Examination of Witnesses (Questions 600
- 617)
THURSDAY 6 DECEMBER 2001
LORD LIPSEY,
DR MADSEN
PIRIE AND
MR MICHAEL
JACOBS
Annette Brooke
600. Would I pay a different level of tax in
Chepstow? (Mr Jacobs) Ultimately I think that is an
option, yes.[3] (Lord
Lipsey) As a former Chairman of the Fabian Society, Beatrix
and Sidney would be cheering in heaven at Michael's earlier remarks
about the extraordinary superiority of state taxed financed services
and then about the role of localism within it. Listening to him
I found that localism comprises restoring regional health authorities,
which we just got rid of in favour of having a greater devolution
of primary health trust, that is an inexplicable paradox. I also
think that it is a false avenue to go down the way of saying it
is accountable so long as it is democratic. Due to the practical
limitations of democracy, first of all, you cannot help but observe
that there is not an enormous enthusiasm on behalf of the British
people for further elections and for further elected officials.
I speak as Chair of Make Votes Count; even where we changed the
electoral system you do not see them queueing up to vote, even
in general elections. Quite what form of democracy that is going
to allow the people of Chepstow and the people of Gloucester to
sit down and decide what drugs should be available in their areas
and make an informed choice, let alone how that is implemented
through the local medical structures is beyond my democratic imagination.
The final thing I want to say is I would be very, very careful
in this whole field of transformational rhetoric, that is to say
if only we put the consumer as king or locally devolve this the
services would be absolutely wonderful. I am afraid that public
service reform requires a complex mix of a great many different
ingredients introduced on a trial and error basis. I totally agree
with Michael that we need more money in public services and we
do not get it. We talked about contestibility, that is an extremely
important element. We talked about private sector involvement.
We should be talking about the appropriate national target to
make sure the money is not being wasted. We have not talked at
all about improved public sector management skills. You talk about
what is going to make the difference, we have it from Whitehall
downwards, better public managers. When you look across local
government, as in my company we do, you find a range of management
skills, if you could possibly get the worst local authorities
managed as the best are you would change the public services.
Yes, finally, we do want a revived, a reinvented and a redefined
public service ethos as an ingredient in all of this. Let nobody
think that any of these things are miracle ingredients that are
going to turn around public service, we have to do them all simultaneously
without going dashing off in pursuit of one particular hare.
601. We talked quite a lot about schools and
barriers to entry, while you were talking it popped into my mind
that exploring the situation with pre-school education would be
rather interesting in as far as you do not have the same barriers
to entry. Quite honestly I think the private sector faired pretty
badly in all those years, I wonder whether you would like to comment
on that? (Dr Pirie) Can you give me the context of
that question?
602. If we are looking at whether greater preschool
education is a good thing and clearly contributing to society
as a whole for years and years we have had sort of private sector/voluntary
sector play groups as the main provision, and very easy to set
up— (Dr Pirie) Pre-schools?
603.—and all of those things that private
sector could offer, but for most children in they country did
not actually have the choice of going to a good pre-school, the
market did not provide that? (Dr Pirie) I thought you
were saying that what was provided was bad, you were not saying
that.
604. I am saying it is a very low quality but
it is only with massive public sector involvement, money and inspection
that standards have risen. If you take a whole sector like that—I
know it is a digression but I think it is a really interesting
model to look into because it is something that great changes
come about here and it has been state driven the change that has
come through.
Chairman
605. What you are describing is market failure
remedied by public action. (Dr Pirie) The Adam Smith
Institute published about 10 years a book called Pre-schools
for All, advocating that there should be pre-schooling available
for all children of the appropriate age. We, in a sense, were
aware that the supply was simply not there. (Lord Lipsey)
You are absolutely right about what happened, it is not very surprising
but this is a group with very limited market power. When people
have young children one person has to give up work and they still
have a mortgage and the expenses of children and therefore you
did not have much effective demand. If you have much more generous
support to parents as individuals so they had more effective demand
I do not know whether the private sector would have failed in
the same way. If you cannot do that what you do is have publicly
organised provision. We are doing very well on that, Sure Start
is a great thing.
Annette Brooke: Yes, exactly.
Brian White
606. Were you here when I asked Will Hutton
about have we got obsessed with ownership rather than liberalisation,
and would you like to comment on the differences between the two
in respect of public sector inputs? (Mr Jacobs) I would
like to say a bit about public ownership. I do believe that having
institutions which are owned by the public, whose accountability
is to the public, and which express non-market values, is important
in itself. I do not think this means that we have to have 100
per cent public services run by them. I do not know how low they
would need to be in terms of the percentage of total public services
for society to change. But, I do think that it is important that
we have institutions in society which are differently constituted
from private sector ones, which operate with different kinds of
motivation and values and different forms of accountability and
which embody our collective sense of being a community. I am always
struck by the way in which, however bad our schools and hospitals
are, we use that phrase, "our schools and hospitals".
