Memorandum by CIPFA (PSR 32)
CIPFA is one of the leading professional accountancy
bodies in the UK and the only one which specialises in the public
services. It is responsible for the education and training of
professional accountants and for their regulation through the
setting and monitoring of professional standards. Uniquely among
the professional accountancy bodies in the UK, CIPFA has responsibility
for setting accounting standards for a significant part of the
economy, namely local government. CIPFA's members work (often
at the most senior level) in public service bodies, in the national
audit agencies and major accountancy firms. They are respected
throughout for their high technical and ethical standards, and
professional integrity. CIPFA also provides a range of high quality
advisory, information, and training and consultancy services to
public service organisations. As such, CIPFA is the leading independent
commentator on managing and accounting for public money.
THE CONCEPT OF A PUBLIC SERVICE ETHOS AND
THE INVOLVEMENT OF THE PRIVATE SECTOR
1. INTRODUCTION
1.1 CIPFA is pleased to submit evidence
to the first strand of the Select Committee's inquiry and would
be happy to comment on the questions raised in relation to accountability
issues at a future date. CIPFA's comments are linked to the questions
specified in the Committee's press release.
2. IS
THE CONCEPT
OF A
PUBLIC SERVICE
AN ANACHRONISM?
2.1 In CIPFA's view the concept of a public
service is as relevant today as it has ever been. Indeed in many
ways, we would argue that the profile of public services generally—and
by implication, the ethos that underlies them—is at a relative
high point with almost daily announcements of public service policy
initiatives and extensive media interest and coverage. In particular
in recent times there has been a real public debate about how
and by whom public services should be provided.
2.2 Much of this, and the broader debate
about the health and efficiency of our public services, has taken
place against the backcloth of successive General Elections and
the contrasting ideas and proposals of the political parties.
The fact that the parties have chosen to position the public services
at the forefront of their manifestos reflects a judgement on their
part—no doubt underpinned by opinion research—that
there is real public interest in our public services and in their
improvement and development.
2.3 Though it may continue to be relevant,
this is not to suggest that the concept of a public service is
static or unchanging. Public service organisations operate in
a constantly changing environment and are continuously adapting
to new circumstances and new demands. As this process occurs so
the distinguishing characteristics of public services evolve and
change. As a result today's public services have a different look
and feel to them than they had twenty or more years ago.
2.4 Some of these changes have blurred demarcation
lines between the public and private sectors. As a result the
way in which public services are managed now has much more in
common with the approaches of private sector organisations. Despite
this, public service organisations remain highly distinctive.
They are motivated by different objectives; they are accountable
to different constituencies by different mechanisms; they are
more constrained in different ways in many of their activities;
and they raise/acquire resources by completely different processes.
2.5 Many of the changes that have occurred
and are continuing in public service organisations are positively
welcomed. However, even positive change is rarely without its
complications. For example, the trend towards more customer-focused
public services has been highly detectable in recent years. This
is entirely welcome from all perspectives. However, its practical
application or "fit" is more relevant and straightforward
in those services where there is a clear customer receiving a
valued service. The fit is less good where the perceived value
of the service is low or where the recipient is a reluctant customer.
These complications tend to arise where, for example, public bodies
are providing regulatory services. In these areas the concept
of customer-focus must be intelligently adapted to reflect the
nature of the organisation's business.
2.6 Overridingly the public services have
changed and are changing in response to public demand. The public
expects that high ethical standards should apply in all aspects
of public life. It expects to receive high quality, good value
products and services across both the private and public sectors.
It is far more aware of its rights than in the past and is prepared
to ensure that they are exercised and fulfilled. These trends
are likely to endure and be reinforced as more and more public
bodies go to greater lengths to consult and involve the public
in their decision making.
3. IS
THERE A
PUBLIC SERVICE
ETHOS, AND
HOW CAN
IT BE
DEFINED?
3.1 In CIPFA's view there is a public service
ethos. For a definition we would take as our starting point the
seven principles set out by the Nolan Committee on standards in
public life. As a matter of interest the seven principles—selflessness,
integrity, objectivity, accountability, openness, honesty and
leadership—are enshrined in CIPFA's own ethical guidance
to its members, a majority of whom work in public service organisations.
3.2 Although many of the Nolan principles
are not exclusive to the public services they are interpreted
in a distinctive way when applied to them. In part this derives
from the political environment in which public services operate.
As a generalisation we believe that the public expects higher
standards to obtain in the public services reflecting the positions
of trust occupied by public servants and the fact that public
services are funded by the taxpayer.
3.3 While we subscribe to the view that
there is a prevailing public service ethos, this is not to suggest
that all public servants or all public service organisations invariably
behave in a uniform way. As in other sectors, individual public
sector organisations develop their own distinctive cultures and
norms. To a great extent these variations reflect the reality
that each body exists to provide a particular range of services
to a particular constituency of users.
4. HOW
IS THE
PUBLIC SERVICE
ETHOS DIFFERENT
FROM THE
PRIVATE (OR
VOLUNTARY) SECTOR
ETHOS?
4.1 Public service organisations operate
in a political environment. Very often politicians are publicly
accountable for their performance. They are required to operate
in a manner that is demonstrably in the public interest. These
distinctive features help to shape the prevailing ethos of the
public sector and to differentiate it from the private and voluntary
sectors. These differences are given sharper definition by the
contrasting approaches to agreeing aims and setting accountability
arrangements in the three sectors.
4.2 In public services the "product"
(ie the service) is an end in itself and the duty is to the public
as a whole (the taxpayer) as well as to the particular user or
recipient of the service. Importantly the organisation is accountable
as much for the processes that are followed (are they fair, transparent,
appropriate, consistent?) as for the outputs/outcomes that are
achieved.
