The death last week of Sir Alan Walters can be seen as a symbolic end to the domination of the free market in Western politics.
Walters, Margaret Thatcher’s economics adviser, famously persuaded the then prime minister to oppose Keynesian orthodoxy and raise taxes in the middle of the 1981 recession. In 1989 he incurred the wrath of Nigel Lawson by dubbing the Exchange Rate Mechanism ‘half-baked’.
Subsequently, both Tory and Labour governments have embraced market mechanisms as the natural way of operating. To argue otherwise would lead to accusations of being ‘Old Labour’ or seeking a return to the 1970s.
Until, of course, the credit crunch and the 2008/09 recession took hold. It now seems that 1970s-style bail-outs, job-creation schemes and Keynesian economics are back in fashion.
The private sector is no longer regarded as the bastion of good sense and entrepreneurial endeavour. Far from being freed up, the market needs to be regulated and controlled.
In the public sector, this has led to a backlash against private providers.
Outsourcing companies, such as Liberata and ETS, have been sacked from major contracts and they are unlikely to be the last.
As Steve Bundred, the chief executive of the Audit Commission, pointed out at the Public Finance round table debate on outsourcing in a recession, there are huge concerns over the long-term viability of some outsourcing companies.
A few public bodies are willing to take a risk. But others, most notably in central government, are now less likely than ever to outsource services.
Such a stalemate is bad news for both the public and private sectors. Rod Aldridge, the founder of Capita, argues strongly in this week’s special issue that outsourcing companies have to come up with new models that fit the zeitgeist.
These could include joint ventures, where the public body has an equity stake and union members are included on the main board.
Alan Walters almost certainly would not have approved, but it might offer a way forward in these straitened times.