We never talk about "our Railtrack" or "our Tesco",
however good Tesco is. Most of us, whether it is Tesco or Sainsbury's
actually have some kind of brand allegiance to a particular supermarket
chain.
Chairman
607. We talk about "our football team",
that does not belong to us. (Mr Jacobs) That is an
interesting case of an institution which as it manifests it is
not belonging to you. But there is tremendous tension between
fans and the new plc structures of football clubs which precisely
illustrates my point. I would like a society which has public
institutions that are publicly owned. In that sense I do think
public institutions are in themselves a good thing. I am certainly
willing to say that there are places where we should have different
kinds of organisations running public services but I would not
like to see a society in which the government was simply a contractor
to wholly privately-owned or voluntary sector organisation.
Brian White
608. Dr Pirie, you were an advocate of privatisation,
is it the liberalisation aspect or the ownership aspect or a combination? (Dr
Pirie) A combination. Look, we have an apartheid system in
both health and education. 90 per cent of our schools are owned
and run by the state and 10 per cent are owned and run privately,
we more or less have the same proportion in our hospitals. It
is an apartheid system, the ones who use the private service are
the privilege elite who have choice, and the others basically
take what they are given in the state sector. There are opportunities
on both fronts, ownership and run. I would be quite happy, indeed,
I welcome to see that many of those institutions are now owned
and run by the state, owned and run by themselves with the status
of freestanding trusts, and I include hospitals and schools in
that. They would not be publicly owned anymore, they would be
self-owned with a board of governors responsible.
Chairman
609. It is the ownership that is the problem. (Dr
Pirie) That is the one. There is a second one coming, the
reason that we have that apartheid system is that while there
is a sum of money allocated to you on your behalf in health and
education you can only spend it within public sector, you cannot
transfer it outside to any of the alternative suppliers and therefore
you are condemned to using a system outside that which the 10
per cent use. If we are unable to transfer your state allocation
and either spend it within the state sector or spend it in the
private sector that apartheid would be moved and we would all
be using the same health service and the same education service.
Kevin Brennan
610. It would be a good way to subsidise the
elite, you would give them the voucher as well? (Dr Pirie)
The Treasury is always opposed to any means of giving as a unified
health or education service because of what they term deadweight,
that is the people who are already paying towards their children
education would claim a state voucher or a contribution as well.
The Treasury have also opposed it for the very reason you have
said.
Mr White
611. What is the role of the Treasury in your
view? (Dr Pirie) What should be or what is?
612. What would you want the role of the Treasury
to be? Should it have a role?
The Treasury at the moment defines what public
sector borrowing should be. It defines what public spend is. It
goes right down to the local level in defining what local government
should spend their money on, that is what it is at the moment.
What do you think it should be or should it have a role? (Dr
Pirie) The Treasury raises the money and it allocates it to
the departments, like education, which allocates it downwards
to local education authorities, which allocates it to the schools.
That is what I refer to as top down structure. I would like to
see the Treasury collect the money and then have it allocated
electronically as a result of choices made by participants.
Chairman
613. As David has written a book on Treasury
I am not going to bring you in. We do want to go down this road
at all. (Lord Lipsey) The main role of the Treasury
is to stop Michael. All services are going to be tax provided,
they all require much more money, as you said earlier on, so we
can have French levels of services, and so on. The proportion
of GDP taken in tax will rise from 39 per cent to 49 per cent
and the government that does it will get unelected. Stopping that
is one of the things that the Treasury does. The second thing
is that it does its best, and sometimes that best is very inadequate,
to ensure that public money is well spent both in the sense of
not being misallocated or stolen or anything like that, not an
inconsiderable virtue given what happens in many other countries,
and increasingly there is an efficiency agenda that makes people
show the results they are getting from that public money. Those
are both appropriate functions.
Brian White
614. I had a number of questions, I will limit
myself to one more, is part of the problem that we have these
think tanks that come along with this fashionable theory that
says we have to nationalise, as we did in the 1940s, and take
away from local control, or we come to the 70s and 80s in which
we have privatisation, so we go through the old and reorganised
privatisation now we have other think tanks coming through. If
we abolish think tanks would it be much better? (Lord Lipsey)
We should only abolish some think tanks!
615. Is this not a problem, this is a serious
issue, what is your role in this debate, because there is a real
problem in following trends and following fashions? (Lord
Lipsey) The issues you are raising with us are issues that
have to be teased out service by service, as well as generally,
item by item with a great input and a variety of views and perspectives
that is the way progress is made. If you leave it to civil servants
and bureaucrats you get one set of outcomes and if you just leave
it to politicians you get another set of outcomes. I think we
get a better mix by adding to those two. (Dr Pirie)
When we were dependent on civil servants to produce the policy
for the future we had really a very limited background, they tended
to come from a very similar social strata and educational background.
Now we have think tanks putting ideas on the shelves for legislators
to put in their shopping baskets they represent a much greater
variety of thinking and you have a much greater choice. (Mr
Jacobs) The role of think tanks may or may not be useful.
