Select Committee on Public Administration Minutes of Evidence

Memorandum by UNISON (PSR 34)


  0.1  UNISON welcomes the opportunity to discuss public service reform with the Select Committee. UNISON has 1.25 million members who deliver public services, working in the public, voluntary and private sectors. The largest group of UNISON members, 700,000 work in local authority services, and we have 400,000 working in health. UNISON is the largest union in education with 250,000 members and we are the majority union for support staff in the police and have members in the utilities and transport and the wider criminal justice system.

  0.2  UNISON members are keen to ensure that Britain's public services are amongst the best. They are experienced in change and welcome innovation that will lead to better service delivery. They are also clear that there must be more to change than cutting the terms and conditions of their employment—regrettably a trend that many have experienced.

  0.3  UNISON further welcomes the public attitude towards public services and the fact that poll after poll shows that the public does care who delivers their services. An NOP poll for UNISON in September 2001 found that 83 per cent of the public do not want private companies running public services for profit. Furthermore, this figure has risen from 78 per cent at the time of the election in June 2001 and from 66 per cent in August 2000.

  0.4  In our evidence we wish to concentrate on the three issues identified by the committee that we believe are fundamental to high quality public services and are pertinent to any discussion of the role of the private sector in the delivery of public services:

    —  Principles and strategy for Reforming Public Services

    —  A public service ethos

    —  Accountability

  0.5  UNISON agrees with the Prime Minister that the terms and conditions of frontline staff should be "geared to proper recognition for the work they do, real incentives for better performance, higher morale and greater fulfilment". In our evidence we shall draw on the experience of these frontline staff. However, the interests of our members go beyond their roles as providers of public services. Our members and their families also use public services and finance public services as taxpayers.

1.   Principles and Strategy for Reforming Public Services (Questions 1-5)

  1.1  Public services exist as a result of a complex set of interactions between the state and the citizen. Public services exist, for example where:

    —  there is no market interest in their provision eg rural post offices;

    —  consumers have poor information about quality eg healthcare, water or food quality;

    —  there are external costs (eg pollution);

    —  there are benefits that impact on society beyond the individual (eg education);

    —  where protection from monopoly suppliers is needed; or

    —  where there is wasteful competition.

  1.2  In addition the state takes account of principles such as equity, social justice and distribution. It ensures that citizens have equal access to services, regardless of their ability to pay for them. Thus public services are not defined by specific ownership arrangements but rather by their function and provision. So for example, the fact that Railtrack and the train operating companies are privately owned cannot and has not altered the obligations that the government has to ensure that the railways provide a safe and effective means of transport for the public, at a reasonable price.

  1.3  Much of the discussion about public services takes place at a very general level, but it is UNISON's experience that in order to do justice to the full range of public services discussions must be service specific. What may be a good solution for one service may be wholly inappropriate for another. Thus, the Committee asks questions about devolved institutions (question 3) and policies at different levels (question 4) and in UNISON's view the answer will depend on the service under discussion.

  1.4  In general, UNISON would like to see devolved decision making across public services within a strong statutory and financial framework that must be accompanied by democratic accountability at an appropriate level. However, in some cases, such as education, devolution can go too far and end up with fragmentation of both delivery and accountability.

  1.5  The Nolan committee report into standards in public life (1996) looked at local public spending bodies, including further and higher education institutions, grant-maintained schools, TECS, LECS and housing associations. Nolan states in the address to the Prime Minister that:

    "There is and will continue to be, a tension between the management driven and output related approach which is central to many recent changes, and the need for organisations providing public services to involve, respond to, and reflect the concerns of the communities which they serve."

  1.6  Thus there is no general answer to the first questions without looking in more detail at the services themselves.

  2.   The Concept of a Public Service Ethos and the Involvement of the Private sector (Questions 6-18)


  2.1  We have said that the state takes account of principles such as equity, social justice and distribution and it ensures that citizens have equal access to services, regardless of their ability to pay for them. UNISON believes that it is within such a framework of public service values that the public service ethos exists. An ethos that is shared by some voluntary organisations, although it does not follow that any organisation that is not-for-profit, automatically embodies these values. Similarly, the individuals who work in public institutions will tend to adopt their values and principles.

