Are the Liberal Democrats a party of untrammelled ideology – sorry,“principles” – or do ethics and evidence also play a role in thinking? This question struck me forcefully when reading David Cameron’s article on public service reform in the Telegraph. It appears that the imminent Open Public Services White Paper has been formulated with collaboration from the Chief Secretary to the Treasury and Nick Clegg is fully ‘on side’. We await the details, but if Cameron’s article gives us an accurate sense of what is to come then I think there is – or should be – a significant battle shaping up. Cameron’s position would appear to be “The answer is marketisation. Now what’s the question?”. Is it appropriate for Liberal Democrats to be complicit in this agenda?
The Liberal Democrat leadership is adamant that we’re all social liberals together. So, we might ask, what separates a social liberal from a libertarian? A facetious answer might be that a liberal has a stronger grip on reality. Certainly it entails a less Panglossian view of markets. We recognise that unfettered markets are not an unalloyed benefit. Markets overlaid upon patterns of social disadvantage mean some members of the population will be unable to participate fully and will not realise their full potential. Hence, the emphasis upon equality of opportunity and education. Not only that, but unless we are vigilant markets will entrench and magnify inequality. Hence, the focus upon challenging monopoly and advocacy of the benefits of competition.
Yet, this willingness to temper idealism by recognising the downside of real world markets seems to evaporate when we come to discussing the reform of public services. Rather than being sceptical, there is a tendency to revert to the idea that markets are a neutral means to an end. It is therefore unproblematic to embed them ever deeper into public service provision.
Cameron proposes to legislate for a general presumption in favour of private companies having a right to bid for erstwhile public services. This will save the bother of having to make the case for marketisation in each sector individually. Rather the onus will switch to public providers having to demonstrate, for each specific case separately, why marketisation is inappropriate. The belief is that provider diversity will generate competition and choice. There is also a strong push for greater use of mechanisms such as payment by results in the belief that they will improve effectiveness.
The language used is revealing. Mr Cameron notes that the proposals “will make it impossible for government to return to the bad old days of the standard state monopoly” and a “decisive end of the old-fashioned, top-down, take-what-you’re-given model of public services”. The language is not dissimilar to that used by Jeremy Browne in a post on the Big Society on this site a few days ago. Mr Browne attracted some flak for his references to the “top-down, all-knowing, one-size-fits-all centralised state”. These are such caricatures of public services that it is almost comical. It wilfully ignores 30 years of reform focusing on increasing responsiveness and facilitating choice. It ignores that we already have a system of mixed provision where much funding has been directed towards the voluntary and not-for-profit sector. The only thing we don’t yet have is a dominant commercial presence. It is tempting to presume that this is what Cameron – for all his talk of diversity and decentralisation – thinks is missing. The issue here is not whether there are improvements that can be made in the public sector; clearly there are. But let’s have a discussion grounded in evidence not undiluted ideology. Please.
We might do well to reflect upon where these proposals originate. Many of the ideas are embodied in Payment for success: how to shift power from Whitehall to public service customers [PDF], produced by the multinational consulting firm KPMG which, of course, has no vested interest in pushing a marketisation agenda. It is, presumably, equally coincidental that one of its authors – Paul Kirby – has recently moved to lead the policy team in No 10. This sort of revolving-door between sectional interests and government cannot, by any sensible reckoning, be healthy for democracy.
A problem with several of these proposals is that they are based upon an extremely idealised – indeed simplistic – view of markets and how they operate. The sort of basic textbook economics that underpins the idea that markets will deliver a socially optimal allocation of resources should have no place in informing policy. More sophisticated analysis provides reasons for thinking that under a wide range of circumstances – many of which are relevant to public sector provision – markets do no such thing (I discuss this further on my blog).
We are presented with simplistic statements about competition in health or the benefits of high powered incentives in contracting as if they provide a justification for marketisation, rather than a mystification. Yet, these statements need to be very heavily qualified in the light of theoretical advances and accumulating evidence. Get the design wrong and unleashing such mechanisms can be hugely damaging. And more reflexive economists are quite concerned that even the more sophisticated economic models that recognise this fail to capture important dimensions of the way in which incentives operate in the real world.
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61 Comments
So many words and yet so little to say.
On what basis do you conclude that all private sector or profit generating providers are inferior to those of the state, or worse still unfit for consideration?
If a private provider can offer same service, measurably identical to that which existed before, but at a lower cost, leaving more funds to allocate elsewhere, would you oppose it?
If provision is commissioned on the basis of the public’s needs and preferences, offered to them free, performance managed and measured by KPIs, with break clauses and the option to ditch a provider if they fail to make the grade, with no or minimal payment upfront but linked instead to agreed desirable outcomes; what’s the risk, either to service users or taxpayers?
The choice you present between state only provision or an unscrupulous and mercenary free Market, where service suffers for the sake of profit is a false one; the state can co-ordinate and regulate, set the boundaries and enforce the standards. It’s called commissioning, and it’s really all an authority should need do.
At this point you may quote rail franchises or utilities – botched privatisations with state monopolies replaced by private ones or broken markets dominated by cartels; to avoid this I’d suggest maintaining state competitors, setting the benchmark above which private providers must rise and undercutting external birders if possible; but if you can’t deliver the same service as cheaply, then you shouldn’t be in business – that level of marketisation is desirable and sorely lacking.
