Select Committee on Public Administration Minutes of Evidence

Examination of Witnesses (Questions 350-368)



  350. Can I just go back again to the question of this improvement in health, figures are somewhere of about a 50 per cent increase in real terms from about 1990-91 to the present period, and, as part of the GDP, because with an increase as well, again, I am sure everyone will say there is no real visual sign of major improvements, not just in health, across the board in public services. Is that UNISON's analysis then, that the Minister is not spending it properly, or it is being diverted wrongly at one end?
  (Mr Prentis) I do not want to paint the picture of public services that are absolutely brilliant and there is no problem, because, quite clearly, there is, and that is why we talk about investment in them, that is why we are talking about, again, spending up to the European level; there are major issues that we do have to address and that we do need to address. But there is a myriad of good examples, of where the public services are actually pulling round and providing a good service, but we still have major problems; there is still a shortage of doctors, there is a shortage of nurses, there is a shortage of beds, the infrastructure is not in place, and that does have to be addressed. The point I would make is that PFI should not be the only show in town, in addressing those problems. In schools, we have got all the problems of repairs, we need new schools, the buildings have got to be built; it does not mean to say that we have got to hand them over to the private sector. In a new PFI school, the headmistress of the latest one being built, in Enfield, spends two to three days dealing with issues arising out of the contract, so you get involved in all the contractual problems. So there is lots of work to do, a tremendous agenda to move forward on; what we have got to say, from the staff's point of view, is that there is a willingness to move forward on that agenda. But it does take involvement and it does take a recognition that you do value the public services and the public service ethos, and that we do not simply come out with this glib generalisation that we will allow the reform to be done by the private companies, because they will not be able to do it, they will provide a service but they will not bring the step change that the Government is seeking.


  351. We recognise that whole problem, which is that the Government thinks it is putting all this money in, the public is being told it is putting all this money in, and yet nothing seems to come out at the other end, and so people say, `where's it going, what's happening, doesn't this organisation need a great big shake-up?'?
  (Mr Prentis) That is what our members say.
  (Ms Jaffe) If I may comment. An awful lot of that money is going, as we said, is enforced through the PFI, and one of the problems with the PFI system is that, because they are so large, because the schemes escalate so that they can generate income and do all the innovative things the private sector is encouraged to do, because of the preferred bidder way of going about PFI, those schemes use up a huge amount of resources. So just to get a scheme up and running uses an enormous amount of time. And we have heard chief executives from NHS Trusts say to us that the other reforms in their hospitals have had to go on hold while they and the senior management of those hospitals were engaged in trying to produce PFI schemes. So PFI is almost a diversion; they might get a new hospital at the end of it, and we have a lot of problems with the way that it is done, but it is almost a diversion from the bigger task of improving the services. And you have got to remember that whilst money is going into the public services a lot of it is very, very directed to particular targets and particular types of spending. The background, is that local government and health are required to make up to 6 per cent efficiency savings year on year, so there are still orphan services that are not getting that money, that are still suffering, and the perception of the people working in those services and the people providing those services is that the services are still being cut back, in the same old way that they have been for the last 20 years.

  Chairman: Thank you for that.

Mr Wright

  352. Just to take you back, you mentioned there that you had commissioned an opinion poll in terms of the public's perception of private and public; but is it not true that the general public do not really understand which section is public and which one is privately-run? If we take in a hospital, for instance, how many people would know, because the cleaning may well be carried out by a private contractor; is that not the perception?
  (Mr Prentis) Where a PFI hospital is being built, because of all the publicity around it, I think the local communities do realise that services are going out into the private company. If you are ill, and this has been said before, you are not bothered who provides the service, as long as you get a good service, I can see the sense in that. But I think communities do know, they do realise the way in which, if a new hospital is built in Durham or in Carlisle, because of the publicity surrounding it, they do realise that it is a private company running that hospital.

