Plans for increased private sector involvement in public
services have provoked wide mistrust. Ruth Winchester asks whether
the plans are a genuine attempt to improve things or is Labour
trying to wash its hands of failing services.
You wouldn’t want a cup of tea made by the public sector. The
kettle would be ancient, the cup would be dirty, the milk would be
weeks past its sell by date and the tea bag would have been used by
a number of other people. A private sector cup of tea, on the other
hand, would be hot, fresh, pleasantly presented and complete with
an individually wrapped custard cream.
If you believe the hype, private companies operate with ruthless
efficiency, spawn great innovations, embrace risk with open arms
and generally manage to make a silk purse out of a sow’s ear.
Public authorities, by comparison, seem unable to manage their way
out of a paper bag. Vast overspends, staffing crises and service
failures are depressingly intractable facts of life.
It seems the government has swallowed this “private sector good,
public sector bad” hype, hook, line and sinker. Faced with a public
sector that is haemorrhaging money to little real effect, Tony
Blair understandably wants a piece of the profit-making magic. His
government is making it increasingly clear that, in future, the
private sector will be heavily involved in providing vital public
services, including social care.
But what does this commitment mean to social care providers, to
local authorities, and to the people who use their services? Can
the private sector do what the government wants it to? And who will
pay if the private sector does not deliver.
These questions have been exercising a lot of people recently.
The report of the Institute for Public Policy Research’s commission
on public private partnerships, funded by private sector health
care companies and launched at the beginning of the month,
succeeded in supporting New Labour’s ambitions but with a number of
important provisos – one of the key points being that drawing in
private finance was not a solution to the underfunding of public
A second report, from the left wing Catalyst Trust, argued that
the first report had made some significant omissions in its summing
up, and had ignored the ignominious history of many private finance
initiative deals. It argues that public private partnerships are
likely, in the long term, to lead to “ever-increasing costs for the
public sector and major public sector deficits, with consequent
cuts in access to, and quality of, services provided”.
Whatever the truth of the matter, for social care these reports
are preaching to the converted. The sector is already a length in
front of other public service stablemates in terms of contracting
out – nearly half of all social care is outsourced to the
independent sector. And there are some examples of very good
practice, of productive partnerships between private companies and
local authorities, which have both saved money and benefited
But in general, public private partnerships have to overcome a
number of fundamental obstacles before success can be guaranteed.
Some of these come from different ways of doing things – for
instance private sector companies are less generous with employee
rights and terms and conditions than public sector organisations.
But the difficulties are also about values and responsibilities.
Any profit-making company’s principal responsibility is to its
shareholders – a motivating force that is very difficult to
reconcile with the interests of commissioning bodies and the people
who use services.
There are also issues about accountability. While local
government is directly accountable through the democratic process,
historically the private sector has been firmly of the opinion that
“as long as we get the job done, it doesn’t matter how we go about
it”. The Freedom of Information Act 2000 will be in force within
two years, and it reassuringly insists that companies carrying out
public functions will have to be accountable to those who
commission and use their services, in the same way as a public
authority would be. But, crucially, it also suggests that
information can be withheld for reasons of “commercial
confidentiality” – two words that cover a multitude of sins.
Brendan Martin, an independent consultant on public sector
reform, is not ideologically against the involvement of the private
sector, but argues that the government should step back and ask
some new questions about how public services should develop.
“In a vague and general way, the government is putting forward
three priorities,” he says. “First, public services must improve.
Second, in addition to additional resources, they need to innovate.
And third, in order to innovate, private sector input is needed. I
think there is widespread agreement about the first two, but the
last is extremely contentious. The government seems to think it is
axiomatic that private management will bring in innovation, but
there is very little evidence for that.
“They think that the public sector has become hide-bound – that
because it has a monopoly, it has no incentive to innovate, to
experiment and to take risks,” he adds. “I think there’s some truth
in that – the systems within the public sector do not encourage
experimentation and risk taking. But there are good reasons for
that – if, as a social worker, you don’t do things by the book you
risk appearing on the front page of the News of the World.”
But he adds: “There is a huge body of experience and knowledge
in the public sector that isn’t being mobilised and developed. This
knowledge simply doesn’t exist in the private sector. The
government hasn’t had the imagination to think about how the
resources within the public sector can be mobilised. Instead, they
seem to go for quick fixes. I think the IPPR’s commission report
did an admirable job of not being influenced in its conclusions by
the people who were funding it, but it was set up basically to look
at how public private partnerships could be made to work. I don’t
think it was asking the right questions.”
He disagrees with the report’s conclusion that, with the right
commissioning skills, local authorities can safely enter into
contracts with private providers. “Contracts don’t exist in a
vacuum,” he argues. “The government seems to think the
enforceability of a contract is delivered by its wording – it’s
not. It’s hugely dependent on the wider environment within which it
He speaks for many when he says there are dangers in shifting
public services to external providers. “When the public sector
starts winding down its capacity – and what’s the point of
contracting stuff out if you can’t do that? – the private sector
ends up with something approaching a monopoly, and the tail starts
wagging the dog.”
Chai Patel is chief executive of Westminster Healthcare, a large
private provider. He is, predictably, positive about the
government’s commitment to increasing the private sector’s role in
public services. “At the moment the sector is maturing – local
authorities are learning to be commissioners, and the independent
sector is learning to be a better partner,” he insists. “But I
don’t think there are any limitations on the competence and
capability within the private sector – it is certainly capable of
what I think the government is suggesting.”
He paints a picture of a private sector itching to give bags of
cash to hard-up public services, pointing out that around £8
billion is already invested in this way. “We need to be absolutely
clear that social services are underfunded,” he adds, “but I don’t
think funding is the issue – and I don’t think the government
should be looking for a cheap solution. It should be looking for
quality, value for money and innovation.
“What the independent sector wants is a level playing field,”
Patel argues. “We need to have that debate about perverse
incentives, and about the lack of transparency about the true cost
of some of the services provided by local authorities, and about
the costs in outsourcing contracts to the not-for-profit sector.”
He clearly doesn’t see good quality services and profit-making as
mutually exclusive, but he admits that there needs to be a frank
debate about the likely implications of the profit motive.
The government has yet to make clear what its plans are for the
not-for-profit sector, although it has just set up a cross-cutting
review of the role of the voluntary sector in public service
provision. Stephen Bubb is chief executive of the Association of
Chief Executives of Voluntary Organisations. He argues, in line
with many others, that democratic and accountable overall control
is more important than the colour of individual providers.
But he is clear that not-for-profit companies will be big
players in the future provision of care, arguing: “Sometimes
community and voluntary groups can be much closer to the people
they are serving, and they are also able to be less bureaucratic
and more responsive to needs, because they are closer. It is
childish to think of the private sector as superheroes. Some are
very good, but there are some very poor ones too. The proof of the
pudding is in service delivery.”
Mike Leadbetter, director of social services at Essex, refuses
to take a polarised view of private involvement, asking instead to
see the real colour of the government’s proposals. But he rejects
the suggestions made by sceptics that the government is motivated
by a desire to wash its hands of publicly managed and provided
“I always tend to shy away from the conspiratorial view of life.
Until I have hard evidence to the contrary, I’m willing to take on
trust that the government has got better services in mind, that
it’s not planning anything Machiavellian,” he says. “I prefer to
believe that it has people’s best interests at heart.”