Is the government doing a u-turn on selling off public services?


10:14 am - May 4th 2011

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contribution by Richard Blogger

In February David Cameron wrote a bold article for the Daily Telegraph entitled “How we will release the grip of state control“. He announced that the government will allow any private provider (the voluntary and community providers were dropped) to take over a public service.

This is not competitive tendering, this is simply the case of a private company saying, ‘we want to provide that service‘ and they will be handed the contract. This is Letwin’s big plan for the NHS, something that he first wrote about for the right wing Centre for Policy Studies in 1988 (together with John Redwood).

Thankfully, we did not get that then, but there is still a chance that we could have that now.

After all, Lansley’s plans are to make sure that he is not in control of, nor responsible for, the NHS (“independent trust“) and he wants the private sector providing much or all of the NHS health care (“increasing co-operation between the NHS and the private sector“).

This is a huge political minefield, it is quite clear that most people are happy with the way that the NHS is funded, who controls it, and who provides the care. Changing all of that is difficult, and unpopular, which is why these ideas were not spelled out in last years election manifestos, nor openly discussed in public.

Now that Cameron is able to get the plan moving, he is still in danger of losing the policy, particularly if the policy becomes deeply unpopular and there is a chance of a vote of no confidence over the policy. This is why it is so important for Cameron to get a full 5 year term, and why Cameron was so much in favour of fixed term parliaments (long parliaments) it lets him off the hook for five whole years.

Even so, it appears that the privatisation plan is going off the rails. It is just so unpopular that the government is losing bottle. Yesterday the BBC reported:

Leaked documents suggest ministers have decided the “wholesale outsourcing” of public services to the private sector would be politically “unpalatable”. Ministers instead want to use more charities, social enterprises and employee-owned “mutual” organisations.

The question, of course, should be why is it any more palatable to outsource to charities, social enterprises or employee-owned “mutual” organisations? Further the BBC say:

The document indicates that privatisation is about ideology rather than efficiency:

The government was not prepared to run the political risk of fully transferring services to the private sector with the result that they could be accused of being naive or allowing excess profit making by private sector firms.

So the future is that the government will partner (pimping?) with private outsourcing companies.

In the BBC’s report the NHS is listed as one of the public services that will be affected by this new policy. Presumably the new Any Qualified Provider policy will be influenced.

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Reader comments


1. Lisa Ansell

I think the problem is that this has been a long process taht hasn’t just appeared.Marketisation has been done at the rate that is palatable- the same rhetoric used to begin fracturing social care- has progressed and through outrest of services.

With three parties committed to it- it is difficult to see how it will end- but Ithink the leaked documents were more about how much could be done politically- ie now. Rather than a U Turn. I can’t see how it will stop whichever party gets in. This is more about how much they can get away with, without losing too many votes.

@1

Excuse me, but since when have the Lib Dems been in favour of privatisation? We’re certainly long standing opponents of centralised, inflexible organisations but that doesn’t equate to wanting to privatise them.

@Lisa Ansell

I am afraid you are right. New Labour was very keen to privatise public services. Labour have not learned from where they were wrong in the Blair years. Ed Miliband has said that he thinks mutuals “are the solution to public services” without telling us what the “problem” is with publicly owned services, and without pointing out that mutuals are private companies so we will lose public accountability. The profit share aspect is spurious. A mutualised public service will still be run by the same people. Since we will lose the public accountability the management will be able to pay themselves whatever they want (and no doubt they will structure the profit share to be based on salary). The people at the bottom of the heap will still be poorly paid, and their “profit share” will be paltry.

None of the main political parties want to have an open and honest discussion about public services and who should provide them (or who will pay for them).

(FWIW, Sunny has edited my piece, so you’ll need to read the original to get the full sense of what I was writing about. The point is that Cameron’s Feb article – sadly under reported – essentially put a big For Sale sign on all public services, it was not about tendering, he was seriously saying that if a private company wanted to take over a public service they would be allowed to. I am sure the Civil Service quietly pointed out to him that there are huge issues about handing large amounts of taxpayers cash to unaccountable private companies, and this is why the government has backed down, talking instead about “partnerships” between the public and private sector. However, we still have to be careful about the craze for “mutuals”. Mutuals are fine to make capitalism work better for ordinary people – Co-op supermarkets, building societies are an example – but they have nothing to add to publicly owned public services.)

@3

Whilst I agree with you in general terms, the thing to bear in mind is that mutuals can work quite well – providing they’re set up correctly. For example, for tax reasons my local council wants to get the leisure centre off of its books. To do this they’re handing it over to a private company – which is obviously wrong. However, one proposal which they rejected was for the staff of the leisure centre to set it up as a community trust and run it along the lines of a mutual organisation – to my mind a far better way of doing it.

