House of Commons - Public Administration

Select Committee on Public Administration Seventh Report

CHAPTER TWO: THE CHANGING CLIMATE OF PUBLIC SERVICES

14. The public services are changing, and rapidly. It has become increasingly difficult to define what the "public sector" is, and what a "public service" is. Boundary lines are shifting, and are often confusing. For instance, gas and electricity have moved from being public to private sector services within the past fifteen years. The same is largely true of residential care, although heavily financed by public money. Some private provision, notably in the utility sector, is regularly described as a "public service". Many public services face direct competition from private providers, while many private services have tight public interest regulation. A recent opinion survey shows great public confusion about the location of a dividing line: although people said that they regarded public finance as a key criterion for a public service, they also thought of some privately-provided services, such as electricity supply, as public. "Meeting society's basic needs" was generally seen as a core purpose for public services, but only two-thirds thought they relied on public services to provide what they needed.[6]

15. To add to the confusion, the scope of public-private partnerships of assorted kinds has been considerably extended in recent years across a range of public services (although, as the Institute for Public Policy Research and others have pointed out, such projects are still heavily outweighed by projects with conventional public-sector financing). Treasury rules have for many years encouraged various forms of public-private partnership, which can be regarded as being "off the balance sheet" of public expenditure. John Edmonds of the GMB union called this "fudging the figures".[7] We are concerned that such considerations should not have undue influence: we believe that private involvement in public services should be motivated by the need for excellence in provision, not by narrow accounting conventions.

The Other Side of the Ethos: Failing Public Services?

16. A major motivation behind such changes has been the perception, and the reality, of serious failings in public services, particularly where they have been delivered by monopoly public providers. The fact that users cannot go elsewhere may often produce a lack of attention to their needs. Public sector provision can be ineffective, expensive and wasteful. The interests of service providers can be confused with the public interest. There are also claims (for instance from Sir Jeremy Beecham)[8] that public sector organisations can be defensive and paternalistic. The law firm Nabarro Nathanson told us that "Public service ethos is not different or superior to the private or voluntary sector ethos" and that suggesting that it might be shows "an implied arrogance".[9] The secrecy said to be endemic in government departments, reflected in official resistance to freedom of information legislation, has also contributed to a perception that the culture of many public sector organisations is patronising and exclusive. These are issues to which we shall return. However, the funding issue is also a crucial part of the context. Under-funding will produce poor public services, and no invocation of a public service ethos will compensate for that.

A Cautionary Tale: The Case of Compulsory Competitive Tendering

17. One attempt to remedy some of these failings, particularly public sector waste and inefficiency, was the introduction of the regime of Compulsory Competitive Tendering (CCT) which was prevalent during the 1980s and 1990s. There are those who argue that it was a necessary driver for efficiency in public services.

18. During that period , parts of public provision—including most local authority and NHS manual services, many catering and ancillary operations in schools and bus services—were subjected to tendering processes. Much of the evidence received by the Committee (including from representatives of both the public and private sectors) suggested that the contracts entered into as a result of these tendering processes were too heavily driven by considerations of cost-reduction, with inadequate attention paid to quality of service. In addition, many employees found themselves with worse conditions of employment and lower wages as companies sought to recoup their investment.

19. The influence of CCT on the current debate about public service provision is still considerable. A number of our witnesses, both those favouring and those against greater private sector involvement in public service provision, believed that CCT had concentrated too much on cost-cutting. It was repeatedly cited as the exemplar of how not to reform public services. The Local Government Information Unit told us of the "adversarial" relationships between private and public sectors which developed under CCT,[10] and that was also the word used by Capita, one of the main commercial providers of public services.[11] The Director-General of the CBI, Digby Jones, accepted that CCT "scarred people" and "did not actually deliver".[12] Under CCT, companies providing tendered services often used to cut the terms and conditions of staff as a way of reducing costs. The impact of worsening employment terms demotivated such staff, leading to longer-term service quality problems. It is significant that not one of our witnesses saw 1980s-style CCT as an acceptable way of involving the private sector in public services. The current debate about the best way to avoid a "two-tier" workforce in privately-provided public services shows how long-lasting and pervasive the effects of CCT have been.

20. This particular shift from traditional public service provision to private contracting therefore had the effect of undermining the quality of service and weakening the public service ethos. However, the damage to the ethos may have resulted more from poor contracting than from any intrinsic link to the private provision of services. CCT was an example of cost-driven private involvement in public services. But lessons may be learned from that experience which can inform a more sensible use of private expertise. As we shall argue below (Chapter 3) different kinds of contracts could have delivered a different, and better, outcome.