  353. And, going on to the contracts, and I mentioned earlier, in the previous session, in relation to the Norfolk County Council, where there was a particular problem; is not the problem in the detail of the contract itself, rather than the end result, because, after all, it is the detail of a contract that will determine whether or not the private company is going to carry out its duties for the public service?
  (Mr Prentis) The private companies, they work on the basis of what is in the contract. It may well be that the public service is not very good at dealing with private companies when it comes to contracts, I do not know, but there is no doubt whatsoever that the contract has become the all-binding document on which services are actually delivered, and if it is not in the contract it is either not provided or additional cost is incurred. It may well be that Government are going to have to increase expertise in the public service on negotiating with the private sector on contracts; but something like, is it, £45 million has so far been spent on contracts in the first wave of the PFI hospitals, 4 per cent of the total cost of the build is now going into the contractual discussions and advisors that take place before the schemes go ahead. So just getting contracts in being as they are now is a massive burden on the public service. And goodwill does come into the provision of public services; low-paid workers, like nursery assistants, classroom assistants, spend an average ten hours extra a week with their children than they actually get paid for. If a porter does extra, the private company will bill the hospital for it, it then becomes purely contractual and the charge is made. And we have even come across hospitals now where because portering was not included in the initial contract for the PFI hospital, any time a porter is used the hospital is charged £24, which is ridiculous.

  354. That is a problem with setting up the contracts, and it is not a problem with the private companies.
  (Mr Prentis) Everything centres on the contract and goodwill, which is the bedrock of public service provision, does go out of the window with it.

  355. In terms of the goodwill, in terms of people coming into a private company running a public service, would you consider that that person, from a private sector background, could actually encompass the public service ethos, eventually?
  (Mr Prentis) The point that we are making is that the company which is providing the service has got a private sector ethos, and the workers within it, they will conform to that private sector ethos, it is the way in which they will be applauded within the companies, the way in which they will get promotion, through the way in which they relate to that private sector ethos. Merely because they are providing a service does not give them that public service ethos that we have been talking about.

  356. Do you necessarily agree with Capita's view on becoming a shareholder of the company encouraging the staff to save as they earn?
  (Mr Prentis) One of the differences between the staffing arrangements in the private company and the public service is over the pay rates, the organisation of the company is totally different from a public service institution. The manager in the public service institution could expect to get twice, three times the average pay, perhaps, of that department; when it is run by a private company, we are dealing with companies now where the director will get something like 77 times the average pay of the workers within that particular company. Now salaries and share options of over £1 million are generated now from providing public services for the managing director and other senior directors, which would not be paid to public service workers, and the whole ethos of the company is different from the old public service department which it may have replaced. So whether or not share options are given, the actual salaries and the pay structure and the award structure are totally different in a private company from a public service function. And we have found that, as housing has gone into the voluntary sector, into housing associations, to enable them to get the money for repairs which is denied to the public authority, the managers in the housing function get 10, 20 per cent pay increases, the average pay for a director now in a housing association is £100,000. The Chief Executive in Birmingham, with a £2 billion turnover, will get £160,000. So the whole structure of the pay rates changes out of all recognition in the private or voluntary company compared with the public service.

Brian White

  357. When Tony Blair was referring to scars on his back, presumably, part of that was the fact that the Civil Service talk about policy and not implementation, and that is one of the real problems. But is not one of the other issues that a lot of the money that is coming into public services is either for project funding or ring-fenced to a particular issue; and is not that the problem, rather than some of the things that you have been talking about?
  (Ms Jaffe) I think both, probably. It is not just so simple as that. But I think the fact that some of the money has not reached some of the front-line services is very much because it is ring-fenced and targeted and very, very centrally controlled, absolutely.