If you don’t want to read the whole PDF The Guardian excerpted some consultant-speak gems from that KPMG paper, including ones like this:
‘Kirby proposes “the boundaries between public, private and third sector provision should melt away” and suggests “this empowerment agenda will have to be forced on to public sector organisations in the early stages to break the tendency to structural inertia”.’
http://www.guardian.co.uk/politics/2011/feb/21/david-cameron-public-services-shakeup
And Polly Toynbee’s take on the proposed privatisation of the public sector is also worth reading:
http://www.guardian.co.uk/commentisfree/2011/feb/21/nhs-turmoil-tory-ideology-run-wild
I think we would expect Andrew Tennant to be both patronising and challenging to the content of your article Alex.
Personally, I think you nailed it at: “The answer is marketisation. Now what’s the question?” and whether Lib Dems should be signing up their very souls to this Thatcherite agenda. Clegg + his Orange book cabal have always wanted this. It’s just our votes and acceptance of the Coalition agreement have allowed them to do it.
Andrew’s response is along the lines of “but if the level of service is the same but the cost lower, it’s a win-win”. It misses the evidence of all privatisations + out-sourcing operations since since time began. it goes thus:
– Private sector artifically lowers their bid cost making it impossible for the public sector to compete
– They offer the same level of service..until it goes wrong and demand more money or a reduction in service
– The public sector providers will fold or be swallowed by the private sector
– The Private Sector will lower the service levels, lower their cost base (fire people) and maintain the contract in re-tender
– It produces state-subsidised cartels or monopolies – like Capita + Serco + Atos etc etc etc
People don’t re-procure Andrew based on “break clauses”. It is a protection only for the contractor. They either do what this government does (pay more money to cancel things, like in the recent Nimrod cancellation) or what the previous government did (pay more money to complete the project, like in the recent Nimrod cancellation)
I am not always and invariably opposed to contracting out public services – each case should be taken on its merits – but at the very least it introduces another party with its own objectives which can only further complicate an already complex situation. And as we have seen with PFI contracts things can go badly wrong. The contracts can indeed be tightly specified but that only leads to inflexibility, payments can be tied to performance indicators but that does not lead to improved performance (only teaching to the test and similar abuses) and if prices for key measures are screwed down they will merely morph into high prices for ancilliary tasks not includedin the specification – those hundred pound light bulbs and so on.
When the Conservatives did this before it screwed up for entirely predictable reasons, including as Alex rightly says, their Panglossian view of how markets work.
I’ve just revisited the Coalition Agreement to check my memory that this thrust to marketise everything wasn’t included. If it was I can’t find it – only a lot of “We will this… and “We will that …” about specific things. Yet this is a very big deal that takes policy in a Thatcherite direction I totally abhor.
And if it isn’t included is there any reason Lib Dem MPs should support it. I can’t think of any.
I am shocked at this; no party at the last election mentioned doing anything like this, but after that please understand, you will be held responsible Liberal Democrats cannot say “57”, you are the government doing this…
I think this is going to end with poorer services and lack of accountability to the public, the volunteer section in our society will have to step back and ask themselves some serious questions, it is one thing to help out the local community and local government, it is another thing entirely to save costs for private business, which let us be quite honest here that is what could happen with certain services.
@Cuse
Every service I’ve ever procured when commissioning on behalf of the public sector has had a break clause; who are the negligent commissioners that you’ve been working with?
@Andrew Tennant.
“If a private provider can offer same service, measurably identical to that which existed before, but at a lower cost, leaving more funds to allocate elsewhere, would you oppose it?”
I would oppose private providers on principle because they are not concerned with delivering the best public services, they are concerned only with their shareholders and their profits and, in my experience they never provide a measurably identical service but a worse one that in the long term is always more expensive.
I have to say if the lib dems vote for this then it will take a generation before centrist or left leaning voters forgive them. If ever. There are many reasons why the Tories were out of power for so long (and still couldn’t get a majority), their botched privatisations were a large part of that.
More generally, the idea that basic state services should be run for the benefit of shareholders rather than the general public is utterly abhorrent on general principles. No longer will government act in what it believes are the best interests of the people, it will barely act at all and we’ll be paying for the privilege.
And how on earth is this idea of shifting responsibility from democratically accountable councils to the private sector compatible with the coalition’s rhetoric of putting people in control of their communities?
@MacK
As I suggested in my first comment, if the public sector can provide the better service, all potential providers having been considered, then they should get the business; but where this is not the case, you’d still insist they had it?
@g
“And how on earth is this idea of shifting responsibility from democratically accountable councils to the private sector compatible with the coalition’s rhetoric of putting people in control of their communities?”
By asking public sector providers to make the case for why their service is better quality and value, or to end the unjustifiable protection and monopoly they are given for delivering taxpayer funded services.
@Andrew Tennant
My point was this – are you saying it is sound financial or procurement practice to effect Break clauses when service levels dip? You would advise your commissioning officers to discharge them, then spend additional money transferring service by re-procuring – because service levels dip?
You believe it is sound contractual management to use the break clause as a means of raising service levels?
You believe it offers value for money – like in the case of the decommissioned Nimrods your Government insisted upon?
Break clauses are contractual elements. They do not result in direct Value for Money.
Cuse is right.
