Government, use momentum to tackle big problems

Give professionals more freedom and regain citizens' trust

The coronacrisis will lead to the role of the government growing and – hopefully – becoming stronger in the years to come. The government should seize that momentum to tackle some major challenges, say Jan Willem Velthuijsen, chief economist at PwC, and Richard Goldstein, chairman of the Public Sector Group.

According to Velthuijsen and Goldstein, what the government has achieved is amazing. A large part of our society is currently drawing its lifeblood from the government, which has so far injected some 45 billion euros into the economy to avert unemployment and bankruptcies.

Tax rises or spending cuts do more harm than good

Jan Willem Velthuijsen: ‘Ultimately, of course, we have to ask ourselves who is going to repay this, and how. But right now we are facing extremely low interest rates. Raising taxes or cutting spending will do more harm than good. This is a debt we can pay off across generations.’

Richard Goldstein: ‘The economy can take it for now. I think all economists agree that this is not the time to apply the brakes.’

More say for the government

Velthuijsen and Goldstein anticipate that in the years to come the government will take on a more financial and coordinating role to tackle pressing social issues. They are calling not so much for bigger, but for stronger government in terms of themes or sectors such as the energy transition, housing, security, education and healthcare.

The limits of market forces were becoming apparent even before the coronacrisis, accompanied by a growing clamour for more government intervention. COVID-19 strengthened that trend and gave the government a certain means of power. Jan Willem Velthuijsen: ‘The public sector is catching up with the private sector in terms of its size and has saved the business community. That gives it a right of say.’

Making demands on companies’ sustainability ambitions

Richard Goldstein: ‘The purpose of injecting all those billions of euros is not only to keep the business community and local retailers afloat. It is understandable that it was all about crisis management when the corona pandemic broke out, but the government is now in a position to make demands concerning the sustainability ambitions of companies and sectors, and that could provide the boost needed for the transition.’

Energy transition not possible without state aid

Velthuijsen: ‘The transition to a carbon-neutral society is a good example of an issue that calls for stronger government. The energy transition is not possible without state aid, and the role of government goes beyond tax measures. It also calls for a strong government that takes charge. This could involve designating sites for generating energy, possibly in cooperation with other countries. A government that applies stricter standards. I think there is room for that right now.'

The government should also give professionals more freedom

But while the government is expected to exert more control, it finds itself under fire for the extremely serious problems with implementing its policy. There are problems not only with the Tax and Customs Administration, but also with agencies such as the Employee Insurance Agency (UWV) and the Central Office for Motor Vehicle Driver Testing (CBR). Even the vaccination programme has got off to a bad start and is the subject of broad criticism. This affects not only policy, but also the relationship of trust between citizens and government.

This failure can be laid at many doors, but Goldstein and Velthuijsen point mainly to the freedom that professionals in the public sector need to do their jobs. And there is momentum for that as well. This must of course be based on clear criteria, endorsed by professionals and embedded in policy by politicians.

Too much bureaucracy and admin in healthcare and education

The coronacrisis has greatly raised our appreciation for workers in vital professions such as healthcare and education. ‘What we are seeing is an inherent underestimation of the complexity involved in implementing government policy and a long-standing failure to fully recognise it’, says Richard Goldstein. 'At the same time we have become so concerned with preventing errors that we tend to overregulate everything. This leads to a lot of bureaucracy and admin, certainly in healthcare and education.’

Jan Willem Velthuijsen: ‘It is precisely this efficiency drive that results in fewer IC beds, more control and bureaucracy and unsuitable KPIs. We are accumulating too many rules, especially in the public sector. Watch the documentaries Schuldig (Guilty) and Klassen (Classes), and you will see that things can be done differently and more efficiently by giving people more freedom to act. This should be kept within carefully thought-out, but broad ethical parameters.’

'We have become so concerned with preventing errors that we tend to overregulate everything. This leads to a lot of bureaucracy and admin, certainly in healthcare and education.’

Richard GoldsteinIndustry Leader Public Sector at PwC

More freedom to act and trust in professionals

Goldstein: ‘To maintain and increase appreciation for these professionals it is important to give them trust and the freedom to act. Of course you have to be accountable, to be open about what you are doing with that freedom, but that does not mean having to account for yourself every five minutes. We have to capitalise on that momentum right now. A crisis such as the childcare allowance issue could also serve as a catalyst. At least that way some good will come of it.’

Time for another way of doing business

A stronger government is right for the spirit of the times. We are seeing the emergence of a broader concept of prosperity that focuses on more than financial performance and indicators alone. The subject of environment, social and governance (ESG) is rising on the corporate agenda. Mindsets are gradually being readied for a different way of doing business.

Richard Goldstein: ‘It is becoming less and less about shareholder value alone. Major business decisions are becoming more and more about fairness. How do we distribute the wealth created by our decisions? And how are we leaving the world behind us? It all starts with asking questions. I recognise the need to make the economy greener whilst taking into account the interests of all stakeholders: precisely because that is what society demands. Large investors are focusing more and more on this. This will also increasingly affect companies' strategic decisions.’

‘Many citizens are questioning whether the government actually works for them. This underlines the need for a renewed relationship between government and citizens. A relationship based on trust rather than mistrust.’

Jan Willem VelthuijsenPwC's Chief Economist

A new perspective on wealth distribution

Jan Willem Velthuijsen: ‘Many citizens are questioning whether the government actually works for them. This underlines the need for a renewed relationship between government and citizens. A relationship based on trust rather than mistrust. This also calls for a new way of looking at wealth distribution. Who in the Netherlands actually benefits from the current system? And does everyone? That does not appear to be the case at the moment and is something the incoming government will need to address.’