The market is failing public services. What’s the alternative?

Photo credit:   Stefan Ray

July 2, 2014 // By: James Angel

“It is common knowledge among the lower ranks that the work we produce is only to enable Serco to be paid. Customer service is a secondary requirement…We soldier on in the knowledge that we make a difference… to the profits.” – Anonymous Serco employee, writing in The Guardian.

Successive governments have pursued a public services agenda based on market competition, consumer choice and outsourcing to private providers. The promise has been lower costs, increased quality and better responsiveness to ‘consumer preference’.

But there is little evidence that these benefits are materialising. Power has been concentrated in the hands of a few supremely wealthy private providers. Pay and conditions have declined. And a recent survey of 140 local authorities across the country showed that the majority are bringing services back in-house or considering doing so, mainly because of rising costs and declining quality.

The market is failing to deliver the innovation and quality its proponents claim. What, really, did we expect? Competition tends to lead to fragmentation and opposition between stakeholders, discouraging the partnerships and holistic thinking necessary for joined-up and preventative services.

What’s more, private companies are legally obliged to prioritise shareholder-return, a goal not easily aligned with broader public policy priorities such as meeting social need.

A new agenda for public services

Where does this leave us? Is the answer to turn back the clock to the old Spirit of 45: public services run from the top down, with power chiefly residing in the hands of Whitehall politicians, civil servants and expert advisors?

A new NEF working paper, out today, sets out an alternative to the market that looks beyond top-down control: shifting power away from private companies, towards citizens and frontline staff. These are the people who are most likely to care about securing high quality services, delivered on the basis of fairness and equality. What’s more, when you work in or use services, day in, day out, you get a real sense of what’s working and what needs to change.

Measures to shift power within public services include:

Getting the conditions right

The Coalition’s programme of austerity cuts and accelerated marketisation has been accompanied by a narrative of increasing local control and citizen engagement in the move ‘from Big Government’ to the ‘Big Society’. Our agenda is different.

Firstly, despite its localism narrative the Coalition has, in many respects, increased the power of Whitehall over local government. NEF insists that power should be decentralised. Schools should come back under local authority control and councils should be given the power to build more housing and to raise taxes progressively to boost revenue.

Secondly, we must acknowledge that ownership matters. Legislation advocated by campaign group We Own It would facilitate a shift in ownership away from private hands towards the public sector and other socially oriented not-for-profit entities. While competitive tendering has pitted the public sector in competition with co-ops, mutuals and  the community and voluntary sector, NEF advocates an alternative model of commissioning that allows for a collaborative partnership between different publicly oriented institutions, paving the way for a revitalised and democratised public realm.

Next, we must be clear about the need for re-distributive measures to ensure that everyone is able to participate in and benefit from more decentralised and participatory services. This means central and local government action to tackle inequalities within and between regions. Meanwhile, a slow and steady move towards a 30 hour working week, alongside measures to address low pay, would ensure that people have the capacity to partake in this kind of everyday democracy.

Finally, NEF’s research shows that public spending reductions are decimating local services and, despite recent claims of the Coalition, the cuts are undermining our chances of a lasting economic recovery. We need an end to austerity and a new macroeconomic strategy based on government investment, including in our public services.  

Join the debate

We do not have to accept the wholesale transfer of services we all rely upon to unaccountable private hands. Nor is a system run by distant experts for our supposed benefit the only viable alternative.  

Our new working paper aims to provoke thought and discussion about what a new public service agenda should look like. Join the debate on Twitter at #futurewelfare, or in the comments box below. 


Public Service Reform

The market is failing public services. What’s the alternative?

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