This – every single time…
– Private sector artifically lowers their bid cost making it impossible for the public sector to compete
– They offer the same level of service..until it goes wrong and demand more money or a reduction in service
– The public sector providers will fold or be swallowed by the private sector
– The Private Sector will lower the service levels, lower their cost base (fire people) and maintain the contract in re-tender
– It produces state-subsidised cartels or monopolies – like Capita + Serco + Atos etc etc etc
The LibDems are helping to make this country a bad place for the old, sick, young, poor… In fact, if you aren’t in the wealthiest 10% its about to get nasty. And it won’t be the Conservatives that really pay for it at the next election…
Liberal Eye makes the very salient point that these proposals were not in the Coalition Agreement. Ergo, Lib Dem MPs are under no obligation to vote for them (no matter how much Nick and Danny might love them).
Also, I will not be going to Conference myself, but I sure hope someone submits an emergency motion on the White Paper (which according to Cameron’s article will be published by the end of next week; the deadline for emergency motions is 8 March).
“Is it appropriate for Liberal Democrats to be complicit in this agenda?”
We should have been leading it !
More freedom to choose between competing services, driving costs down and quality up, with risks entirely borne by entrepreneuers and with taxpayers freed from sub-standard state monopoly provision. Hurrah for Liberalism!
If I’m not happy with my mobile operator I can switch to another network. If I’m not happy with a service provided by the public sector I can vote out the management. If I’m not happy with a public service provided by a private company I can ……… do nothing.
If I’m not happy with my mobile operator I can switch to another network.
You could not have switched to another phone network in the days when telecoms were a public service provided by the government. You can do so now only because the government monopoly was abolished.
But of course, you could have waited some years until the next election, researched the manifestoes of the different parties to decide which one was most likely to alter the phone network in ways you approved of and, if there were no issues you considered more important, voted for that party.
Who knows, your vote might even have had some effect on the state monopoly.
@Cuse
Sometimes I wonder if you’re deliberately simple – such a decision would depend on the track record of the supplier, their explanation, their recovery plan, and the extent and duration of variance; if you’re paying them predominantly on outcome then they should be as motivated as you to put it right.
@AndrewR
Either vote of those that commissioned them, report them to a regulator, or in the case of personal budgets, change who you buy from. Do you have any problem returning something to John Lewis? Or for that reason any retailer?
If it need be said I agree whole heartedly with Andrew Duffield.
@ad
If you are not happy with your gas supplier you can simply switch to another provider however you will be shafted either way whilst they all continue to record return massive profits.
You can do so now only because the government monopoly was abolished.
At last we have an activist that approaches a real issue !
This is the end of Thatcherism and the dawn of Cameronism; this proposal and the NHS reforms are really nasty policies and I can’t believe that the Lib Dems are backing them.
I really hope that this bill is the straw that breaks the camels back.
@ Andrew Tennant
You describe yourself on your Twitter feed as, and I quote “An Orange Book Lib Dem and an occasional pain in the arse”, I would dispute neither! (perhaps only the use of the word occasional) 🙂
Moving slightly away from the point here, but salient none the less, would you like to explain to me exactly the difference, as you see it, between the philosophy of the Orange Bookers and that of today’s Conservative party. Are there any areas of policy which you believe to be “Red Lines” in this coalition?
It is mindless ideology (in my opinion) to advocate that markets provide cheaper/better products and services. It flies in the face of the overwhelming evidence in the poor quality provided by a large proportion of the private sector in the UK (the financial services sector being the worst offender, with awful products delivered by overpaid incompetents) and also the fact we are in a recession that was entirely caused by an enormous deviation from economic market pricing (in land prices) by irrational human behaviour, enabled by the private sector. To advocate free market capitalism is as stupid as advocating communism; both create equally awful societies. The Liberal party worked this out a century ago. Why would anyone (such as Clegg et al) want to return us to the 19th century? In that century our wealth was derived from invading other people’s Countries. Our wealth in the 20th century was derived from a modern liberal, mixed economy with a meritocratic ideology. That is now being undermined by this return to feudalism. Please don’t dirty Thatcher’s name by comparing her to Cameron/Clegg – she did actually believe in meritocracy and was successful in appealing to the vote of the working man/woman (OK, partly by bribing them by selling them taxpayer owned houses at below market value and shares in taxpayer owned companies at below market value, all at the expense of the taxpayer).
Finally, Lib Dem Voice gets round to discussing this desperately urgent matter after I have had my knuckles rapped for posting off message about it elsewhere. Well done Alex Marsh – I agree 100% with everything that you say. Wise words indeed.
Can the free market proponents cite a single example where the intervention of private enterprise in truly public services like transport, health and education has resulted in both lower costs to the state and higher quality services? And please, spare us the irrelevant example of mobile phones – no-one ever died or suffered major hardship from being unable to change mobile phone provider or not having the right text, data and calls package.
That Cameron can call for the “decisive end of the old-fashioned, top-down, take-what-you’re-given model of public services” and then propose that services to be handed over to faceless grasping corporations like Serco and Capita really takes the biscuit.
Ever since it emerged that Andrew Lansley’s office was funded to the tune of £21,000 by private health operator Care UK (Total turnover £443.6m, operating profit £37.7m) in January last year it has been plain where the Conservatives’ agenda lies as far as the NHS has been concerned. I assumed that the Lib Dems had managed to stop this kind of ideologically-driven, evidence free market jihadism in its tracks, but it seems this is not the case. Just as we appear to have caved in to the ‘nasty party’ agenda on taking people’s employment rights away (thanks, Vince), so it appears we are about to let the Tories have their way on further privatisation.
