Select Committee on Public Administration Appendices to the Minutes of Evidence

Memorandum by the Business Services Association (PSR 5)

  The Business Services Association is a policy group for major companies providing outsourced services to companies, public bodies, local authorities and government departments and agencies. The combined annual turnover in the United Kingdom of its 20 member companies is around £15 billion. Member companies employ directly and indirectly more than 500,000 people.

  BSA member companies are among the leaders in providing services across the public sector. They are actively involved in the majority of PFI and PPP projects across the whole range of Government Departments and Agencies, NHS Trusts, Local Authorities and Local Education Authorities. As such they are engaged in implementing Government's agenda for modernising public services.

  The Association itself is closely involved in working with Government to develop and deliver the principles for modernising public services. As well as representing the providers of relevant services, all employees of BSA member companies are users of these services. This gives them and member companies a clear perspective on quality and end-user requirements. Those views are reflected in those of the Association in its submissions to Government across a whole range of issues.

  In line with the PASC's request, this Memorandum concentrates on Questions 6-18 of the Request for Evidence. A further paper dealing with the remaining issues will be submitted within the next 10 days.


Q7.  Is there a public service ethos, and how can it be defined?

  Much has been said elsewhere about the Public Sector Ethos which we take to be what the Committee defines as the Public Service Ethos for the purposes of this Inquiry. We are not convinced that a PSE really exists. If it does, it is frequently centred round the ideology of public provision of public services.

  On the other hand we do strongly believe in a real Public Service Ethos—that is, an ethos of delivering high quality services to the public, regardless of the provider. We are convinced that what is important is what works and not who provides, and that what really works is that which works best in the interests of the end users.

  We do not regard this as a semantic distinction but as a fundamental principle which should underpin all service provision in the public sector arena. It is to this latter definition that we attach the initials PSE throughout the remainder of this submission.

Q8.  How is the public service ethos different from the private (or voluntary) sector ethos?

  There is a perception that because the private sector has to make a profit, it must have a different ethos from that of the public sector. We accept that there is a difference between companies which need to make a return for investors and public bodies which are centrally funded, in whole or in part. Nevertheless, the same drivers of efficiency, effectiveness and economy are present in both sectors. In the private sector this is driven by shareholders and clients; in the public sector it is driven by Departmental Ministers, NHS Trust Boards, Local Councils and LEAs. Their aims are no different. The 3Es apply equally forcibly and for the same reasons—only the best can succeed.

Q9.  Is a public service ethos necessarily a good thing? Can it be an obstacle to the effective delivery of services to the public?

  For too long, the public sector has believed that it has the right to deliver services to the citizens of this country without due regard to what those citizens require and want in terms of service quality, flexibility and delivery. Many in the public sector now realise that this is no longer acceptable, if it ever was. The age of consumerism has changed permanently the way in which consumers regard public services and this has been reflected in Government's commitment to modernise public services. We wholeheartedly support that campaign. Citizens deserve the best in public services and public sector bodies must seek the best providers to deliver services of appropriate quality to meet that standard.

Q10.  Would the creation of a single public service help a public service ethos?

  We do not believe this is either possible or helpful.

  There is little commonality between the parts of the public sector. Their diversity is part of their strength. Many parts of Government are run by agencies. Local authorities, local education authorities and NHS Trusts are statutory bodies. Their drivers and challenges differ widely. The only community of interest is that all are in the public sector. In that respect there is already one public sector, but many public services.

Q11.  Is it possible for profit-oriented organisations to maintain the public service ethos?

  Companies which are involved in the provision of public services must have embraced the PSE or they would not tender in the first place or remain within the sector in the longer term. Profit is a red herring in this debate, as has been pointed out in the answer to Q8.

  The average profit return on public sector service contracts currently is between 1 and 3 per cent. In PFI this will be higher because of the style of the contract and its longer term nature. Thus, companies are not in the market for high returns. In any event, contracts won by the private sector are subject to competition so that the public sector client is assured of having obtained a good price for the services it wishes to be provided.