  2.2  Public institutions such as the civil service, local authorities, hospitals, schools and the police service exist to perform public services and the values of public service are at the heart of these institutions. Public authorities have social responsibilities as well as statutory responsibilities to provide a range of services. Local authorities also have a role to promote economic development in their areas under the Local Government and Housing Act 1989. Furthermore, they have a power to promote the social and economic well being in their area under the Local Government Act 2000. A core principal of the NHS is to provide a universal service for all based on clinical need, not ability to pay. The obligations of such broad and open-ended goals can only be borne by public institutions, nor would it be reasonable to expect other kinds of institutions, such as private companies to undertake such a role.

  2.3  Very often, public institutions are required to choose between conflicting interests for example in planning decisions and to choose how to allocate scarce resources between competing interests eg rationing of health treatments or distributing grants. Citizens must be able to trust them to perform these functions impartially and must also have adequate means of scrutiny and redress to back up that trust. This is particularly important in the criminal justice system. A simple model based on business practices cannot encompass the ethical dimensions of public services.

  2.4  The question then is, can the private sector do the same, or at the very least, perform defined tasks within such a framework? The answer is not simple. Contractors may strive to perform services to high standards, not least because a good reputation will bring more business. But their very nature and structure subjects them to competing interests. Not only must they fulfil the terms of their contract, but they are also obligated to their shareholders. A private company gains little from performing above contract, on the contrary, this may detract from their competing goal of maximising shareholder return. At the same time, a contract held in one local authority or a hospital will be just one of many contracts that the company is responsible for, diluting the commitment that they are able to invest in any particular contract. Again there may be conflicts between different contracts. Ultimately, if a contract goes wrong or becomes too difficult, a company can walk away, an option that the public sector does not, nor should not have. The nature of public service is such that come what may, there has to be sustained commitment to users and the community.

  2.5  The case of the care sector exemplifies these tensions. The major share of care is now delivered by the private care sector. Laing and Buisson data shows that as a result of costs being driven down in the residential and nursing care services, 700 independent care homes have closed each year for the past two years. In some cases it has become more profitable to realise the value of the homes as assets in a rising property market, than to continue providing care. This is an entirely logical response for a private, profit making enterprise to make, it is not an option for a public service that must put the interests of the client group first.

  2.6  Defining services by contracts also places limitations on both the service and on the contract holder. Contract specification is not easy and however carefully services are specified, there will be elements and transactions that are omitted. It is always easier to specify quantifiable factors rather than the many intangibles that can make a service human and special. This is inherent in a contract culture. And when there are many contracts operating together, then the chances of service users or aspect of services being left out, become all the more likely.


  2.7  The values of public service are also reflected in the practices within public service organisations. So, for example, public service organisations tend to have flatter employment structures than private sector organisations—reflecting a higher priority given to equality. This is illustrated by recent research for UNISON[2] that showed that every one of the top 20 contractors supplying public services, paid their executives a larger multiple of their average employees pay than is found in the public sector. In fifteen of the top twenty contractors, the average executive pay was more than ten times the average pay of their employees, the highest multiple being 77 times. Furthermore, whereas in the public sector all staff are members of a single pension scheme, directors of contracting companies give themselves more favourable pensions arrangements than their staff. Indeed, for the most part, new starters taken on to public contracts are denied any occupational pension at all.

  2.8  In another research project commissioned by UNISON[3], significant differences were found between public and private employers in the application or existence of a range of employment policies that could be said to reflect values akin to a public service ethos. So, for example, studies of Compulsory Competitive Tendering have found that it has led to a deterioration of maternity benefits and the loss of policies covering sexual harassment. Part II of the Local Government Act 1988 specifically outlawed taking workforce issues into consideration into contracting, so it is hardly surprising that UNISON members identify private sector employment with a reduction of policies that we identify with good employment practices and a wider concern for employees within public service. The amendments to Part II that allow a consideration of workforce matters remain voluntary rather than mandatory so this trend could continue. UNISON would like to see them made mandatory.