21. The introduction in recent years of a Best Value regime—as a replacement for CCT—has shifted the balance back towards service quality. The present Government still expects public services to be subjected to challenge and, sometimes, competition from other providers (private or public). Although Best Value is currently under review, the idea and subsequent developments suggest, at least tentatively, that it might in principle be possible to retain a public service ethos even where services are delivered by private sector providers.

Public Service Myths

22. The controversy generated by CCT and the other changes in public services has greatly reinforced the influence of two polar positions, which, because they are superficially plausible, often hamper sensible debate about public services. We consider these rival myths in turn.

Myth One: The Public Sector as Public Service

23. It is sometimes suggested that the public sector is the unique repository of the virtues of selflessness, service and caring. On this view, only public sector monopoly organisations can properly deliver public services with the right ethos. Mr John Edmonds, General Secretary of the GMB Union, made a plausible case that the pressures to maximise profit can lead to a cutting of corners. He contrasted the approach of a publicly-employed hospital cleaner who would be regarded as "part of the team", talking to patients and helping out in a number of ways, with the behaviour of his or her privately-employed counterpart, who would be obliged to work to "a particular specification and nothing more".[13] In other words, considerations of profit can hamper good service.

24. However, the argument is weakened when monopoly public sector organisations fail to meet the needs of the public. Poor management, combined in some cases with under-funding, has handicapped parts of the public sector for years, hindering necessary reforms. In the words of Martin Taylor, a leading businessman as well as an adviser to Government, "purity of motive would not compensate for poor public services".[14] We agree with Mr Taylor about this misuse of the idea of "public service ethos" as ideological cover for those who might wish to evade crucial questions about the quality of public services. 'Public sector' and 'public service' are not identical. Nor is it possible to sustain the view that public sector workers always display a service ethos, or that private sector workers do not. Stereotypes do not help deliver good public services.

Myth Two: The Fantasy of Public Service

25. At the other pole are those who suggest that there is nothing intrinsically special about public services and the processes by which they are provided. There is something of this in the view of Martin Taylor, who said "If I am a consumer of public services, I do not much mind what drives the supplier to supply them, I want them to be good".[15] It is also suggested by some that without constant injections of private sector skills and attitudes there can be no efficient public services. Doubting that public sector workers were unusually selfless or dedicated, Sir Steve Robson, a former Treasury official, vividly described the public sector ethos to us as "a bit of a fantasy, it is rather like middle-aged men, who fantasise that beautiful, young women find them very attractive".[16]

26. It would be easy to conclude from this that public services are in no essential or intrinsic way different from other services that are supplied by the market. Because it is increasingly difficult to define public services, it may seem easier simply to put them in the same category as commercial services and ask no questions about the process by which they are delivered. On this view, "what matters is what works", a phrase used frequently by the Government when it describes its attitude to the provision of public services.

27. We reject this view as inadequate. It does matter what a public service is, and what matters is that it works as a public service. Whatever the shortcomings of the public sector as it is, there is something necessary, special and distinctive about those services which are provided as public services. They carry with them intrinsic assumptions about equity, access and accountability. In the end, as the Government discovered in the case of Railtrack and NATS, the accountability of public bodies for public services is very difficult to evade. There is something that links many of these services indissolubly to public bodies and public decision-making. The public realm, of collectively provided services and functions, needs to be recognised for what it is—an essential component of a good society. This is why these services need to work well.

Misplaced Ideology and the Mixed Economy of Public Service

28. The polar views outlined above are clearly inadequate. But, in terms of an ethos of public service, what is the appropriate approach to private sector involvement? Most of our witnesses were careful to state that they were not ideologically opposed to private sector provision of public services or, alternatively, that not all public services would be appropriate for private involvement. In principle, most individuals and organisations were open to a mixed economy of provision. But it is hard not to conclude that, beneath the surface, and perhaps encouraged by the painful history of CCT, positions remain in many cases driven by ideology rather than practicality.

29. Such ideology is misplaced. It is sometimes difficult to draw a firm line between the "public" and "private" parts of service provision in Britain. This leads us to conclude that a public service ethos can exist whether a particular service is delivered by a public or private agency. It is perfectly possible, in the mixed economy of service provision, for an individual to carry an ethos with them from one institution to another (for example, from a public to private care home, or vice versa), whether in the public sector or not. Equally, another individual may lack such an ethos, whatever the circumstances. The culture of the organisation is the crucial factor.

