It looks increasingly like the momentum of the coalition’s reform agenda has been lost. With flagship health reforms in the midst of their ‘pause for reflection’, other signs also indicate that the coalition’s blitzkrieg of reform has become bogged-down, possibly to go into reverse.
That would be unfortunate, since there is much to like about the plans for market-based reform in policy areas as diverse as criminal justice and education. But nothing seems to illustrate the government drawing in its reforming horns better than the messages around the long-awaited – and further delayed – public service reform white paper.
The Prime Minister’s orphan Telegraph article on the issue, back in February, seemed pretty gung-ho about the role of private capital in delivering public services. It rightly promised a new ‘presumption that public services should be open to a range of providers competing to offer a better service’.
But Cabinet Office Minister Francis Maude now appears to be playing a different tune, if his statements in a leaked memo this week are to be believed: ‘wholesale outsourcing’ to the private sector is, according to Maude ‘politically unpalatable’. Instead of the nasty private sector, employee cooperatives, social enterprises and voluntary sector organisations will be at the front of the queue.
Who could possibly object to all those lovely people being put in charge of our public services? Unfortunately, the shift in tone to emphasise the voluntary and community sector (VCS) creates three risks to the whole agenda and the VCS itself.
First, freezing out the private sector will make it impossible to transfer delivery risk onto non-state providers. VCS organisations typically do not have deep enough pockets to bear the financial risks involved with market-based delivery. This is especially true in payment-by-results models, where substantial up-front investment is required before payments start to come. But if the VCS can’t handle it, the government will ultimately have to bear the financial risks of delivery.
That points to a return to central control of public services – the second risk. As in the past, where government bears the risks, Whitehall calls the shots. Unable to transfer risk to providers, the Prime Minister’s promise to ‘restore the discretion of professionals’ would involve an unsustainable accountability deficit.
Ministers cannot allow professionals to control the purse strings if those same professionals face none of the consequences of service failure or financial incontinence. The aim of devolving autonomy to the frontline would be replaced by centrally designed processes, albeit ones delivered by non-state providers: back to command and control – of the VCS.
Finally, keeping out the private sector will lead to more dreaded postcode lotteries. Local variation in service performance is inevitable in a pluralist system. But by limiting private sector involvement in delivery, that variation is likely to be unacceptably large. Even where the best VCS organisations operate, scaling-up their delivery will be impossible without substantial amounts of investment that the private sector can bring.
Cooperatives, mutual and charities may be cuddlier that Serco, Capita and G4S, and indeed they offer more potential for innovation. But they cannot succeed alone, and the VCS risks being captured and directed by Whitehall if it tries.
Partnership – in which private capital facilitates risk-bearing and scale, and the VCS brings innovation and local knowledge - is essential. The government’s excessive attention to the cosmetics of reform risks dooming the whole agenda to failure. In our current fiscal predicament that is more than something of party political concern.
Ian Mulheirn is director of the Social Market Foundation