Don’t get me wrong. I think some element of choice can be useful. In particular, competing co-operative or mutual type organisations could be a good thing. But the introduction of private companies into new areas of public services has the potential for disaster after disaster – just as has been the case in so many instances from hospital cleaning to railways, public building projects to school meals.
And what about local choice and autonomy? What if we don’t like having private provision rammed down our throats? What if we decide that it would be better to have our local services run under public ownership? Will that also be allowed to happen?
Any Lib Dems attending the conference must make it clear to the leadership in no uncertain terms that the measures proposed under this Open Public Services White Paper are totally unacceptable and will not be tolerated under any circumstances. This is not part of the Coalition agreement and our MPs must be forced to vote it down.
@James Sampson
Sure, Lib Dems believe in policies to maximise opportunity, to reduce inequality, and help the disadvantage and downtrodden to get on – in tax cuts for the poorest, not millionaires; in logical and evidenced based policies, not tabloid rhetoric – like rehabilitating prisoners and investing in education, not hanging and flogging em; in creating a diverse and tolerant society where individuals do not have to suffer prejudice – equality of marriage law, not ‘no gays, no blacks, no jews’; in regulated markets, not the shirking of political responsibility; in a sustainable inheritance where we tackle tough choices, like climate change and social care, not denying that they’re happening.
@Andrew Tennant
Ah, the joys of repetitive insulting, brought to you by an Orange-Book neo-con. If you don’t feel like answering the question, why not just say so?
There you have it – the perfect Neo-Con circle: The Private sector is better; and when they’re not, motivate them with money. And when that doesn’t work, ask them why it’s wrong and what you need to pay them to put it right; And if that doesn’t work, break their contract and buy it off someone else.
And repeat.
I tell you what – here’s a wacky idea Andrew. Why don’t you start a political party where free-market ideology drives its every thought; get it supported with donations from the private sector and banks; and do everything you can to asset-strip the Country when you get elected. Sound familiar?
Me? I’ll maintain that the answer to every public sector problem is not “privatise it”.
@Cuse
You certainly don’t convince me by deliberately misrepresenting what I said, building strawmen, and then failing to demolish them!
I proposed payment by results, not upfront; did not propose increasing payments are making terms more preferrable to the provider when they were failing – quite the converse; and proposed the maintenance of public sector alternative providers as the backmarker and insurance policy to take over in incidences where the chosen provider fails.
If you want to argue against someone, HINT: start with their arguments?
Thanks for the comments so far. This is a topic of huge importance. Too much has already been raised to engage with all the points in detail.
I have great respect for what properly regulated markets can achieve to further human well-being (which, after all is – or should be – the ultimate objective). But we shouldn’t fetishize markets and ascribe magical properties to them – that way lies crass market fundamentalism. And nor should we fetishize the public sector.
I think the issue here can be approached at (at least) two levels.
The first is that the conditions under which market mechanisms deliver beneficial outcomes are more restricted than the simple stories in the basic text books would suggest. Key issues include, for example, access to information and the observability/measurability of outputs. WIthout costless observability the result of price competition is quality degradation and a race to the bottom. That is one of the problems with Lansley’s proposals for reform of the NHS. Similarly, we know that setting simple PIs for multidimensional services results in output distortions (“what’s measured is what matters”). Likewise trying to write performance-related employment contracts that seek to generate high powered incentives can be problematic when the service is multi-dimensional, unpredictable and requires flexibility. We know that markets populated by providers with diverse motivations do not operate in the same way as markets populated by profit-maximising private firms, but the theory assumes the latter is the case in order to reach its result that markets allocate resources efficiently.This isn’t the place to rehearse all the evidence on the problems badly designed efforts at marketisation deliver. But there is plenty to give all but the most ideological policy maker reason to be extremely careful.
The second level relates to broader questions of political economy. The marketisation of public services, if it results in increasing concentration of economic power in the hands of multi-billion pound multinational corporations (and it almost certainly will), will be bad not only for the provision of public services, or even the economy more generally, but for the very nature of society – the maintenance of an appropriate separation between the poltiical and the economic. We can look at what is currently happening in some of the US states where political power has been captured by large scale economic interests. The implications for the social welfare of the broad mass of the population, rather than the further enrichment of the few, are profound – and profoundly negative.
And this a pandora’s box. Once it is opened and economic power becomes further embedded and enmeshed with the political it will result in a political system that – for that very reason – is unwilling to address the problem.
We should not be guided by idealised notions of benign market mechanisms but by a concern for the deleterious effects upon society of undue concentrations of economic power. The market economy only functions effectively – for the benefit of all – if it embodies appropriate checks and balances, institutions that can act as a counterweight to the interests of the economically powerful. Liberals shouldn’t really need to be reminded of that. But some seem happy to sign up to the current agenda, which would seem to be intent on removing many of those checks and balances.
Cameron is getting into classic knowledge of the price of everything and value of nothing, there is no need to put all parts of the public service out for competition, reforming the public sector by giving them more flexibility and allowing them to reinvest when they have a budget surplus instead of encouraging them to spend any forthcoming surplus and anything just to meet budget statistics would drive down costs, privatising the public sector simply won’t end well.
Good to see some discussion on yet another Tory policy not in the Coalition agreement but being pursued enthusiastically by the Govt. Now we just have to see which gullible Lib Dem minister will be the human shield for ‘public service reform’.