  358. One of the things that Lord Haskins told us last week, and it has been repeated, is that in the private sector the thing that drives them is competition, and the absence of competition in the public services leads to a lack of urgency and a lack of application within public services to deliver, and you need to replace that with regulation and inspection and league tables and other artificial devices to provide the artificial competition. What is your view on that, and are we spending too much time on inspection, regulation and that kind of thing, or how do you actually create public service entrepreneurs who are prepared to take risks and take forward new services, etc?
  (Mr Prentis) Inspection is a massive burden on public service, both in the time it takes prior to an inspection then during the inspection process, we are talking about billions of pounds which is spent on inspection. Personally, I believe that there should be inspection, I am not against inspection, but we have got to look at ways of improving it and rationalising the inspection process to make it more streamlined and less of a burden on the public authority. But the inspection should remain, I think it is a vital tool in ensuring that we do get fair critical services and that we do get value for money. So I am not opposed to inspection. But where I do think it is wrong is to believe that there is increased competition through using the private company. We have had the experience of competition for cleaning contracts for, what, 25 years, and we are now in a crisis as far as cleaning is concerned in our hospitals. Competition has actually led to worse services, cheaper services but far worse services than we had before. So competition has not delivered there. And when it comes to the way in which the PFI is being developed, competition is limited, competition is limited by the preferred bidder status, and then competition is limited by the length of the contract. So, as far as we can see, competition is not being brought in and it does not sharpen the public service.

  359. Should we not have long-term contracts to stop it, so that if the Tories ever gain control of some local authorities they cannot change it?
  (Ms Jones) Public service contracts . . .

  360. It was John Edmonds, when he was here, was saying that there is a real issue about the difference between the voluntary sector and the public sector, and there is a conflict sometimes between when voluntary organisations do jobs in partnership with local authorities. Do you feel there is a problem there?
  (Ms Jones) Again, it is hard to generalise on this, but we have many members who work in the voluntary sector, so, obviously, there are, again, very good examples of the voluntary sector providing good services. Our concern is, and it goes back to the whole issue about accountability and what kind of democratic structures they have, and whereas it is quite obvious if you have got a publicly-provided housing service, for example, who to hold accountable, it is not so obvious, for example, when the voluntary sector get involved and the local consumers of those services, the lines of accountability and how they change the democratic control are not so clear. So there are some concerns about some ways that the voluntary sector is managed, and Dave has given some examples of the fact that if you allow some of the voluntary sector provision to get too big it almost becomes a replica of some of the problems that occurred in the public service provision in the first place. So it is horses for courses; there is some good voluntary sector provision, but we would like to make sure, if you are going to have that provision, that the regulation, the accountability, the democratic control, and so on, are equivalent to the public sector provision.

  361. If we have got these partnership boards, which are a mechanism for trying to get all the different stakeholders, rather than simply just relying on a council getting elected every four years, how do you actually get that accountability to all the different stakeholders?
  (Ms Jones) You are right to raise that question, because that is something, if you do not have that proper accountability then I think, at the end of the day, you will not get the kind of service attention, the service responsiveness, that you really need, so it is something that you just have to work, I think, very, very carefully at. And I think it was flagged up, in some of the evidence that I looked at earlier, that there is a real danger that the clients, the consumers, lose track of who to hold accountable, they are getting provision from so many different sources that they are not quite sure who to hold accountable for what and I think we have to be quite sensitive to that; it is okay saying choice, but, actually, if there is so much choice that people are confused about who is providing what then you are actually blocking their control over their own lives and their own services by doing that.