  2.9  Finally, UNISON is concerned by the track record of many privately run services. Taking two services, rather than individual contracts, of which there are many examples. Housing benefit is a notoriously difficult service to deliver. A recent Audit Commission report found that private contractors administered 9 out of 14 local authority areas in England where new claims took more than 100 days on average to process. At the same time, there are outstanding examples of good practice, such as the housing benefits service in the London Borough of Camden. The Department of Health's own evaluation of hospital cleanliness found that four out of the five dirtiest hospitals were run by private contractors.


  2.10  Some individuals are attracted to work in public services because of the function they perform. They are also attracted by not working to corporate goals, but to wider societal goals. They may also prefer the more equitable practices and structures that are consistent with their wider values and to the relative openness and transparency of public sector organsiations.

  2.11  Many of our members who provide manual services, such as cleaning and catering, have clearly told us that they derive job satisfaction from performing these tasks within the public service. Over 600 UNISON members working in the Dudley Group of Hospitals took industrial action over a six month period, precisely because they did not want to transfer to the private sector, albeit doing similar work. They said that within the NHS they worked as part of a health team, fighting infection or providing nutrition. They feared their jobs would be reduced to menial and unsatisfying tasks if they were both separated from the rest of the NHS team and transferred to a profit making company, under separate management.

  2.12  In a survey[4] of UNISON members working in local government, respondents were asked if they ever worked additional hours for which they were neither paid in money or in time off. The survey found that 28 per cent of respondents worked up to ten hours extra per week unpaid. Not surprisingly, more than 60 per cent of chief executive and senior managers figured in this group. However, 49 per cent of nursery nurses, 41 per cent of classroom assistants and 53 per cent of school administrators were also in this category, showing their tremendous commitment to providing vital care and education to children.

  2.13  Individuals working for private companies delivering public services may well share a sense of public service ethos. However, they will also have obligations to their employers, whose first duty is to their shareholders. There may well be a conflict of interest between providing a better service and ensuring the commercial success of a contract.

  2.14  The public service ethos extends beyond those who work in such services. It is exemplified by the army of volunteers who give their time and energy to the support of public services. Volunteers are to be found in schools—both private and public—as parents tend to share a commitment to helping with their children's education. However, the same degree of voluntary commitment is not to be found in private hospitals or private nursing homes. Indeed, some volunteers object to giving freely of their time, knowing that their efforts will ultimately contribute to the profitability of a privately owned company.

  2.15  A key lesson from the problems at Railtrack has been how difficult it is to incentivise a private company to perform what should be its core task. Not even the combined efforts of the Rail Regulator, the Government and the Strategic Rail Authority have been sufficient to force Railtrack to prioritise the safe, maintenance of the railways.

  2.16  In another example, a key public service is suffering because responsibility for it lies between publicly owned service—local government and a privately owned public service—water. According to a survey of local authority pest control units by the National Pest Technicians' Association, "Rats are a growing problem. Latest research shows an average annual increase of 18 per cent in the population of brown rats—the dominant variety in this country. The increase is as high as 31 per cent in the summer months." There are a number of causes, "But at the heart of the problem, many argue, is the way sewers—homes and passageways for rats—are maintained. On this analysis, there is a crucial and damaging tussle between the public and private sectors." and "vital co-ordination has been lost."

  2.17  In another sector, UNISON has concerns that the use of the private sector in a variety of functions will have a detrimental effect on the government's stated intention of achieving a joined up criminal justice system. So for example, the fact that separate agencies may be involved in the transportation of prisoners has led to a break down in communications and a threat to the health and safety of both staff, clients and the general public, on a number of occasions.


  2.18  UNISON has a significant membership in the voluntary sector and believes that the voluntary sector can play an important role, but only within a framework of publicly run services. Voluntary sector organisations can and do demonstrate a commitment to public services, however, they are subject to competing demands and are ultimately answerable to their governing boards and funders. Voluntary sector organisations would not therefore be appropriate bodies to take on whole services.

