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What Can Tesco's Terry Teach the Government?

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So today I headed down to Westminster's Policy Exchange to see Sir Terry Leahy. Promoting his book Management in Ten Words, the discussion with Tesco's former CEO was chaired by The Times' Daniel Finkelstein. A reporter usually incisive with his analysis, I was hoping for a good hour of give and take on what exactly it was the government could hope to learn from private companies.

Although Leahy has disavowed government ambitions several times, it's easy to see why David Cameron's favourite think tank invited him along. His key messages of competition and changing the public service culture directly reflect the various Conservative reforms passed and proposed.

In short, Leahy sees that the public's view of what they actually want from their government is more often ignored than not. And while some of the best private companies embrace the service ethos of the public sector, the efficiency of the former is rarely taken up by the latter.

His view is that this largely stems from an overgrowth of regulation. Rather than listening to the public, public services listen to those in control. Pointing to the last 25 years, Leahy notes that the legislative apparatus controlling businesses and services has developed far quicker than the economy itself. This both stems from and encourages a lack of trust in the people who actually work in such institutions.

In the public sector (the thesis continues) this lack of trust generates a culture in which failure is rewarded only with punishment. Consequently the public have been taught to expect an excessive standard of accountability from both their civil servants and politicians.

With the standard of public accountability set too high, real innovation (and the inevitable risk that accompanies it) can never be allowed to flourish and "managerial incrementalism" ensues. Rather than a public sector based on dynamic growth, we have a public sector that mixes agendas, limits its own ambition and prevaricates in order to minimise damage.

Leahy's almost inexorable answer is competition. Performance-based incentives will encourage the right kind of growth and achievement that the current system does not. Leahy cites a conversation with a friend who, like his wife is an NHS GP. To paraphrase: 'in the current system running a successful practice gets me nothing, whereas if you run a successful company, you get a bonus'. Today's public sector focuses too much on the system of delivery and not the goods that are being delivered.

Comparing it with his own experience, Leahy notes that size of the food and health industries is about equal (c. £100m). The difference however, is that customers can choose where they shop. Empowered customers can elect to visit Sainsbury's or Morrison's whereas their GP is their GP. Service to users is limited and what's more never commissioned as a result of their own choice. Instead, it is dispensed top down and awarded by those who can successfully pitch to win business rather than deliver the service.

To change this, Leahy suggests a wider paradigmatic shift is necessary: "Too much of our everyday life... is managed by government" and responsibility in large institutions can only stem from entrusting it to individuals. Added to this, a government hoping to change the public sector can only do so by ridding it of the notion that eschewing private companies means declining wealth creation. Shrinking the public sector's remit would, in turn make way for those larger salaries that ultimately are capable of attracting the best talent. Instead, "too many people are simply not taught where their wages come from", such that pecuniary desire is seen as incompatible with genuine public sector ambition.

All this of course is nothing new to anyone familiar with Conservative policy. Leahy's most penetrating insight only comes towards the end of his reflections on how exactly to push business-like competition into the public sector. Rather than the slew of management consultants brought in to advise businesses, experts should be instated as the actual heads of sectors with all the accountability that accompanies the position.

Despite this, the interchange between Leahy and audience rarely steers away from the more Conservative aims of the Con-Lib coalition. Pushed on exactly how one would introduce an increased tolerance of failure into an institution like the NHS, Leahy can only answer half-heartedly that "in certain sectors" it couldn't but "in others" it might be easier to control. Likewise, other than a passing nod to the Virgin Trains debacle to showcase bureaucracies as a "terrible form of human experience", no mention is made of that particular mode of transport which has made itself into a case study for privatised public service failure: the trains.

All in all, Leahy is an affable speaker who delivers his ideas well. Finkelstein too is charming and confident but that's exactly the problem: I'm not an overly political animal yet I have more heated political discussions among my own friends; the whole event is too chummy by half. Rather than see Leahy's ideas tried and tested, the discussion just affirms what most of the British public already knew: that Leahy can run a private business specialising in food retail. Whether those ideas can be applied to the public sector is something anyone not already onside is hardly likely to have accepted on the back of this performance.