From the archive: How outsourcing and privatisation got their teeth into public services

Michael Harris /   July 23, 2013 at 8:36 PM 4,674 views

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In the shadow politics, some policies – such as outsourcing and privatisation – are beyond the need for evidence. And once they sink their teeth in, they don’t let go.

Many people might have got the impression last week that the Government decided to sell-off the UK’s blood service to US investment firm Bain Capital. It didn’t. Rather, it decided to sell the plasma supplier to the NHS, an organisation called Plasma Resources UK (PRUK). (The previous Labour Government bought PRUK in 2002 because of a global plasma shortage, and PRUK uses American plasma as a result of a decision in 1998 to stop using UK plasma because of concerns about BSE). PRUK is distinct from the NHS Blood Transfusion Service, which collects blood for the NHS.

Nonetheless, what was interesting about much of the media coverage and comment was that it was widely thought that the Government had flogged off the nation’s blood to Mitt Romney’s corporate vampires. Such is the seemingly unstoppable onward march of privatisation that ‘selling-off our blood’ was a made-to-measure metaphor for private companies feeding richly on public services.

Over the past few months we’ve been examining the ‘political class’ – who are the political elites that govern us, what qualifies them for the role, and how they are interconnected. This new series of posts on the ‘shadow politics’ is about the way the political class behaves and the consequences of its actions.

The way the political class works, including its often closed and incestuous nature, means that there exists a kind of ‘shadow politics’, quite different from the public debate and policymaking process visible to the rest of the public. The willingness to believe that for the political class, everything is for sale and nothing is beyond the pale – including our blood – is a function of the shadow politics.

Surveys consistently indicate that privatisation and outsourcing of public services have never been popular policies with the public. A majority of the public like the idea of public services, publicly delivered and publicly accountable. Knowing this, the political class doesn’t try to change the public’s mind – they just ignore it.

As a result, such policies have never received an electoral mandate; vague references to ‘increasing the diversity’ of ‘independent’ (never private) providers in party election manifestos – and a compliant mainstream media – do not make for political legitimacy. Occasionally however the shadow politics comes into the light.

Take the report, also published last week, from the salon of the political class the Institute for Government (“…one of the most important that the Institute for Government has produced”, according to the IfG itself). Its assumptions are obvious from the title: Making Public Service Markets Work. Not whether ‘public service markets’ (outsourcing and privatisation) actually work – but how they can be made to work better.

This echoes the mainstream media’s reaction when providers such as G4S are revealed to have cooked the books – not to ask whether such (increasingly frequent) incidents might possibly mean that public services shouldn’t be outsourced to for-profit companies, but why didn’t the ‘hapless’ civil servants manage their contracts to deliver better?

One of the smoke and mirrors twists common in the shadow politics is the nationalisation of private failure, and the privatisation of public success – witness the public bailing out the banks, and the privatisation of the income-generating Royal Mail. To wit: if companies like G4S can’t be trusted to do their job with competence and integrity, it must ultimately be the fault of the state – so further undermining the legitimacy of the latter to the ultimate benefit of the former.

So it goes with the IfG’s latest publication. The report is inadvertently damning of outsourcing – clearly there are massive problems with ‘public service markets’ and the government has no real idea of what it is doing when it decides to outsource service after service, often in great haste. Yet nowhere is the most obvious question asked, let alone answered: if government struggles so much to commission, manage or even keep track of outsourced public services, then shouldn’t it stop the outsourcing bandwagon, at least until it works out how to do it properly? Or even roll some outsourcing back?

As the report notes, £1 in every 3 that we spend on public services now goes to ‘independent providers’; if there are such serious issues with outsourcing as suggested in the IfG’s report, shouldn’t we be trying to reduce this massive exposure to these providers as a matter of urgency? Instead, the IfG only recommends that government advances with outsourcing ‘more slowly’.

Why the reluctance to take their findings to the logical conclusion? Because putting the brakes on outsourcing isn’t a view countenanced by the political class. The IfG claims that “The Institute does not take an ideological position for or against competition in such services…” – although advising on how to make something ‘work better’ might be taken as an implicit endorsement that it’s worth doing in the first place. But the question of whether to outsource or privatise doesn’t have to rely on ideology, which is necessarily subjective.

We could try using evidence instead, the use of which in policymaking the IfG promotes in its other programmes of work for ‘better policymaking’. (It’s worth noting that the report was written by a former ‘strategy consultant’ at Boston Consulting Group and a senior policy adviser in the Prime Minister’s Strategy Unit who helped to develop ‘new commissioning models in immigration services’, a former associate in PwC’s Government and Public Sector Advisory Practice, and a couple of PPE types from Oxford – so no ideological biases there then).

Is outsourcing unquestioned because the evidence for it is so strong? Hardly. The IfG itself acknowledges that the evidence for outsourcing is “extremely limited” and that it “does not always succeed in delivering value for money” – but then quickly moves on to how more services might be outsourced more effectively. (Of the few bits of evidence that are referenced in the report – always in favour of outsourcing – there are a couple of reports from 2008-9 that focus on ‘low-level’ contracting-out such as rubbish collection, another is a report commissioned by the CBI, and the last is a biased poll commissioned by the pro-outsourcing right-wing think tank Reform).

The solutions put forward by the IfG are mostly think tank blah – “adjusting the rules of the game”, “steering the system”, “market stewardship” and so on. The report does at least call for one thing that is tangible: more transparency regarding the funding that providers receive from government, the suppliers they subcontract services from and their value, and “where practical” their performance.

Since it’s the public’s money we’re talking about, you’d hope that the last one is a deal-breaker rather than a nice-to-have, but again this inadvertently hints at the current reality: many outsourced public services are out of control and the government has no idea about how to get them back. (What then of the official opposition’s reaction to such a damning report from inside the political class? Sadiq Khan, Labour’s Shadow Justice Secretary, reiterated the party’s policy of extending the Freedom of Information Act to include the private sector, but voiced no criticism of the idea of extending the private sector’s reach into more public services.)

So – a policy no-one voted for, which the political class itself acknowledges lacks evidence, doesn’t work in practice and which raises significant issues of public accountability, but which carries on regardless, propelled by private interests, lobbying and donations. It’s the shadow politics in action.

As the Institute for Government concludes in its report: “The current pace and scale of change represents a high risk strategy that may undermine confidence in the reform agenda in the longer term.” Given that the public is seemingly unable to influence such policies, one might ask: whose confidence? Next-up to be outsourced: vulnerable children’s services.

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