19 January 2007
Tony Blair has successfully used market forces to improve public services, but will his successors adopt a more populist approach? This is not the time to change, argues one business leader
Politics and business are different creatures. Few businesses would survive the battering the media gives politicians and no successful enterprises are driven by Disraeli's political dictum 'never apologise, never explain'.
But for those of us engaged in delivering public services, politics — and making our political case — matters more than ever.
This is partly because of the successes of our society. Britain is a prosperous, democratic and stable country. Standards of living are high, most people who want work can get it and the rising tide of prosperity is raising most boats.
Unsurprisingly, citizens of such a country demand a great deal from their public services. Every penny paid in personal tax towards them could instead be used to fund our retirements, improve our wellbeing through holidays or home improvements, or buy the kids a new computer or some extra help with their schoolwork. Levies on business are, in reality, foregone pay rises or missed opportunities for capital investment.
So politicians have to show they can get the balance right between quality public services and economic stability and prosperity.
Twenty years ago, part of the answer to the problem seemed to lie in privatisation. In many areas, individuals were given the opportunity to make their own decisions and the state butted out.
But there are limits to this, and we are not demanding privatisation of our public services. Today, all the mainstream parties are committed to a taxpayer-funded NHS, for example, and no one has suggested opening up frontline policing or defence to competition.
Crucially, however, by accepting that the state should retain responsibility for certain core services, it does not mean that we have to lock the market out. This is where effective contracting out of services provides the other part of the answer. Well-designed markets that focus on delivering clear public policy objectives, with the best provider being awarded the contract, can square the circle of public provision and efficient delivery.
Tony Blair didn't invent this idea, but he has been driving it hard for most of the past decade. What business is not confident about is that this will continue.
There is much to indicate that the next generation of Britain's political leaders — regardless of their political hue — might be inclined to opt for halting public service reforms for the sake of short-term populism.
At the inaugural CBI public services summit on January 24, we will be showing off the very real achievements in service transformation and innovation that competition and a diversity of supply has helped public service commissioners to achieve.
But we will also be warning that change must continue. The improvements brought about by managed and regulated competition depend on the continued use of market forces.
Citizens only get to vote occasionally, but they want the everyday power of the consumer when they make choices at the point of need. If their decisions cannot be made properly because of lack of information, the answer is not to get rid of the choices but to get rid of the ignorance.
Even where it would be impossible, or simply perverse, to offer choices to individual consumers of public services, the efficiencies and innovation that markets bring can still be applied. It is the state that is the consumer, but it is the citizens who will benefit.
But these markets need to be managed. All markets rely on willing customers. I won't set up a greengrocer, for example, if nobody will buy fruit and vegetables. This applies equally to public services — there cannot be a market without a regular flow of opportunities.
And if you ask for the cheapest apples, you shouldn't be surprised to be offered a bag of bruised fruit. This is why commissioners must look for value for money, not simply the lowest cost.
But there are signs that the financial squeeze of the Comprehensive Spending Review on one side and the desire to blame council tax rises and NHS financial difficulties on the government on the other are pushing politicians and commissioners back towards the idea that 'cheapest is best'.
Certainly, there has been waste in the past ten years. We have paid a great deal of tax but the performance of our services has rarely matched the increases in funding.
While poor providers from any sector are right to fear change, the public should not.
Reform can bring turbulence, but those of us who seek excellence in provision know that an even greater pace of change is the way to get through this, not turning around and retreating from it.
Kevin Beeston is the chair of the CBI Public Services Strategy Board and executive chair of Serco Group
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