@George W. Potter

Excuse me, but since when have the Lib Dems been in favour of privatisation? We’re certainly long standing opponents of centralised, inflexible organisations but that doesn’t equate to wanting to privatise them.

Lib Dems are not against privatisation either. Look at their plans for Royal Mail.

In the Lib Dem manifesto last year they were pushing the idea of “Sponsor-Managed Schools” which sounds very much like privatisation (otherwise, what are the “sponsors” for?). They said they wanted to “allow staff to establish employee trusts”, ie non-publicly owned mutuals (apart from the issue of abrogating responsibility, this means that the new service providers would not be public accountable and – as I have explained above – the top management could legitimately get very rich at the expense of the public purse).

6. Flowerpower

There’s a certain irony in the way you cite the BBC in passing. The BBC is, after all, just the kind of model envisaged:

* Publicly funded
* Institutionally independent
* Accountable….. but
* Free to exercise its own initiative, take its own risks

@George W. Potter

I am not against mutuals, in fact, in an ideal world there would be no shareholder companies, every one would be mutual so that people benefit from tjheir own work (rather than shareholders merely benefiting from the fact that they have capital). There are lots of examples where mutuals work and are a better solution than the private sector. My point is what evidence is there that mutuals are better than publicly owned?

Whilst I agree with you in general terms, the thing to bear in mind is that mutuals can work quite well – providing they’re set up correctly. For example, for tax reasons my local council wants to get the leisure centre off of its books. To do this they’re handing it over to a private company – which is obviously wrong. However, one proposal which they rejected was for the staff of the leisure centre to set it up as a community trust and run it along the lines of a mutual organisation – to my mind a far better way of doing it.

I think the issue there is why is it better, tax-wise, for the local council not to own the leisure centre? Why have mutuals or private companies got a tax advantage? This is the sort of law that has been introduced over the last couple of decades to whittle away public services. It’s time it stopped, at least to allow us to have a proper, and open, discussion about public services.

@Flowerpower

The BBC is wholly publicly owned. So that is certainly different to the “partnership” model being suggested, where a service will be partly owned by the government (or through a “mutual”) and a private company.

The 1980 Broadcasting Act says that 25% of the TV and radio broadcast by the BBC must be from independent producers. The government mooted this idea across all public services in the Spending Review last year (and Maude hinted many times that he would require that at least a fixed percentage of public services would be privately provided – like the Broadcasting Act), but a couple of months ago they dropped the idea as unworkable.

Another issue that concerns me is will we have a guarantee from the government that the public services will be provided? Last year Connaught went bankrupt. They are a large services company used by councils to maintain council houses and so when Connaught went under tenants were left for a period with no service provider. So what happens if the company that goes bankrupt provides the school your kids go to, or the hospital that treats you? Some services must be protected, and guaranteed, after all, we are paying for them.

9. Bruno Kay

This could be an even worse option than outsourcing directly to the private sector;hundreds of thousands of public sector, union represented posts replaced by non-paid or minimally paid charity/NPO positions leading to many areas of the country with large public sector economies suffering, local incomes dropping badly along with associated problems. A crucial point is this: “As part of building the Big Society, we want to open public services up to SMEs [small and medium-sized enterprises], employee co-operatives, voluntary sector organisations and social enterprises, who may often partner with the private sector.” So the private sector could get involved even more cheaply than through direct outsourcing by using non-paid or minimally paid, non-unionised charitable sector/NPO workers, rather than their own merely low paid, non-unionised workers. The worst of both worlds.

@5

Yes, indeed. Our plans were to turn the Royal Mail from a state owned service into an employee owned one. We also planned to set up a Post Office bank so that Post Offices would be more useful to local people.

11. Jmaes Alexander

@2 (George Potter) This betrayed ex-L-D used to think they weren’t ideological privatisers; but now he thinks that for so long as their PLP is enabling unmandated ideological privatisers to implement their programme, then they surely are.

12. Sevillista

Just spin that the Tories themselves “leaked” – actions will speak louder than words.

13. Lisa Ansell

Also- social enterprises are businesses. No difference. A company limited by guarantee, with profits reinvested but business nonetheless. With many already solid routes to extract profit from them- in form of consultancy fees, salaries etc etc

14. Watchman

So Cameron floated an idea, which now hasn’t happened?

Wow – actually thinking about things seems to be allowed in government…

The brownshirts will not rest until they have destoyed the NHS.

Why the Lie Dems go along with this I do not know. But if they don’t stop it they will be out of power for 100 years.