Cameron sketched a vision of a society and public services which would pre Coalition have been supported by only a small percentage of Lib Dems. If there can be any claim to be a moderating influence then it is on this type of issue that LDs need to make a mark. I would guess most Lib Dems support more diversity in public service provision but without the wholesale marketisation proposed. It ought to be possible to push the Tories to a less aggressively ideological stance on this into a more centrist, mainstream approach. If Clegg cannot or will not I would suggest that it ought to be a pivotal moment for many mainstream Lib Dems. A point not to pass.
Once upon a time, we took pride in our ability to see beyond the knee-jerk ideologies espoused by our opponents. We would have been rightly concerned about all the problems of inefficiency, demotivation, remoteness and bureaucracy that can creep in when State provision is not subjected to rigorous checks and balances, in particular from the democratic oversight and public participation which “community politics” could bring. We would equally have been appalled to see right-wing market theoreticians and grasping private providers offering an ideology-based alternative, making the deeply dishonest pitch that the invisible hand of the free market guarantees efficiency and effectiveness, and asking us to help them get rich quick.
We have gone backwards, haven’t we?
“the problems of inefficiency, demotivation, remoteness and bureaucracy that can creep in when State provision is not subjected to rigorous checks and balances”
These problems are inherent in all large monopolistic organisations, regardless of whether they are private or public.
In the case of the private organisation, there is at least some sort of check and balance created by other large monpolistic organisations. The problems creep in when government acts to preserve the monopoly.
@Andrew Tennant
“Either vote of those that commissioned them, report them to a regulator ….”
So you vote out those that commissioned the private sector provider and then what? The people you vote in will be bound by whatever contract the previous lot negotiated. The effect of these proposals will be to reduce the accountability of service providers to those who fund them.
@AndrewR
“The effect of these proposals will be to reduce the accountability of service providers to those who fund them.”
Increase Andrew, increase.
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@ Tabman
“In the case of the private organisation, there is at least some sort of check and balance created by other large monpolistic organisations”
Just being pedantic here, but a monopoly means by definition there is only one of itself, otherwise it would be a duopoly or an oligopoly.
The point is that big, profit-led organisations with large market share almost invariably crush smaller rivals and frequently disregard ethical concerns in favour of maximising financial gain. This has become even more the case recently since ‘paternalism’ became a dirty word and most large companies started jettisoning their social obligations e.g. pensions provision.
The whole Conservative philosophy – that markets and free enterprise are the natural and inevitable way of organising virtually all areas of society – is pure ideology. Markets and companies are a social construct like any other form of economic organisation. There are vast areas of human society where they is utterly inappropriate. If we deny this, we are not just denying vast areas of accumulated economic knowledge about how markets can fail and do so very badly. We are also wilfully ignoring the tangible lessons of the last thirty years – that privatisation can wreak enormous damage to standards of provision while costing taxpayers more than the publicly owned organisation that has been replaced.
I thought we had emerged from the era of New Labour failure into a greater understanding of the mistakes that have been made in imposing the market-led model on areas where it is inappropriate. Yet it seems there are some among us who are still deeply in denial. I shake my head in despair at the thought that we might enter a further round of this ideologically-led, evidence-free type of policy making and share Alex’s fear that once put in place, further privatisation will give rise to entrenched economic interests that will become impossible to dislodge once in place.
@Alex Marsh –
“But some seem happy to sign up to the current agenda, which would seem to be intent on removing many of those checks and balances.”
Exactly.
There are conflicts of interest build into Lansleys NHS plans – for example we will see BUPA-run GP Consortia groups commissioning health services from BUPA hospitals. With no oversight from the SHA, because it is being abolished.
Where will this leave the district general hospital when all the ‘profitable’ services under Payment by Results have gone elsewhere?
The govt are proposign rigged markets, not free markets.
Should read: …”they are utterly inappropriate”. Sorry.
@Alex Marsh: I would like to congratulate you for making the case against unfettered marketisation in the public services even more succintly and eloquently in your comment. Bravo, sir.
On the proposals themselves, here is something for supporters of the plans to consider. What if the eligiblity for bidding for contracts were opened up only to charities and two specific legal forms of social enterprises, community interest companies and industrial provident societies (the latter designation includes co-operatives and community benefit societies)? Due to the restrictions placed on these forms of organisations, I think this would remove a lot of the concerns many people have (including, I hope, many fellow Lib Dems) about “increasing concentration of economic power in the hands of multi-billion pound multinational corporations” that Alex Marsh expressed so well.
Why is it necessary to involve profit-making companies, which owe their first allegiance to their shareholders?
@ Top of the league
“Where will this leave the district general hospital when all the ‘profitable’ services under Payment by Results have gone elsewhere?”
Precisely. Thanks for pointing this out. What happens to infrastructure like schools and hospitals built at huge public expense (probably under costly PFI agreements as well) when the “invisible hand” of market competition has swept their customer base away? Are they junked or sold off cheaply to the highest (private sector) bidder?
How does the market put a value on non-price factors like ease of access for people with reduced mobility, often the sickest and most vulnerable members of society?
The idea of choice, for instance in school provision or in terms of hospitals, is predicated on the idea of being able to exercise that choice effectively. If you don’t have a car (or the time, say because of shift work) to ferry children to different schools or the price of a taxi fare to a hospital that is not easily accessible by public transport, what does that “choice” mean?
Because this type of reform is being envisioned by middle class, even wealthy individuals with no experience of such problems, they are simply unaware that they exist.
Andrew Duffield
More freedom to choose between competing services, driving costs down and quality up, with risks entirely borne by entrepreneurs and with taxpayers freed from sub-standard state monopoly provision.