  It is necessary in this context to clarify what is meant by profit. Clearly, shareholders demand a return on their investment but it is left to companies to determine how that investment is achieved. Within the return which companies seek on contractual activity is included investment in training, development of new processes and products, and development of innovative solutions to future service developments and requirements. Unlike public bodies, companies have no separate pot of money which can be used to fund such activities. The so-called "profit" element is, therefore, not "ill gotten gain" but development seed corn.

Q12.  What measures, if any, need to be put in place to ensure that the search for profit does not undermine the public service ethos?

  There is no search for profit, as has been outlined in the answer to the previous question. This is a myth peddled by those with an interest to do so.

Q13.  Can lessons be learned from the experience of private sector involvement in public services in other countries?

  There is much which can be learned from the experience in other countries. In France many health related services are provided by private companies. Local authorities, too, rely on private companies to provide most of their services rather than embracing direct service provision. The Netherlands and Germany also have experience which would be useful to the Committee. BSA members are active in those countries and can assist the Committee with first hand experience.

Q14.  Do private sector people working in and around government, including secondees, task force members and others, undermine the public service ethos? Are special measures needed to regulate their activities and prevent possible conflicts of interest?

  The purpose of secondments and other such appointments is to enrich the capabilities and understanding of the public sector in order to address more effectively the policy issues of the day. We accept that conflicts may potentially arise for secondees between the interests of the company and those of the government department or agency. This issue has to be addressed within the secondment contract and monitored throughout by those involved.

Q15.  Many companies are becoming increasingly aware of social and ethical issues. Does this make them more suitable for work in partnership with the public sector, or does it make no difference?

  Companies have been aware of these issues for a long time, probably longer than public bodies. This is necessary because of the private sector client base for which they provide services. Clearly, as the interests of the private and public sectors coincide in these areas co-operation between them in the provision of public services becomes easier and more beneficial.

Q16.  Do the views, motivations and attitudes of public sector workers differ from those in the private sector? Does any difference in motivation have an effect on the delivery of public services?

  There are differences in the ways in which public and private sector employees operate. Both are, or should be, focused on the users of the service. In the private sector there is the ability to reward employees financially for exceeding targets in service provision which is an added incentive to do well. This is not possible in the public sector.

  Financial incentives are, however, not the main driver. Private sector companies are keenly aware of the value of their reputation as providers of quality services. In this they share common ground with public sector providers. Unfortunately, the experience of member companies is that such motivation is often lacking within the public sector because of lack of incentivisation by management and the tighter circumscription of jobs and responsibilities.

  However, it must be remembered that private companies employ the same staff who were working for the public body immediately prior to the transfer of the contract. They work for the same client and serve the same people.

Q17.  There is conflicting evidence as to whether the public is in favour of private sector involvement in public services (MORI polling, June 2001) What in your view is the truth about public attitudes?

  Despite the results of various polls, we believe that the public is more interested in good service delivery than in who provides the service. Private companies would not continue to be used by public sector clients if there was a real concern among the public users of the services.

Q18.  If there are to be rules regulating private sector involvement in public services, should they also apply to, for example, the voluntary sector? Should there be less stringent regulation where profit is not involved?

  There are already sufficient rules of engagement applying to the involvement of the private sector in the provision of public services without any suggestion of further bureaucracy. The involvement of the public sector is meant to be in partnership with the public sector. The public procurement directives, Better Quality Services, Best Value and the principles regarding PFI and PPPs already provide a firm, clear basis for such involvement. We see no good reason for any further rules.

  While we appreciate the particular issues applying to the voluntary sector, we see no good reason why standards of quality and service provision should be any less strict for the voluntary sector than the private sector. The interests of the users are the same regardless of who provides.

Norman Rose, Director General

October 2001

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