The prime minister’s apparent calls for more privatisation last week risk a return to CCT, and could merely replace a public sector monopoly with a private sector one, says John Tizard
When PM David Cameron wrote last week that, ‘We will create a new presumption – backed up by new rights for public service-users and a new system of independent adjudication – that public services should be open to a range of providers competing to offer a better service’, was he being revolutionary? And what was he signalling?
What could this mean for local government?
Mr Cameron was certainly laying down a challenge to the public sector – especially, local government – but also to voluntary, community, social enterprise and private sector providers. Many commentators believe it is based on a presumption that all public services should be delivered by the private, third and social enterprise sectors in preference to the public sector. But is this what government really wants?
There has been a long history in this country of public services being provided by the third and private sectors, alongside the public sector. Pluralism of supply is now well established, especially for local authority services. But the fact is that no one sector has a monopoly of excellence. There are many examples of highly effective public services amanaged-within the public sector; excellent public services delivered by the private and third sectors; and shoddy, inefficient public services provided by public, private or third sectors. What matters is that the choice between delivery models is made on rational grounds to meet specific service objectives.
When the previous Conservative Government forced local authorities and others to conform to a competitive process for specified services – compulsory competitive tendering (CCT) – prices were driven down, but often at the expense of quality. The market was tilted in favour of low-balling private sector providers, and the opportunities for local choice and local solutions were lost. There is a need to learn the lessons and not repeat the same mistakes.
For all that, local authorities and the wider public sector should not simply reject the Government’s agenda. We need a ‘thoughtful’ response, rather than simply defending the status quo, and certainly not promoting a return to some earlier ‘golden age’. The public are just not going there.
Neither can one argue against the Government demanding more innovation, more user choice from all sectors, better outcomes, and more cost-effective public services – which is not the same as the cheapest. And, it is unarguable that monopoly or near-monopoly supply, be it public or private, is inherently inefficient.
Pluralism of supply and competition between suppliers can contribute to performance improvement, innovation and cost reductions, but only when the right conditions prevail. These include the right payment incentives and contract terms, a competitive supply market – which there currently is not for many public services – and highly-competent public sector commissioning and procurement.
Public acceptance of provision by other than state employees is also critical, which is presumably one of several reasons why Mr Cameron excluded the security services and judiciary from those services which should be open to competition.
The prime minister places much emphasis on the rights and choice of service-users and increasingly, for supply markets, because many services traditionally organised by the public sector have been opened up by the development of personalisation. The consumer of the service selects between competing suppliers using self-payments, co-payments or direct payments, funded by the state, but these markets will require active regulation by the state to ensure quality and fair competition. No rational person would advocate unregulated markets for social care or children’s services.
These cannot be subject to unfettered free markets.
However, there remain public services which have to be organised on a collective basis, because they have a wider contribution to public wellbeing or because of their economic scale. Before consideration is given to who should provide these services, it is much more important to determine what outcomes are required.
Therefore, the starting point should be for a local authority or other public agency to adopt a user-led, strategic commissioning approach.
Such commissioning should identify needs and aspirations; set the required outcomes; be clear about employment standards; and then, given the available resources, choose the delivery option to best secure these outcomes. It should be neutral as to provider, and must be focused on outcomes. Commissioners need to understand what might be possible beyond the traditional or the known; foster innovation; and be aware of potential supplier options. In this context, the ‘right to supply challenge’ could be a powerful, and potentially, liberating concept, and could augment strategic commissioning and open up new ideas. However, local authorities and others will understandably be wary of a process that could lead to another bureaucratic or disruptive burden, so the process of right to supply challenge needs to be simple, but based on robust business cases – and there must be supporting user endorsement.
Local authorities and other local commissioners should respond in an objective manner to serious and practical calls to run or take over services and, in doing so, they must take into account local circumstances, local needs and local objectives – including wider public value goals and employment which are associated with public services. When and if there is a ‘right of supply challenge’, service-users must be fully involved in the evaluation.
Public sector employees should have also have the right of supply challenge, irrespective of whether or not they form social enterprises. And there must be a right for services-users to challenge current provision, including that which is already contracted, and to require the commissioner to review provision and supplier – and contracts will have to allow the flexibility for this. Local authorities must be accountable to local residents and communities for their decisions. They must be able to determine the outcomes and the means of delivery, including any contract terms –and they should not be expected to cede final decisions on such matters to a national appeals process. Such an approach flies in the face of localism and local accountability.
Actually, many local authorities seek a longer-term partnership relationship or genuine ‘shared equity’ joint-ventures with the private and third sectors – not shotgun, price-driven contracts or imposed solutions. A national appeal system could undermine such approaches as the decision criteria undoubtedly would be national and not local. Furthermore, a client who is ‘forced’ to contract with a supplier is unlikely to be attractive to suppliers – we should recall the adversarial client-contractor relations inherent under CCT.
The Government has stated that it wishes more public services to be contracted to the community, voluntary, third and social enterprise sectors – as well as current and new suppliers in the private sector. But unless a right of supply challenge is well-designed, it will not produce a level playing field between well-resourced businesses and third sector bodies, since the business sector is more likely to be able to ‘play the system’ – which is why we will hear none of the latter complain about the new suggested policy. Access to affordable capital, adequate revenue funding and appropriate procurement processes could prove more helpful to the third sectors than the right of supply challenge.
The rhetoric is about ‘user choice’, but the reality could end up being ‘provider domination’. Is this the Government’s intention?
Local government has an opportunity to demonstrate its ability to secure high-quality services – but it must be allowed to make local decisions and create a portfolio of services delivered by public, private and third sector which best meets local needs and choices. And the Government needs to stick to its localist commitment and not impose central control or cut too deep and too fast.
John Tizard is director of the Centre for Public Service Partnerships, which was signatory to a recent letter sent to Cabinet Office minister, Francis Maude, calling for a new approach to public-private partnership working