It doesn’t look like this was intended to be ironic, so apologies if that was the intention.
We have now had thirty years of this being the dominant ideology in our country, and it hasn’t worked.
As other have already noted, the succession of mis-selling scandals in financial services show the simple mantra “competition drives down costs and drives up quality” does not always apply.
I remember how when I was a councillor PFI agreements were pushed with just this sort of line. If you voiced any criticism, you were denounced as an statist dinosaur, wanting rigid inefficient poor quality services purely because of some outdated political ideology you had. Now we find that most of these things were enormously expensive in the long-run, and are giving us very poor quality service. What they involved was signing up to long-term service provision contracts, which might have looked good at the time but turned out to be poor in practice, dominated by cutting corners in order to make profit. What is worse, if it were a service under proper public control, it could be changed in response to how it worked out on practice, but it cannot so easily be changed if it is a long-term contract. At the least, getting put of it involves fierce penalties.
Negotiating the contracts for these things involved vast amounts of time, with lawyers and accountants and other consultants taking their fees at every step on the way. Might we not wonder just how much the fat fees that come from all this drive the agenda towards this whole “private sector know-how competition is always the way forward” thing? Look at the fat fees and bonuses the bankers take for what is often quite mundane bureaucracy work.
The effect of 30 years of this sort of thing has been to drive down morale and expertise in public service. The “better service” the private sector offered often turns out to be based on employing cheap poorly trained labour. In many cases imported labour, because it’s not the private sector entrepreneurs who are paying out the unemployment benefit and for the social costs of unemployment. Support services taking a long-term strategic approach are thrown out because they don’t contribute to immediate profit. Only many years later do we find what we have lost when all we have running the show are people who know nothing but management-speak buzzwords, who have no care for what they are doing, who are thoroughly brainwashed into this “dog-eat-dog” mentality that looks for short-term profit at the cost of long-term destruction.
One thing that has been thoroughly lost in all this is the value of stability. Long-term employees with a culture of real pride in their jobs are an immensely valuable resource, but there are few left of that sort. What we should be doing is just letting people who love the job get on with it. Instead, this competition mentality, people feeling they are constantly under short-term pressure, pointless management-speak changes, the whole feel that the only thing that counts is hitting whatever targets are imposed from on top today, the constant fear that one will lose one’s job, is driving down morale and hence performance and hence the standard of service. This should be so obvious, it’s what EVERYONE I know who works in the public sector is saying, yet these clueless millionaires who run our country seem oblivious to it.
@Andrew Tennant:
“… the maintenance of public sector alternative providers as the backmarker and insurance policy to take over in incidences where the chosen provider fails.”
Could you elaborate on how this would work exactly? For instance, suppose the company running a hospital fails, what happens? Or what about in the case of a school? Does the state just step in and take over all the assets and continue running the service until the contract is re-let? (And what happens if the local population find that they’re happier with the state running the service, and don’t want it to be re-privatised?) I don’t quite understand exactly how you keep “public sector alternative providers” going alongside private providers, just in case.
Thanks for a piece that makes a lot of sense to someone who worked in local government through the era of enforced privatisation and CCT. So much time and resource wasted on an adversarial relationship between central government and local councils. Not what we need again, in a[eriod of hauling the country through years of austerity.
What looks like emerging in the White paper on Open Public Services is a set of policies which were not in the Coalition Agreement. Nor even in Control Shift or the Conservative manifesto. The overview of the Big Society posted on the Cabinet Office website in May/June did not refer to ‘opening up public services’. It now refers to this as one of three ‘key elements’. The Localism Bill contains convoluted mechanisms to enable the ‘independent’ sector to put in ‘expressions of interest’ for services commissioned or run by local authority services. The Cameron piece in the Telegraph talks of an ‘adjudication’ process, which will presumably determine which categories of public services should be tendered. Fixed quotas for outsourcing by local authorities have also been floated, which would take us right back to the days of CCT.
The appointment of Paul Kirby confirms ther worst fears of many in local government. An example of someone so convinced of the rightness of their relatively simplistic ideas that they become determined to impose universal adoption across public services (starting with local government as ever, rather than testing policies on Whitehall functions first). Paul was the architect of the Audit Commission’s Comprehensive Performance Assessment, as a nationally imposed framework of huge cost and arguable efficacy. He had a spell at Tony Blair’s Office of Public Service Reform from 2002-4, an episode which does not seem to be featuring in current press reports of his new appointment.
One cannot help wondering on what terms KPMG loaned him (apparently) to work with the Opposition before the election, or whether he has formally and finally severed all ties with KPMG before taking up this new appointment. Just as with the incoming Labour government in 1997, the global management consultancies have their claws deep in the policy-making processes of Whitehall, in health, local government, and other key public services.
“Just being pedantic here, but a monopoly means by definition there is only one of itself, otherwise it would be a duopoly or an oligopoly. ”
Just being pedantic, but that’s why I carefully chose the word “monopolistic” 😉
Monopolistic competition
Definition: A market structure in which several or many sellers each produce similar, but slightly differentiated products. Each producer can set its price and quantity without affecting the marketplace as a whole.
Matthew Huntbach. I’m prepared to listen to your argument about short termism driven by contract letting and the pursuit of profit, and the demoralisation of long-term employees. I think there are many very dedicated people who work very hard for the love of their job at little personal gain.