This was today’s FT Alphaville. How much is spin and how much is reality I dinna ken – but see the last line. They’re obviously sensitive to the accusation that lots of Government work will head straight for their outsourcing mates (though we should remember it was under Labour that outsourcing to mates really took off. Didn’t the head of Capita, Rod Aldridge, have to quit after he was revealed to have lent Labour £1m ?)

4 May – BBC story suggesting that “plans to outsource public services scaled back.” Leaked documents relate to a meeting between Cabinet Office Minister, Francis Maude, and the director general of the CBI, John Cridland. The note from the meeting says – “The minister’s messages were clear cut… the government is committed to transforming services, but this would not be a return to the 1990s with wholesale outsourcing to the private sector – this would be unpalatable to the present administration.

“The government was not prepared to run the political risk of fully transferring services to the private sector with the result that they could be accused of being naive or allowing excess profit making by private sector firms.” See this story.

“The minister’s messages were clear
cut… the government is committed to transforming services, but this
would not be a return to the 1990s with wholesale outsourcing to the
private sector – this would be unpalatable to the present administration.
…..The government was not prepared to run the political risk of fully
transferring services to the private sector with the result that they could
be accused of being naive or allowing excess profit making by private
sector firms.”

The “entrepreneurs” of the private sector are so bereft of ideas that they seek to seize public funding instead.

I think that Bruno K at # 9 is spot-on. The public sector is still reasonably well unionised and thus in a better position to defend jobs and conditions. Mutualisation — or to put it more accurately, self-privatisation — is about further fragmenting the workforce, chopping up what’s still in public hands into little companies, and in today’s conditions this will be a race to the bottom, as mutualised ex-public-sector concerns will be competing with non-union or poorly-unionised outfits to produce the lowest tender. Instead of standing together to defend jobs and conditions, public-sector workers will be effectively cutting their own jobs and pay to undercut the competition. This is what I believe to be the main reason for these proposals.

Richard Blogger should get round to *reading* the article in the Torygraph. Cameron does *not* say that “a private company saying, ‘we want to provide that service‘ and they will be handed the contract.”
I suggest that all the rest of you should put on your spectacles and read the article. Cameron isn’t as bright as some of my friends but he isn’t as stupid as Richard Blogger makes out. A private sector provider may *compete* to provide better services but the state is to ensure fair competition and fair access for all.
Anyone who attacks Cameron’s stated policy instead of Richard Blogger’s crudely inaccurate caricature will have to explain why we should accept a worse service from a state-owned provider in preference to a better service from a charity or private-sector provider.


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  1. Liberal Conspiracy

    Is the government doing a u-turn on selling off public services? http://bit.ly/lzPVoE

  2. False Economy

    Is the government doing a u-turn on selling off public services? http://bit.ly/lzPVoE (via @libcon)

  3. IndigeNati

    RT @libcon: Is the government doing a u-turn on selling off public services? http://bit.ly/lzPVoE

  4. Queer Resistance

    RT @FalseEcon: Is the government doing a u-turn on selling off public services? http://bit.ly/lzPVoE (via @libcon)

  5. David Kirkham

    RT @FalseEcon: Is the government doing a u-turn on selling off public services? http://bit.ly/lzPVoE (via @libcon)

  6. David Kirkham

    Is the government doing a u-turn on selling off public services? | Liberal Conspiracy http://t.co/AI7rUl4 via @libcon

  7. David Kirkham

    @RichardJMurphy @FalseEcon http://liberalconspiracy.org/2011/05/04/is-the-government-doing-a-u-turn-on-selling-off-public-services/#comments

  8. David Kirkham

    @FalseEcon http://liberalconspiracy.org/2011/05/04/is-the-government-doing-a-u-turn-on-selling-off-public-services/#comments

  9. Nick H.

    RT @FalseEcon: Is the government doing a u-turn on selling off public services? http://bit.ly/lzPVoE (via @libcon)

  10. Daniel Pitt

    Is the government doing a u-turn on selling off public services? http://bit.ly/lzPVoE #ConDemNation

  11. Staffordshire UNISON

    RT @FalseEcon: Is the government doing a u-turn on selling off public services? http://bit.ly/lzPVoE (via @libcon)

  12. A hammering for the Liberal Democrats, victory for the SNP in Scotland, likely defeat for the Yes to AV campaign and is Lansley on the way out? – round up of political blogs for 30 April – 6 May | British Politics and Policy at LSE

    […] Will Straw at Left Foot Forward blogs that falling economic growth may mean that the government will miss its deficit reduction target. Guest poster Richard Blogger at Liberal Conspiracy says that it appears the government’s privatisation plans are going off the rails. […]





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