30. There are also other, more practical considerations. In judging the acceptability of profit-making companies providing public services it is essential to balance the quality and cost implications of contracting out. If the profits paid to a private sector provider are outweighed by the value of management improvements and service benefits, without other disadvantages, there is clearly a good case for allowing the private sector to provide the service. On the other hand, if profits and other private costs are greater than benefits to public service quality, there can be no case for a transfer of provision. The need for proper assessment, in a way that is transparent and open to scrutiny and challenge, is fundamental.

31. The growing role of the voluntary and not-for-profit sector in the provision of public services also demonstrates that simple ideological dividing lines are unhelpful. These kinds of bodies can contribute their own distinctive approach, based on their right to act independently of government when appropriate, and on their long experience of providing social and other services. Although they operate on a more restricted terrain, and have a narrower set of accountabilities, than public services as a whole, they play an important part in the overall picture.[17]

32. We conclude, therefore, that it is possible for private and voluntary sector organisations and people to uphold the public service ethos, although the ethos may be put under strain by the profit motive. The ethos needs protecting and, where necessary, reinforcing in these circumstances. The private sector can be a useful servant for public services, if properly supervised; what it can never be is their master.

Good Contracts, Bad Contracts

33. Lord Plant of Highfield argued that there were certain essential state activities that could not be provided on contract by the private sector. He told us that he saw the "ability to incarcerate people" for instance as "perhaps the most fundamental and far-reaching power of the state". He therefore doubted whether contracted private providers could undertake such functions.[18] However, the former Chief Inspector of Prisons, Sir David Ramsbotham, told us that he had concluded that contracts could improve delivery, even in the most sensitive and "core" of public services:

It is also commonplace for social care to be provided by the private sector, with appropriate regulation. We conclude that it is quite possible for contractors to uphold the public service ethos. But the ethos must be soundly built into the contracting process. Public services delivered in this way must be provided by reputable contractors, given the right contracts by properly accountable public bodies.

34. The examples of private prisons and social care might seem to demonstrate that, in certain circumstances and with the right contract terms (and effective ways of enforcing them, with independent inspection in appropriate cases), private providers can maintain the public service ethos, even when the services concerned are essential or sensitive. However, it is important to safeguard against the danger of fragmented responsibility that may come with contracting. A public service ethos should have the notion of seamless service ('doing more than the job') at its centre. It is also essential that private providers of public services should meet acceptable criteria. These examples further demonstrate that both public and private sector providers can succeed and fail, suggesting that the quality of management—whether public or private—is the crucial factor, with a decisive impact on the ethos of an organisation.

Mixing the Messages

35. The Government has not so far produced a consistent and coherent policy for the involvement of the private sector in public services. It is not clear whether the private sector is seen as a remedy for particular cases of public sector failure, or as a routine ingredient of public service provision. The extent of, and justification for, private sector involvement varies widely within and between departments. There is still force in the IPPR Commission's judgement of June 2001 that the Government has a "scatter-gun approach" to partnership with the private sector which "appears inchoate and opportunistic rather than coherent and principled".[20] In their evidence to us both private providers and trade unions stressed the need for a firmer set of rules to ensure greater accountability and transparency in partnerships.

36. The Government has recently gone some way to remedy this deficiency in its response, in March 2002, to the Report by Lord Sharman entitled "Holding to Account".[21] The Government's acceptance of most of the Sharman proposals means that public standards of audit and accountability will now be extended to a substantial number of bodies, whether private or public, which play important public roles. This is the beginning of a more consistent approach, which is to be welcomed, but more still needs to be done.

37. The problem of consistency has also been apparent in the Government's difficulties in arriving at an agreed code to govern the terms and conditions of employees transferred to private contractors, and the pensions provisions for these and new staff. More generally, Government in one voice suggests that the existing ethos of the public services represents a blockage to reform, while in another voice it says that this ethos represents an asset to be built on. Such mixed messages are clearly unhelpful in building and communicating an understanding of the Government's reform programme.

Motivating Public Service Workers

38. There are also questions to be asked about the likely effect of public service reform on the motivation of public service workers. Given that the vast majority of those providing public services will continue to be in public sector organisations, these are clearly important issues. The recent tendency towards rising public sector salaries—especially for senior jobs—may assist with recruitment, but also might have an effect on attitudes to public service values. Similar questions arise in relation to external recruitment for senior posts, and to secondments. In addition, informal networks within organisations can be very influential in deciding whether reforms succeed or fail, either spreading the word that change is good or harming motivation and morale by highlighting the risks.