I hope on the contrary, you’re also prepared to admit that there are also many employees in public services who are time-serving jobsworths (I have seen this form my own experience both in and outside the public sector) who have hitherto had no real fear of needing to improve.
So – the question I would ask, then, is if you continue with the present arrangements what’s your plan to deal with this problem?
@Andrew tenant
By asking public sector providers to make the case for why their service is better quality and value, or to end the unjustifiable protection and monopoly they are given for delivering taxpayer funded services.
……………………………
Public sector providers frequently are judged on their provision of services. In the case of local councils it is called ELECTIONS . Andrew you seem to want to put the market before devolved democracy . Cant remeber that being in the Lib dem or Tory manifesto …Please explain at what point you started publically making these Neo-Con privatisation beliefs were you campaigning for them prior to may or simply keeping them up as part of a hidden agenda ?
@Alex
Great article. Nice to see a realisation within my former party that there is a hidden agenda emeraging which was in neither parties manifesto and far more right wing than anything Thatcher even intended .
@ Andrew Tennant
“As I suggested in my first comment, if the public sector can provide the better service, all potential providers having been considered, then they should get the business; but where this is not the case, you’d still insist they had it?”
Yes. The private sector can only provide an identical service at a lower cost by providing lousy pay and conditions It’s the private sector that hates so called red tape, i.e. health and safety regulations which protect workers. The private sector also detests paying decent labour costs, i.e. wages. Which of the words “public” and “service” are hard for you to understand? And if there are a few lazy jobsworths in the public sector (I’ve yet to come across any)
well, let’s find a creative way of dealing with them rather than destroy the morale and excellent contribution of a whole set of public service workers by threatening them with the sack and then re-employiong them (if at all) on inferior pay and conditions. Monopolistic competition? Lower costs? Cheap is dear in the end as my grandmother used to say.
@Tabman
Unless you have no experience of the private sector, any informed observer would have to concede that the ‘time-serving jobsworth’ is perfectly present, correct, and leaving at 5pm on the dot in the private sector as well, whether it be the petty official demanding your ticket on a late, overcrowded privatised train to the bored employee uninterested in dealing with your query at the privatised utility to the spiv who tries to sell you a dodgy financial product that he knows doesn’t give you value – but hopes you don’t realise that – when you go to your bank. What do *you* intend to do about *those* people?
Pretending either that this is a solely public sector phenomenon, or that this will ‘punish’ only those people and not the majority of hard-working, committed, knowledgeable public sector employees that would be an asset to any organisation and who are currently being unfairly demonised by right-wingers with an agenda, merely for making rational choices about pay and conditions, is deeply and abidingly dishonest.
Chris Riley – did I ever say those people weren’t present in the private sector? But the point about the private sector is that if you don’t like the way such people treat you, you can take your business elsewhere* (and the company goes out of business – so it’s in their – sometimes long-term – interest to manage it).
In the public sector you can’t – you’re reliant on an effective management structure to deal with the issue because, as someone once said, there is no alternative.
And that. my friend, is the problem that I was asking Matthew to address – how do you tackle this issue when the external pressure form alternative providers is not there to keep people honest?
* – but see my point about monopolistic competition
Tabman
I hope on the contrary, you’re also prepared to admit that there are also many employees in public services who are time-serving jobsworths (I have seen this form my own experience both in and outside the public sector) who have hitherto had no real fear of needing to improve.
Yes, of course.
So – the question I would ask, then, is if you continue with the present arrangements what’s your plan to deal with this problem?
What do you mean “the present arrangements”? The present arrangements are the result of three decades of “private sector good, public sector bad” policies. The result has been to create more time-serving jobsworths. The continual pressure on the public sector means that’s the only way to survive. Being a time-serving jobsworth is generally the best way to get promotion. Not being a time-serving jobsworth means you risk being thrown out of your job.
Then you get all the private-sector time-serving jobsworths in the shape of lawyers, bankers, consultants, trying to muscle in with their “privatise everything” mentality. Which I am increasingly coming to see really is a job creation scheme for the likes of them.
The private sector has become the 1970’s trade union movement. Ridiculously heavily subsidised, failed industries are being propped up simply because they are in the private sector, whilst the heavily reformed public sector that actually provides value for money is being bullied and beaten up because of the mantra that private is good, public is bad. The present government is as out of touch with reality as the Labour party/trade unions of the 1970s/early 1980s.
Public sector spending is presently no higher than it was for much of Thatcher’s reign and there is a greater proportion of that money spent on prvate sector out-sourcing than on the public sector wage bill, yet all we hear from the loons in power is that the state is bloated and somehow responsible for the mess that in reality was created by the private sector. Deranged is the only fitting word.
Mmm, more of the tired false straw man that “Orange Book liberals” are Tories, from people who’ve never read the Orange Book. There’s no point reading comments from people who spout such rubbish – they literally have nothing to contribute to the debate.
Dave, it seems fairly obvious that there are some fairly serious divisions in the party. I suppose you could argue that everyone who espouses a point opposite to yours is talking rubbish / is not a Lib Dem / a Labour troll, or whatever else you wish to believe, but I think most here know that is not true. FWIW, I have not read the Orange Book, couldn’t get hold of it when I wanted to. I do know roughly the range of subjects and views put forward there, and that they are not all “right wing” etc. However, I credit you with a certain intelligence, that when people use the term “Orange Booker” they don’t refer to all those who contributed to the publication (eg Steve Webb). They do refer to free market Ultras, who I think we are justified in referring to as Thatcherites / “neoliberals” etc. This does not constitute a straw man argument, it is a very real debate, and difference of view in the party. You may think this inaccurate use of language, but as with any jargon or specialist speak, it is very hard to put a genie back in the bottle. So I would suggest you swallow your objections, address what people mean, don’t pretend because you don’t accept the words that the phenomenon is somehow non-existent.
