Opinion: Let’s Have John Lewis Public Services

One of the themes in the loosely constructed narrative the Liberal Democrats have deployed in recent months has been industrial democracy – in catchphrase terms the promotion of the John Lewis economy.

This presents a radical, if embryonic, approach to the private sphere and a unique contribution to the debate on how to rescue capitalism. Looking at how to adopt the themes of this approach to the public sector should be the next logical step. First, though, we have to resolve the question of where liberal reform of public services should go.

Governments always hold public service reform as a key objective but don’t usually engage the public with any more detail than that. In recent years the messy privatisations of the 80s and 90s have given way to outsourcing; a mixed economy approach that allows Ministers to deny they are resorting to privatisation, which has understandably become a pejorative concept.

Speak to anyone in the public sector who works anywhere near the frontline and they will tell you stories of having poorly thought-through edicts foisted upon them from somewhere far up the hierarchy and having no recourse to defend what they are doing against this bureaucracy. This inflexible management and the difficulty of driving innovation-only – in part the fault of trade unions – leads to poor morale and low productivity. We don’t have the private sector option of letting such services disappear, but should politicians, by default, reach for commissioning as the answer to this problem?

Full-blown commissioning and outsourcing will be coming to a health service near you in the next couple of years but it has already been extensively rolled out in many sectors, from local authorities to welfare provision, with questionable results. The potential for more responsive and flexible services which outsourcing brings has to be weighed again a number of risks. The involvement of commercial interest tends to reduce the scope for democratic scrutiny and accountability.

There is a very real risk that public services might be stuck with expensive long-term contracts that in hindsight were foolishly entered into. There is a greater risk that private providers will try to game the system. In outsourcing massaging the figures to overplay success not only keeps politicians happy, it is an incentive to get hold of some hard cash.

The recent revelations about A4e’s alleged systemic problems, in this regard, highlight this central problem. Not only does the public get a poor service but they are stuck with it for the foreseeable future. As Private Eye noted last week, persistent failings and damning inspection reports do not seem to deter commissioners from giving large contracts to the likes of A4e, proving that this sort of outsourcing has become the only game in town.

The danger is that this approach becomes ingrained in the minds of senior civil servants and by extension the Ministers they advise; indeed, much of the evidence suggests that this has already happened. Both Labour and the Conservatives appear fully at ease with this approach but the resurgence of the Beveridge Group in the Liberal Democrat Parliamentary Party shows that the argument is alive and well in the party.

Even if for pragmatic reasons – public services employ millions, and serve even more, voters – we need to have a rigorous debate over what shape future reforms should take and, most importantly, what safeguards should be put in place when contracting out to private companies. As we are, hopefully, pluralists, we should be presenting a range of options to be decided upon at the most appropriate local level. Making sure that a publicly owned and run John Lewis service is one of these options is crucial.

Business Minister Norman Lamb has said he does not believe the state is very good at providing services – it might turn out to be even worse at commissioning them.

* Tom Smith is Director of Liberal Insight, the new liberal think tank.

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8 Comments

  • “This inflexible management and the difficulty of driving innovation-only – in part the fault of trade unions – leads to poor morale and low productivity”

    Is there a word missing after innovation only, as I don’t understand this sentence as it stands

  • I really don’t understand the economic reasoning behind the outsourcing/commissioning out of services.

    Competition works in a free market, where customers have choices and can respond rapidly to alternatives. In addition you need failure as being an option, so if Company A gets it wrong then Company B takes all the customers until New Company C challenges them.

    But outsourcing doesn’t work anything like this. The “customer” in the form of the government makes a choice once, at the beginning but then cannot easily respond to the market. If Company A wins a 10 year bin collection contract and then, a year in, Company B invents a machine that can empty bins 10x faster and for 10x less cost then we can’t switch our business for another 10 inefficient and expensive years,

    We have to accept that there are some things that are done better privately, and some areas where monopoly is the best practical approach. And if a monopoly exists it is far better to exist in the public sector.

    Also not sure what John Lewis style public services means – do you mean a single supplier owned by their staff and paid for from the public purse? Other than the staff rather than the state owning it how is that any different? If they are the sole provider of public services is it not better that the customers (the state) owns it rather than the staff?

    I’m all for JL style competitive private sector companies but I cannot see why that would work in service provision.

  • Iain Brodie Browne 26th Mar '12 - 1:17pm

    We should be a ltlle wary of being co-opted into the assualt on public services from the Tories whose intersest in workers’ ownership does not appear to be so strong when reform of PLC’s is concerned. We should show far more conviction in tackling ownership in the ‘private’ sector. Robert Oakeshott-the for CEO of The employee Ownership Assoc and Liberal Parliamentary candidate explained:
    “Democratic employee ownership and control also has many advantages as a way of creating a more egalitarian society. It puts earning differentials under democratic control, redistributes wealth quite substantially, prevents external shareholders taking unearned income, improves productivity, develops a sense of community and begins to free people from the divisions wrought by hierarchy and status competition. Furthermore, because employee ownership can and does exist side-by-side with conventional business, it makes successful transformation achievable, with the new society developing within the old. “

  • mike cobley 26th Mar '12 - 1:20pm

    ” If Company A wins a 10 year bin collection contract and then, a year in, Company B invents a machine that can empty bins 10x faster and for 10x less cost then we can’t switch our business for another 10 inefficient and expensive years, ”

    Whereas if the bin collection function was kept in-house by the council (or whatever public body) then it can switch to a more efficient collection method as required. It seems to me that the contractual arrangements vis-a-vis PFI and other big ticket outsourcings are designed not to provide services acceptable to the public but to lock government funding into providing a revenue stream, regardless of changing circumstances.

    Also, is it not true that outsourcing public services to private sector entities results in the closing-off of pertinent performance data under the excuse of commercial confidentiality? No freedom of information for you.

  • Gareth Jones 26th Mar '12 - 1:37pm

    I don’t want to moan but I’m with Timark; where’s the argument/explanation for John Lewis style companies in the public sector? I have a good idea what they may entail as I know of a plan (which alas didn’t come to pass) to create a “Social Enterprise” formed by the existing council staff.

    Perhaps we need a part two to this article, exploring the concept and how it would fit in the public sector?

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