Michael Ward, Research Fellow, The Smith Institute
The ignominious collapse of the franchising process for the West Coast Main Line, leading to abortive costs of at least £40 million, brings to a head major concerns about the way we run our public services.
After the Second World War it all seemed to be straightforward: the Government ran the health service and, through public corporations, the railways and the energy industries, while local government ran schools and welfare services.
In the 1970s and 1980s, a different approach began to emerge. We were told that services would be better under conditions of competition. Markets, not government, knew best. The utilities were privatised, and local services were put out to tender.
Over time, this became a new orthodoxy: Public Service Reform. Anyone with a complaint about British Rail, the local gas board or the council housing department was told that the answer to all their worries was simple: a heady brew of choice, markets, competition and outsourcing. Miraculously, one size really would fit all.
Where public bodies continued to provide services directly, they were split into rival bureaucracies – one acting as the ‘contractor’, the other as the ‘client’. Many services went to new providers. Public Service Reform has become the conventional wisdom of the age, enshrined in legislation, and supported by commentators (and politicians) from left and right. Services as diverse as Women’s Aid refuges, and now probation, have been subjected to the same formula.
Now, however, public services face a unique set of challenges:
- The period of budget austerity, originally planned to end in 2015, has been stretched out, at least until 2017. Councils and health authorities are having to squeeze budgets, year after year. Whether the delivery agency is public or private, there is no more scope for ‘efficiency’ savings – real cuts in standards are taking place.
- Even when the national budget deficit has been eliminated, tax yields in the future are expected to go down – as taxes on North Sea Oil, and tobacco, and environmental taxes, bring in less.
- An ageing population puts extra demands on health and social services.
- Some services, like health and universities, are facing their own, separate, national, top-down reorganisations.
As service providers grapple with these challenges, the need to observe the doctrinal precepts of Public Service Reform, and to restructure so as to promote markets and competition, is just another burden.
Public Service Reform is no longer part of the solution: it has become part of the problem. Introducing markets and outsourcing is neither necessary nor sufficient to cope with the challenges communities now face.
It must now be time for a new settlement – one that:
- Accepts a mixed economy of public service delivery;
- Halts the forward march of marketization;
- Accepts that, just because markets, choice and outsourcing may work for some services, it does not follow that they are appropriate for all;
- Identifies the costs as well as the benefits of separating client/commissioning roles from provider/contractor roles.
- Starts from need as the basis for service planning;
- Guarantees full transparency about direct costs and overheads;
- Ensures democratic scrutiny and accountability;
- Sets minimum national standards for key services.
At the heart of that new approach must be a commitment to public service productivity. Productivity in the NHS stagnated for most of the last decade. In moving away from market-based solutions, public authorities and their workforce need to develop a new, joint approach to improving value for money. This commitment is as important for trades unions as it is for councils and health organisations.
Public service managers have navigated their way through past periods of austerity with their organisations and structures largely intact, confident that the good times would return, and spending levels would increase again.
This time it is different. There is no early prospect of the years of plenty coming back. It is time to stop creating pretend markets, fantasy castles in the neo liberal air, and start addressing the core problems of community need and service productivity.