39. All this is a reminder that reform may founder if it seems not to take sufficient account of the needs and behaviour of public servants themselves. Good public services clearly require well motivated public servants. This certainly does not mean that a necessary process of reform and change should not be engaged in. Public service is about serving the public, not protecting the interests of public sector employees. However, it does mean that those who work in public services need to feel fully engaged in the process of reform if it is to be successful. It also means that public service workers in the new climate need the tools to do the job. This should include, for instance, a significant increase in training. A meagre one-and-a-half days is apparently now the average for local government employees.[22] Public servants deserve better support and encouragement if they are to give reform the support it needs.

40. For example, the recent report on Civil Service Reform noted that there had been an 88 per cent increase in Senior Civil Service jobs subjected to open competition since December 1999.[23] The Prospect trade union gave us evidence of a significant decrease in morale among Civil Service members which seems to be associated with the opening up of more posts to competition.[24] We will be seeking to discover at some point in our inquiry whether the effect on morale—and perhaps on the ethos of the Service—is detrimental or not.

41. However, this does not mean that the motivations of private sector workers are inferior to those of public sector workers. Private companies are increasingly expected to demonstrate social responsibility and to take account of the world beyond the balance sheet. Again, stereotypes are not helpful. Yet the particular environment experienced by public service workers, and the nature of the demands on them, does have to be properly recognised.

42. We do know, for instance, that the structural changes and funding constraints of the past twenty years have increased the pressures on individual public servants in a wide variety of ways. The demand for higher service quality has been added to the requirement to be a cost-effective and efficient manager of resources and people. The demands of public accountability, performance measurement and the "Nolan" principles of ethical behaviour are another set of issues which have to be handled. The public service worker, unlike many of those providing purely "private sector" services, is faced with a testing range of demands which are intrinsic and special to public service.

43. This essential complexity of public service decision-making is well demonstrated by the example put to us by the Council of the London Borough of Hammersmith and Fulham.[25] The Council's submission gives a vivid description of the many pressures on a Housing Benefit officer processing a complex claim: he or she has to decide "whether to spend an extra 15 minutes resolving a given problem, or to set the file aside and move on to the next. For the public sector employee, the factors influencing and motivating his or her judgements and decisions will be various—the daily pressures to get the job done, the expectations of his/her line manager, targets for the section to deliver. But there will also be countervailing pressures against rushing the task, which may include an awareness that the council will be at risk of a maladministration claim if the calculations are not done correctly, a sense of accountability to a ward councillor [who] will have an unhappy tenant on his doorstep, and ultimately an innate sense that as a public servant the over-riding goal of a day's work is to deliver the "right" outcome, in terms of social equity as well as arithmetical accuracy, even though this may take a little longer". Working out the best way to serve the public interest (or interests) in this situation will never be easy.

44. There is also the question of the effect of an externally-imposed measurement culture on the ethos of public service. There is a danger that such a culture can erode trust and damage the values of professionalism. It is crucial to get the balance right here, involving an approach to accountability that understands the importance of professionalism and an approach to professionalism that understands the requirements of accountability. We intend to explore this measurement culture and its effects in a future report.

45. Because of these increasing pressures, we believe that there would be benefit in a systematic survey of the attitudes of public servants, possibly under the aegis of the Office for Public Services Reform (a similar survey, for civil servants only, was recommended by our predecessor Committee in 1994, but there was successful resistance from the then Government.[26]

46. The principles behind reform, then, need to be properly explained, if it is not, like CCT, to be counter-productive. We believe that a new approach to the public service ethos has an important role to play in that, and in the next Chapter we suggest what such an approach might consist of.

6 Jane Steele 'Defining Public' The Stakeholder, July/August 2001, p 25 Back

7 HC 263-i, Q 14 Back

8 HC 263-II, PSR 35 Back

9 Ibid, PSR 9 Back

10 HC 263-II, PSR 15 para 25 Back

11 HC 263-iv, Q 273 Back

12 HC 263-iii, Q 236 Back

13 HC 263-i, Q 6 Back

14 HC 263-iii, Q 130 Back

15 Ibid Back

16 HC 263-v, Q 369 Back

17 One example is Glas Cymru, a company limited by guarantee, which provides water for Wales and has a majority of independent members with no shareholders. Back