Mr Heyes

  362. I also need to confess my UNISON membership, before I ask a question. I am glad that we seem to have made the opportunity today for you to have some dialogue with Capita, perhaps, after the meeting, and it is a Capita-related question. You must have many members employed nowadays in Capita, and I guess that you are well in touch with their mood and their concerns. We were told by the Capita managers that their staff formerly employed in local authorities and public service generally would not go back, so happy are they to be employed in the private sector nowadays that they would not want to transfer, without exception, I think it was said, back to the public sector; is that true?
  (Mr Prentis) I do not know. But you could say `they would say that wouldn't they.' We have had discussions with managing directors of private companies like this before, and we have said to them, `well let's do a survey, let's give them the choice, we'll have a secret survey where they can come clean on what they think,' and none of the managing directors have yet taken us up on it. So it is very difficult to say if that is true or not. I will go back to what we were saying before, part of our role is to protect and look after the interests of our members, whether they be employed in private companies or in the public services, but the issue is far greater than that, it is how we provide our public services and will continue to provide them over the next 20 or 30 years, and protection and improvement of pay and conditions is one part of the equation, but the other part, obviously, is that we want to make sure and work with the Government to actually improve our public services. It is a difficult debate to have, but the thing that we are finding wrong in the debate is this idea that if things are wrong within the public service the private company will pull it around, and that the staff will enjoy working with the private company, and they will actually achieve it. We do worry about accountability of the service. We have got Hyder Business Services, again, where we have got lots of members; they are taking over the strategic local authority functions in Middlesbrough, they are taking over in Lincolnshire, they are bidding in other parts of the country for them; but Hyder itself came out of Welsh Water when it was privatised, they were our members then, they formed the private company now bidding for this local government work. When we talk about takeovers, Hyder is now fully owned by Nomura, the Japanese investment bank, the biggest investment bank in the world. And if Hyder take the services in Middlesbrough, Lincolnshire, they have been turned down by Kent County, actually, which is quite interesting, but if they take over quite a number of these strategic, central services, they will not be provided at local level, within the terms of local democracy, they will be centralised functions, and not necessarily in a certain part of the country, they could be provided from anywhere. And that is where the private sector involvement will take us. When we talk about the voluntary sector, and the `not for profit' organisations, and we look at the Careers Service, where they have `not for profit' companies, but that does not mean that money is not siphoned off, and we are well aware that money is put into a `not for profit' careers company and yet money can be siphoned off by its parent organisations for use somewhere else. So even with `not for profit' companies we have got problems. So all the ideas about `well, we won't use mainstream public service to bring about reform, we'll find another way of doing it,' we are saying, very strongly, that they have got equal problems, if not more insurmountable problems, than doing what we should be doing, which is having the guts to reform from within and drive through that reform.


  363. We are just ending now. A colleague asks if perhaps the agreement which you have made with the NHS, you were describing earlier, whether we could just have a little note about that, so that we know what is going on?
  (Mr Prentis) Yes. We are involved in a number of negotiations. There is the secondment arrangement for the PFI hospitals, it is a pilot to see if it can work. But, to be fair to the Government, during the discussions that have taken place, they have not proceeded with any PFI hospitals on the old basis to find out if this formula can work, which has meant us having detailed negotiations with the private companies. But in local government we are in the middle of very serious talks, with Nick Raynsford leading them, on a more level playing-field for local government. We are in a position that if you want to invest you must use a private company which can then put money in to invest. What we are trying to do is get for local government the right to borrow money, so, if they want to do, they can invest themselves. We are in negotiation with them on the best value arrangements, which downgrades the role of externalisation, clarifies the role of the Inspectorate, and tries to make best value what it should have been in the first place, a tool for levering in change into local government. So a number of negotiations are taking place, and what we really want is a commitment from the Secretaries of State, Stephen Byers and others, to actually delivering those commitments. And, again, it is not being defensive and protective, we are trying to create a level playing-field by which changes can take place.

  364. I think, as we end, we ought just to ask you the question that we asked John Edmonds, which is that if there was a conflict between defending the interests of your members and measures to improve public services, which would you opt for?
  (Mr Prentis) If there was a conflict between the two, I would look for agreement so that it can be reformed.

  365. You would jump for reform?
  (Mr Prentis) I would look for an agreement.

  366. A third way. Thank you very much for coming.
  (Mr Prentis) If I could just clarify that. In the secondment arrangement that we have just reached, it benefits 85 per cent of our members, but 15 per cent of our members still move over to the private sector. But that agreement enables the PFI hospital to now go out for tender.

  367. Thank you for that, and I think, too, we are genuinely interested in UNISON's thinking about internal reform of public services, and I think we shall look closely at how they develop. So thank you very much indeed for coming along and giving us your time.
  (Mr Prentis) We will put in a written submission.

  368. That is very kind of you. Thanks for your time this morning.
  (Mr Prentis) Hopefully, it will not be as long-winded as we have been today.

  Chairman: You have been very helpful, thanks very much.

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