  2.19  At one time, housing associations were seen as the remedy to large-scale council housing departments, that were sometimes perceived as being large and unresponsive. Now that so much resources have been diverted into housing associations they have come to be criticised for the same failings they were expected to correct. In several respects, their sense of public service ethos could be questioned. A recent survey found that the pay of housing association directors had increased by almost three and a half times inflation in a year and that 24 housing associations paid their chief executives £100,000 or more per year. Another study by the Audit Commission[5] has also criticised a number of housing associations for changing the way that tenants are represented, so that they now have far less influence over decisions affecting their homes than previously. And the National Audit Office[6] found that housing association boards could not be trusted to provide reliable information about their organisations.

  2.20  The fact that organisations are either charities or not-for profit does not necessarily mean that they are not also subject to competing demands for their resources. For example, when careers services were privatised some contracts were awarded to not-for-profit organisations that were part of educational charities. As such the subsidiary companies running the careers services did not pay dividends, however, they did make a "donation under deed of covenant to the parent charity". The parent charities were then free to spend that money on other activities. Thus, public money, originally allocated to the careers service, may find its way into other activities, pursuing the interests of the organisations that own the careers subsidiaries. Whilst these charities may share a public service ethos, this may ultimately be overridden by the interests of the larger group to which they belong.

  3.   Accountability

  3.1  Involving the private sector in the provision of public services leads to a number of accountability issues that UNISON would like to draw to the committee's attention:

    (a)   Democratic Accountability

    (b)   Access to information and consultation

    (c)   Accountability of the private and voluntary sectors providing public services

    (d)   Accountability of staff moving between sectors


  3.2  An essential feature of public services is that those who deliver them are democratically accountable for them. A mixed economy of providers has led to less accountability. It is not uncommon for Ministers to decline to answer for services because they have been privatised and the ministers either no longer have the information or decline to take responsibility.

  3.3  There are concerns across the board that using the private sector in PFI leads to a distortion of public policy priorities whereby making projects attractive to the private sector takes precedence over policy considerations. Thus single school upgrades are unlikely to get funding, whatever their local priority and the reality is that only grouped schools are likely to get PFI credits. The effect of privatisation in criminal justice has seen policy decisions increasingly following commercial imperatives rather than social policy objectives. It is the terms of the PFI project that set the criteria for the location/function of new buildings. For example, green field sites for police buildings may make sense from a commercial point of view, but they do not from a public access point of view. Such sites may make it difficult for relatives to visit family members held in custody for instance.

  3.4  Local authorities are democratically accountable bodies where the decision-makers, councillors, are directly elected by local communities. The involvement of the private sector has damaged the democratic accountability of local authorities and limited their control over expenditure and resources. At its simplest, there is often a confusion of accountability between the council and the contractor when problems arise in a service. Another manifestation is where one generation of councillors enter into very long contracts, typical of the Private Finance Initiative (PFI) and strategic outsourcing. At the last local elections, the ruling political party was ousted from control of the London Borough of Islington, not least, because of their poor handling of some services. The incoming administration found they were bound by long contracts that would be too costly to break. They in their turn entered into more very long contracts, which will bind future administrations. It cannot be right that a group of councillors or school governors, with a four year term of office can commit funding and the form of service provision for up to 30 years into the future.

  3.3  The Audit Commission[7] has warned "PFI contractually commits the public sector body to paying for services for long periods of time. This could restrict the future flexibility of the body to determine the way that services are provided unless careful attention is given to incorporating into the contracts provisions for making changes to the nature and cost of services provided." In a later section it also warns that PFI "limits the ability of public bodies to switch resources in the future."


  3.4  UNISON welcomes the very large programme of infrastructure renewal that the government is undertaking. However, UNISON is concerned by the lack of user, community and employee consultation over the schemes and the way they are being undertaken.

  3.5  Members of the public, employees and trade unions are regularly denied access to information about PFI, often on the grounds of commercial confidentiality. This is especially common in local government, where it is regularly used as an unnecessary excuse for withholding information about PFI or other contracts. As a result accountability to local communities is reduced and it is almost impossible to debate, to assess and to scrutinise projects.

