical than usually understood, rather than seeking to reinvent the wheel.
That said, those who claim the NHS reforms will destroy UK healthcare are wrong – the sorry truth is that they won’t make much of a difference either way. It would be better for the government to abandon them entirely, sack the beleaguered health secretary Andrew Lansley and focus on other things. The NHS is not good enough when compared with health systems in countries such as the Netherlands, Germany or Singapore – and will face a huge, terminal crisis within a decade as an impoverished UK state becomes unable to keep up with increasing costs. But tragically that will now have to be a battle for another time. The coalition would be better off dedicating itself to salvaging welfare reform, which faces political and logistical difficulties that many in government appear to have under-estimated. David Cameron needs to refocus his government’s efforts if he doesn’t wish to be remembered as a prime minister who merely tinkered around the edges of the welfare state.
PAY DEALS
IMAGINE everybody thought your company made £1bn in the last financial year – and you, as its boss, were rewarded accordingly – when in fact it only made £500m because what seemed like good decisions at the time turned out not to be that great. You might be happy, but your shareholders certainly wouldn’t be. It makes sense, therefore, in some circumstances, to defer and spread bonus pay-outs over several years to make sure that there is enough time to assess the outcome of decisions. If they turn out to have been as good as previously thought, the entire sum is paid out over three years; if not, then the deferred bonus can be withheld.
It’s an obvious mechanism to make sure incentives are aligned to real, long-term performance and has become the norm in the City; Lloyds Banking Group has become one of the first to make use of it, as a result of provisions for PPI mis-selling materially altering its past performance. The only problem is the terminology used – bonuses are said to be clawed-back, which is misleading. By definition, the deferred components were never paid out and were never guaranteed – they are therefore not being recovered from bank accounts. Rather, future payments are not now going to be made because the conditions required are no longer met. All pretty sensible stuff – it’s hard to know what all the fuss is about.
allister.heath@cityam.com
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