But there is a substantive point here. I would be careful about
theories of public services which start from the assumption that
all of them are in terrible crisis and therefore move rapidly
to the conclusion they need wholesale transformation into something
else. If you like I do belong to a tradition which says that the
founding principles of our public sector services are right. What
we now need to do is improve their management and operation, both
to root out failures that have emerged and to try and meet the
greater expectations that we now have of them that have been transformed.
I am very interested, therefore, in the debate that we have not
had here, but perhaps you were having with Will Hutton and others
this morning and elsewhere about how you improve management effectiveness,
efficiency, and so on within the public sector. That is the work
the Fabian Society is interested in and is doing. We are not talking
about radical transformations, we are talking about how we improve
these institutions as public service institutions. They are not
like other institutions. If think tanks can do that kind of work,
as well as the theoretical work that might get more public and
media attention, then think tanks can do something useful.
Chairman
616. I am conscious that the area that I wanted
to ask you to say something about, the one that David referred
to right at the beginning teasing us about market leading position
on these issues, the public service ethos question, because I
thought you all had something to say about that and I do not think
we have explored that with you. The conversation we have tended
to have with witnesses being, does this thing exist, if it does
can you tell us what it is or is it just an aspiration that exists
out there that if we can define it we might operationlise it and
it might do some good. Is it possible, in a nutshell, to say anything
that is in your head about that? (Lord Lipsey) I think
we can say what it traditionally was, it is something that is
not quite often now used which means you are generally doing good
things, the phrase, I think, the thinking behind it goes back
to Weber and the characteristic of somebody who practices the
public sector ethos is that they believe in equity of treatment
as opposed to other things. They believe in the rule of law or
rules in determining things and impartiality and due process.
That was originally what characterised public sector ethos, that
is its intellectual tradition. I think we found that there are
lots of difficulties with that concept of public service ethos.
One is that in practice you find that impartiality is undermined
by the power of people who approach certain kinds of bureaucrats.
If I say I am David Lipsey and I am ringing up to complain about
rubbish collection nothing happens but if I say I am Lord Lipsey
a lorry is round quite quickly. (Mr Jacobs) I should
try that. (Lord Lipsey) Sometimes equity and the pursuit
of rules lead to rigidity and failure to reflect the needs of
the consumer, which is why I think that we need an updated concept
of what the public service ethos is. I think it is quite wrong
to say that the ethos of wanting to serve the public is confined
to the public sector. Companies just are not what some people
think they are, they are not groups of marauding profit margins—some
city firms are—but most companies are not marauding round,
short run, profit maximising, screw the customers organisations,
if they were they would fail. The main thing you try to do if
you are running a private company is to align your customers and
your workers in a sort of common picture of what you are trying
to do. A company board I was at yesterday, the whole thing is
how you train staff, empathise with the needs of our customers
to serve them better, unless the staff believe they are doing
it for that, not just to make maximum dollar you ain't going to
have a successful company for very long.
617. I would feel inclined to stop there unless
you want to say anything?
(Mr Jacobs) I think everybody who works
in caring services and nearly everybody who works in professional
services have "intrinsic" motivations. They want to
do the job well and there are standards that are applied to it.
It does not matter what sector you are in. But there are also
"extrinsic" motivations.[4]
And these can then affect service delivery. I have a little anecdote
about this. As we know dentists operate in and out of NHS, and
most of them do both. A friend of mine who had a tooth knocked
out recently was offered by her dentist the NHS treatment and
the private treatment by the same dentist. The NHS treatment was
a yellowing tooth cap that looked as if it had been removed from
somebody else. The private one was a bright, white shiny cap.
It was pretty clear which would be the nicer tooth to have. I
do not believe it is beyond the resources of the NHS to buy white
teeth caps. It seems to me there was an extrinsic motivation going
on here. The dentist did not have the incentive to do this operation
on the NHS. So I do think that we should be interested in the
kind of organisation people work for. This, and the kind of contract
it has within the public services, since that is what we are by
and large talking about, will affect the kind of services that
are provided. It is, very complex, and different for different
kinds of services, but we do need to be aware of that possibility.[5]
(Lord Lipsey) I went to see my wife who
is in hospital, nothing serious, in Bart's last night and the
ward was clean enough to eat your dinner, and it
came as a terrible shock to me after all I've heard. I have a
note from her on my pager, "lady who cleans the ward has
been doing it for 24 years, it is not contracted out". So
the public service ethos survives and flourishes
Chairman: That is a note to end on. Thank you.
Give your wife our best regards, tell her we have enjoyed our
communication with her this morning. We have not done justice
to your contributions, we could gone on a lot longer, we scratched
the surfaces only. I am grateful to you for all coming along.
Thank you very much indeed.
3 Note by witness: But that is clearly a question
of the constitutional powers available at different tiers of government.
It isn't necessary in the devolution of decision-making over health
service priorities. Back
4
Note by witness: Delivering from the kind of organisation
you work for. Back
5
Note by witness: And, how extrinsic motivations can "contaminate"
intrinsic ones. Back
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