  3.6  Guidelines should be set to ensure genuine consultation with local staff and communities. A number of Members of Parliament have expressed concerns about the refusal to allow the public access to information on PFI proposals. For example in a House of Commons debate in March 1999, David Lock MP for Wyre Forest, whilst being supportive of PFI, voiced his concern.

    "As a result of the commercial confidentiality inherent in the PFI process, virtually no informed public debate has taken place on the merits of that scheme. The details have seeped out and the local authority has quashed every request for information or a public debate on the ground that it would breach commercial confidentiality."


    "there is no opportunity in that process for local people—even local councillors—to have their say on the overall strategy. The demands of commercial confidence in the PFI process come into direct conflict with the openness that the Government rightly require from public authorities."

    More MPs complained during a debate on PFI in July 2001 including Edward Davey (Kingston and Surbiton) who said that:

    "In so many PFI deals we have seen a complete lack of accountability. There has not been a full analysis, in the House or in Whitehall, of the deals before they have been signed. The deals have been pushed through with political drive and the issue of whether they are good for the taxpayer and the user of that service has been neglected."

  3.7  The Audit Commission document "Building for the Future—The Management Of Procurement Under The Private Finance Initiative,"[8] notes that the interest of service users can be neglected. And, "there is often a tendency to adopt an insular common manager approach to PFI . . . but community involvement in proposed PFI schemes is becoming a critical issue as local opposition to some PFI deals has intensified. Local people care about the future and shape of public services and the provision of health services is a particular emotive issue in many areas".

  3.8  With regard to consultation, the Audit Commission acknowledges in "Building for the Future' that"

    "provisions requiring contractors to consult with users is being built into some contracts. This is not the norm, however . . . the general performance of existing local government PFI contracts in meeting the best value consultation requirement could best be described as mixed".

  3.9  Despite Government requirements for disclosure of information which are better in the NHS than elsewhere there have been several examples where the "Commercial confidentiality" has been used to withhold information from the public, information that the public should have a right to, about the services they depend on. For example, the Health Select Committee has requested information on the profit levels of private sector companies involved in PFI and UNISON believes such information should be in the public domain.

  3.10  Finally, in February 2001 UNISON was threatened with legal action by a police authority that did not want a critical report about a PFI scheme, prepared for UNISON, to enter the public domain. In this case, UNISON representatives had been given a copy of the PFI Outline Business Case and had informed the authority that they would be seeking expert advice on it. As a courtesy, a copy of the report was given to the authority prior to publication and it was at this point that they sought to gag UNISON. After lengthy correspondence and legal advice, UNISON published a revised version of the report.

  3.11  UNISON would like to see the full disclosure of information and full consultation on PFI proposals with key stakeholders—trade unions, employee, user and local community representatives, before any decision is made to opt for a PFI proposal. Information and consultation with key stakeholders should begin at the outset and continue throughout all 14 key stages of the PFI process.

  3.12  There should be mandatory guidelines on disclosure in every sector, along the lines of those recommended by the NHS Executive in "Public Private Partnerships in the National Health Service: The Private Finance Initiative—Good Practice". All key PFI documents including Outline and Full Business Cases for PFI schemes should be made publicly available within one month of their respective final approval. Where any information is withheld about a PFI scheme, public authorities should be required to give a full explanation for non-disclosure rather than hiding behind blanket phrases of "commercially confidential" or "not in the public interest."


  3.13  UNISON is concerned that neither the voluntary nor the private sectors are subject to the same degree of accountability as the public sector. Neither accountability to service users nor a wider accountability. The Health Select Committee has recently requested information on the profit levels from companies undertaking PFI contracts. UNISON would go further and supports the recommendations of the Sharman report[9]. Sharman states that "Public Audit has a key part to play in safeguarding public money, ensuring proper accountability, upholding proper standards of conduct in public services helping public services achieve value for money".

