If anyone has real insight into the provision of public services, and particularly energy as a public service, with all its inherent difficulties and contradictions, it’s Simon Virley, who has a wealth of experience both within government and as part of the private sector in the UK. In our conversation, Simon Virley recalls the role that managerialism has played in energy policy. He is positive about the future of energy and acknowledges why the private sector will be crucial for the success of future energy policy in the UK.
Striking the balance between ‘the centre’ and those responsible for service delivery
We began our discussion by asking about his time in government, particularly at the very centre of government when he worked at the Treasury, No.10 and the Cabinet Office. “There were definitely elements of a ‘managerialist approach’. There has always been tight control from the Treasury on tax and spending decisions. But there was also an even further shift at No.10 under Tony Blair with the creation of the Prime Minister’s Delivery Unit around 2000.”
“I saw it at first hand with the introduction of the Delivery Unit under Michael Barber, the target setting for each public service reform area, the Strategy Unit leading cross-cutting projects, the Office of Public Service Reform, and better regulation being lead from the Cabinet Office. That was a considerable ramping up of activity from the centre to drive reform and manage departmental activity.”
We asked if he thinks that there has been an overreliance on ‘the centre’. “The UK has one of the most centralised systems of government in the world. At times, overly centralised, I feel, and this approach can sometimes undermine the ability of individual departments, the agencies, to innovate and get on with delivery. But ‘managerialism’ is not all bad. There’s certainly been some good practice that has come in from the private sector around having clear targets and incentives”.
Having also worked within a number of line government departments, Simon can see both sides. “As with any large organisation, there is always tension between the centre and the front line of delivery. It’s about getting the balance right. I remember my time in various departments when we wanted to make progress on a number of decisions and being frustrated that we weren’t allowed to get on with that or the centre of government wanted to take a different route. But I also saw occasions where departments simply weren’t addressing things as urgently as they should have or weren’t implementing the political messages from the top. It’s not as simple as ‘the centre is too powerful so let’s reduce its power’. There are definitely two sides to it.”
It’s not as simple as ‘the centre is too powerful so let’s reduce its power
The challenges specific to the energy sector
A story we often hear is that the people running and delivering public services such as health and education out in the departments and beyond feel hamstrung by Whitehall’s target-driven managerial approach. Energy, however, is unusual as a public service in that it is almost exclusively delivered by the private sector. What particular issues does this pose?
Simon explains: “For me, energy is a very interesting case. It’s quite different from health or education in that it is not purely about public spending. We produce energy through the investment private companies make against a framework that government puts in place. And then, apart from the ideological question of whether or not you regard energy as essentially another public service, we have the tensions between two apparently contradictory directions of travel. The first is an overall policy intent to get bills down for consumers; the second is at the same time trying to make our energy more environmentally friendly with a lower carbon impact, whilst at the same time keeping the lights on.
“Of course, if you want renewables you’ve got to spend more money to subsidise new technologies. And if you spend more money the bills go up. The challenge for energy policy has been how we can green our energy system, meet our carbon targets, keep the lights on and keep energy bills down for citizens. That has been a constant and difficult discussion between the centre of government and the departments throughout my time in government. During the Coalition government, it was a real fault line between the Liberal Democrats (who were in charge of the energy department) and the Conservatives, which has only added to the complexity of moving the energy agenda forward.
“The way it’s playing out in government now is fascinating. In the 1990s the Conservative government privatised the energy industry, arguing that markets and competition were the way forward. But the 2018 Conservative government is returning to centralised control by regulating energy prices from Whitehall. The Labour Party, by contrast, is in favour of re-nationalising energy and treating it as a purely public service like health or education, despite the fact that it’s not public spending that delivers our gas and electricity.”
So how have we got to this point? Simon cites a number of factors: “Movements in global energy prices over recent years have increased wholesale prices and driven bills up. No UK government can do anything about these macro trends. But the move to green energy is, of course, also part of this. And I don’t think successive governments have been particularly upfront with people about the fact that developing a low-carbon energy system involves significant costs. There has also been a break down in trust in some practices used by the big energy suppliers, like those not switching paying more for their energy. So if you are an older customer and not ‘tech-savvy’ and don’t switch suppliers, then you could end paying more. This has created a backlash and calls for regulation to protect more vulnerable customers.”
With this in mind, can it ever be right to bring private providers into public services – not just energy but in areas like health and education, where this debate is raging fiercely at the moment?
There has also been a break down in trust in some practices used by the big energy suppliers, like those not switching paying more for their energy
A role for both the private and public sectors in energy provision
Simon believes the private sector has a valuable role to play. “There has to be a role for both the public and the private sectors in the delivery of public services – and not only energy. There are some areas government struggles with – keeping up with new technology, is a prime example. We need the private sector to help us keep pace with the rate of change because we simply can’t do that from within Whitehall. As an example, I used to have to decide how much subsidy the government would pay for solar panels. It was almost impossible, from a government office in London to keep up with what was happening on production lines in China as the cost of solar panels tumbled globally.”
“And of course the pace of technological change is increasing all the time with robotics, AI, digital data platforms, and so on. The potential of new technology in improving provision across all public services is absolutely huge. It’s vital that we harness the power of new technology – for which we need private sector involvement – in developing the energies of the future.
“So yes, I see a vital role for the private sector in energy, as it’s the only way we can keep up with new technology we need so badly in the delivery of our energy needs. But government’s also got a big role to play in terms of setting the regulatory frameworks, monitoring the prices and distribution of energy, looking after those who are more vulnerable and making sure the data that’s going to be flying around on all these platforms is held securely.”
Does this mean the debate around the future of energy is not going to focus solely on public versus private sector provision? Simon hopes so, since the burning question is less an ideological one than a pragmatic one: how can we keep the lights on for all, develop and produce more environmentally friendly energy and keep prices low?
We need the private sector to help us keep pace with the rate of change because we simply can’t do that from within Whitehall
A positive future – how we can make it happen
“I’m actually very optimistic about the future for energy. I see almost free energy ahead, because once you’ve built the wind farm, the solar farm and stored your energy in batteries then you really can deliver an energy system with very low bills, green energy and a reliable supply. I can certainly foresee a time when green energy is cheaper than fossil fuels and it’s not too far off, but there’s no doubt that the transition is going to cost money and involve the private sector.
Although I do see a role for government in setting regulatory frameworks, I very much hope that central government regulation of retail energy prices will be time limited so that we can find a way to harness the power of new technologies like solar, electric vehicles and battery storage for the good of consumers going forward. Harnessing these new technologies will be key to meeting our future energy needs.”
At the Centre for Public Impact, we’re exploring how government can be better equipped for the future.
We’re speaking to government leaders, civil servants and public sector workers around the world to understand how they’re thinking about the future and shaping their organisations for the challenges ahead. And we want to hear from you too.
Find out more about our Future of Government Project here.
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