@Dave Page – It isn’t quite clear which contributions you’re point is directed at.
My original post very intentionally took the leadership’s statements that we are all social liberals together as its starting point – the implication being that there is no meaningful division between even self-proclaimed ‘orange book’ liberals (whose views are represented above) and left leaning ‘social’ liberals. I’m very happy to start from the presumption that if we’re all social liberals then we should all be concerned about what is being proposed for a whole host of reasons. Debating the extent or nature of this putative division within the party is a distraction from Liberal Democrats engaging with the proposed reform agenda, which, at least as trailed by the article that spurred my post, cannot be viewed by any LD with anything but concern.
And, just in case it’s a concern, I have read the Orange Book. It’s a curate’s egg of a collection and no mistake. But that’s probably a debate for a different day.
What do you mean “the present arrangements”? The present arrangements are the result of three decades of “private sector good, public sector bad” policies. The result has been to create more time-serving jobsworths. The continual pressure on the public sector means that’s the only way to survive. Being a time-serving jobsworth is generally the best way to get promotion. Not being a time-serving jobsworth means you risk being thrown out of your job.
Or … you don’t really know, do you? There are a lot of statements in that paragraph, but no logical causality. In fact. surely the opposite?
If the public sector really has adopted the private sector mores you attribute to it. then poor performance would be being dealt with.
Dave / Alex – my recollection of the opening chapter of the OB is that it is the aim of acheiving social justice that unites Liberals, but the method of acheiving it differ.
Personally, this was the last straw for me, and although I’d already decided to stand down and leave the Party in May, our implicit support for wholesale privatisation has made leave early. 29 years of hard work wasted. 🙁
Tabman
Or … you don’t really know, do you? There are a lot of statements in that paragraph, but no logical causality. In fact. surely the opposite?
If the public sector really has adopted the private sector mores you attribute to it. then poor performance would be being dealt with.
I don’t have time to write detailed prescription for reform of the public sector. All I am saying is that from my direct experience and all I have heard from friends and relatives who work in various public sector jobs is that almost everything that has been done in the public sector to “improve performance” in the past three decades has had the opposite effect. I have tried a little to explain why, that’s all. I can just tell you of dedicated hard-working people who used to love their jobs left screaming in despair at what has become of them, at how they cannot give the service they used to give, at the utter uselessness of the people who run this country in not realising what is happening, at the total collapse of pride and morale that is the most damaging thing of all to performance. If you do not believe me, don’t, you just don’t want to know because it doesn’t fit in with your prejudices and the prejudices drip-fed into us by the Murdoch press and the like. I was right on the disastrous long-term effects of PFI, of the privatisations of our vital infrastructure, of the sale of council housing. All have ended up costing us more for little benefit, have taken control away from the people and put it into fat cats guzzling their bonuses. What looked good in the short term was a disaster in the long term, and we the people are paying for it, while they the fat cats are living their lives of luxury from it, and we can do nothing because they have us in their control, threatening to bugger off to Zug or wherever while keeping us with the debts to them.
As @Matthew Huntbach notes, it is the big picture we have to attend to. Don’t get distracted by idealized models of what competition can do in theory. We need to keep the political economy of the issue squarely in view.
It is not all bad news. See
http://www.opendemocracy.net/ourkingdom/ryan-gallagher/nick-clegg-must-oppose-his-governments-privatisation-plans
I think the difficulty is working out how rhetoric is translated to substance. However I am not looking forward to finding out.
@ Mathew Huntbach
I utterly concur with your comments. Having witnessed nearly forty years enforced privatisations of parts of the education service and the imposition of market place economics in the public sector (the worst under Thatcher) I can verify that the only people who benefitted were capitalists and their shareholders. They have done nothing to improve an excellent service and have usually made it more costly and far less efficient. They have destroyed morale and forced people who were already working hard for peanuts to work harder for even less. If those people have given up and resigned they have been replaced by cheap, untrained labour. It seems to me that you can’t be on both sides in this debate, that’s why it is so hard for some Liberal Democrats. You are either for the workers or for the capitalists. And of course, the Liberal Democrats, at bottom, are a party of capital.
Great article – retweeted – you’ve encapsulated what I’ve been thinking for months now – markets aren’t an unqualified good
This is one of the best articles I have read on LDV and I agree with most of it. Having worked in public sector area which have seen services outsourced to private providers a simple uniformity takes place which should disturb all those interested in decent public services which 90% of the population rely on (the other 10% can and do purchase private provision). The uniformity is this; 1.price low and promise the earth 2. win business with glitzy presentation, 3. take on contract and workers 4. start process of reorganisation to take out cost regardless of impact 5. start to attack workers pay and conditions in a way to avoid upfront conflict, 6. see performance dip, picked up by contract monitoring, promise to improve but also argue things are not as bad, 7. ignore failings and maximise profit, transfer as much money away from service and those who work to provide to an small number of directors etc, 8. have the odd burst of improvement in a superficial way, 9. Decide not to retender when contract renews and look to win a contract elsewhere having made the required 30% to ensure shareholders happy.
That is the reality almost every time.