  3.14  In a mixed market of service provision, public bodies have a duty to ensure that the bodies to whom they subcontract services observe the highest standards of performance and practice. They are, after all, spending public money and often, the private and voluntary bodies act as agents of the public authorities, in their dealings with clients and citizens.

  3.15  A recent report by the Kings Fund[10] said "All UK health care should be subject to a common system of state regulation, regardless of whether it is provided by the NHS or the private or voluntary sectors." And, "If the Government is determined to bring more public-private partnerships (PPPs) into the NHS, it will have to take greater responsibility for regulating the work of private companies. It is simply illogical to have two separate systems of regulation when more and more NHS patients are getting treated in non-NHS facilities." UNISON believes the same standards must be applied to public services regardless of who delivers them.

  3.16  There is currently uncertainty as to whether the government is likely to apply the terms of the Race Relations (Amendment) Act 2000 to the private sector. In the context of the criminal justice system, the possibility of the private sector being allowed to take on increasing direct responsibility for contact with the general public, but not being required to meet the same high standards in relation to the diversity and equality agenda, is extremely worrying, especially in light of the post-Lawrence agenda. The need to ensure that private companies are accountable in law in the same way as the public sector in terms of diversity is a vital issue.

 (d)   Accountability: Moving between sectors

  3.17  UNISON is concerned that there are possible conflicts of interest when individuals move between sectors. Public servants going to work for the private sector should be subject to a code of practice. There is a code for civil servants that is followed in the NHS but no such code exists for local government. There is nothing to stop a local authority officer working on the client side of a contract and taking their knowledge to a job with a contractor.

  3.18  UNISON is also concerned at a blurring of roles that can occur when private sector companies or individuals act in advisory capacities to public bodies. They may give advice from which their company or another client may stand to gain. It is important that roles are clearly separated and that individuals advising public bodies or government have no other affiliations or remuneration from other interested parties.

  3.19  An example would be the government advice on refinancing of PFI projects, which was largely written by private sector experts who were seconded to work for the Treasury Taskforce. That advice essentially warned public sector bodies to leave refinancing to the private sector. Following the scandal of the huge sums that the PFI consortia have made from refinancing, new advice recommends a 50:50 split on any gains. The point is, that the advice was written from a private sector perspective. The public interest was subordinated to a business point of view and this represents a real danger of using private sector experts to produce public sector advice.


  4.1  A public service ethos exists in the very institutions of public services: in the compact between citizens and the government that leads to the development of public services; in the trust that citizens place in government to allocate resources and spend their taxes; in the values underpinning public service and in the wider duties and obligations born by public bodies.

  4.2  Individuals subscribe to and reflect a public service ethos within this institutional framework, both as employees and as volunteers.

  4.3  Whilst companies may well wish to subscribe to the values of the service they undertake, they cannot and should not be expected to take on the wider duties of public services. The private sector also has obligations to its shareholders that may conflict with their obligations within any one contract.

  4.4  The public service ethos should be valued and nurtured. It is being damaged by the constant blame and criticism heaped on public service workers. By the insecurity with which they face the future and by the constant threat of transferring their employment to the latest winner of a contract for the service they work in.

December 2001

2   Public Service, Private Profit , UNISON, September 2001. Back

3   Contracting culture: from CCT to PPPs: The private provision of public services and its impact on employment relations, Sanjiv Sachdev, UNISON 2001. Back

4   Making a Difference Under Pressure: UNISON Members Delivering Local Services , UNISON 2001. Back

5   Group Dynamics-Group Structures and Registered Social Landlords, Audit Commission, November 2001. Back

6   Regulating Housing Associations' Management of Financial Risk, NAO, April 2001 Back

7   Audit Commission, Taking the Initiative, A Framework for Purchasing Under the Private Finance Initiative, 1998. Back

8   "Building for the Future-The Management Of Procurement Under The Private Finance Initiative", Audit Commission, June 2001. Back

9   "Holding to Account : the review of Audit and Accountability for Central Government". Report by Lord Sharman of Redlynch, February 2001. Back

10   Public-Private Relations in Health Care, commissioned by the King's Fund. Back

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