4.3 In the private sector the product (which
may of course be a service to the public) is a means to an end
with an ultimate duty to the shareholder and an imperative to
generate profits.
4.4 In the voluntary sector the product
may be a service but tends to be one that is designed to fulfil
the needs of a particular interest group (effectively a subset
of the public) rather than the public as a whole. Accountability
is to that interest group and the organisation's board of management.
4.5 It is difficult to generalise and to
try to make comparisons between sectors when practice within them
varies widely. On the whole there is probably a trend towards
convergence in the ethos that organisations are seeking to encourage—for
example, in public, private and voluntary organisations there
has been a significant emphasis on customer service over recent
years. But this does not mean that all organisations in all sectors
have successfully developed a strong customer service ethos. Another
example would be the way in which organisations from all three
sectors have shown enthusiasm for accreditation schemes like Investors
in People to reinforce aspects of organisational culture which
they are attempting to develop. This demonstrates a common commitment—in
this case to employee development—but again it does not
guarantee uniformly high standards in all organisations in all
sectors.
5. IS
A PUBLIC
SERVICE ETHOS
NECESSARILY A
GOOD THING?
CAN IT
BE AN
OBSTACLE TO
THE EFFECTIVE
DELIVERY OF
SERVICES TO
THE PUBLIC?
5.1 In CIPFA's view a strong public service
ethos is likely to be a powerful and positive force for the delivery
of effective services. Not least it is likely to reflect a well
motivated workforce that is in sympathy with the organisation's
aims and proud to be associated with the delivery of its services.
5.2 This is not to suggest that organisational
ethos is the sole determinant of the effectiveness of public services.
Clearly there are many other important variables including the
level of resources available to the organisation and the skill
with which they are deployed.
6. WOULD
THE CREATION
OF A
SINGLE PUBLIC
SERVICE HELP
A PUBLIC
SERVICE ETHOS?
6.1 The creation of a single public service
is unlikely in our view to have a positive influence on ethos.
It is likely instead to create an atmosphere in which individuals
feel relatively unimportant and disempowered—tiny cogs in
an enormous machine. A single public service might also, because
of the sheer scale of the machine, result in much of the focus
of the organisation being internal rather than external.
7. IS
IT POSSIBLE
FOR PROFIT-ORIENTED
ORGANISATIONS TO
MAINTAIN THE
PUBLIC SERVICE
ETHOS?
7.1 In our view private sector organisations
can certainly exhibit many of the characteristics that we associate
with a strong public service ethos. All organisations can, for
example, subscribe to the seven Nolan principles outlined in para
3.1. However, by definition profit orientated companies' first
duty must be to their shareholders rather than to the public as
a whole. To them, serving the public by delivering a service is
a means to an end (making a return to shareholders) rather than
the end in itself. In the public sector delivering efficient,
valued services to the public is the end goal.
8. WHAT
MEASURES, IF
ANY, NEED
TO BE
PUT IN
PLACE TO
ENSURE THAT
THE SEARCH
FOR PROFIT
DOES NOT
UNDERMINE THE
PUBLIC SERVICE
ETHOS?
8.1 In CIPFA's view the ability to provide
such an assurance depends on an effective organisation-wide approach
to procurement that is rooted in sound underlying governance arrangements.
If objectivity and confidence in public services is to be maintained
the three fundamental principles of corporate governance—openness,
integrity and accountability—need to be reflected in all
dimensions of a public service's business including its relationships
with profit orientated organisations.
8.2 The extent and range of interaction
with the private sector varies across the public services and
is affected by legislative differences. However the need to ensure
that the public service ethos is preserved is common to all. This
is more likely to be achieved if the organisation has a sound
approach to contract specification, evaluation and management.
8.3 CIPFA's own work in this area emphasises
the importance of there being a consistently applied, easy to
understand and transparent "contract strategy" that
sets out an organisation's approach to:
— Types of contract/specification and
design
— EU procurement procedures
— Managing/monitoring the contract
— Terminating the contract.
9. 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?
9.1 Every individual working in or with
the public services brings with them their own attitudes, interests
and allegiances. This inevitably leads to a potential for conflicts
of interest to arise—a danger that needs to be recognised
and managed.
9.2 It is clearly not possible—or
desirable—to require public servants to react in a uniform
way. Instead the focus should be on ensuring that they all adhere
to the key principles set down by Nolan—and in particular
that where there are possible conflicts of interest full disclosure
is made in a consistent and transparent way. A generic code of
conduct setting out the standards expected from public servants
may be helpful here.
10. 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?
10.1 In CIPFA's view awareness of wider
social or ethical issues and of the public sector context generally
is undoubtedly helpful when developing partnership agreements
or entering into a contract for the delivery of a service. However,
this does not eliminate the tension that exists between a company's
overriding objective to make a return for its shareholders and
the need for public services to achieve value for money.
10.2 Again our contention would be that
this tension should not be an obstacle to effective partnership
working provided that the underlying governance structures are
sound and that the approach to establishing and managing partnerships
recognises and addresses from the outset inherent differences
in partners' aims and accountabilities. It is also essential that
partnership arrangements are subject to the rigours of performance
management to ensure that they continue to meet agreed objectives.
10.3 In CIPFA's view there needs to be a
recognition that there is no single "correct" model
for an effective partnership and that they need not necessarily
involve either the private or voluntary sectors. CIPFA believes
that there are also benefits to be gained from public services
entering into shared service arrangements with other public bodies.
A recent survey that we carried out among local authorities showed
that, although they are not always high profile, many potential
prototypes of these arrangements are already in existence around
the country. With more promotion and encouragement CIPFA believes
that shared services could play a much more prominent and valuable
part in the drive to improve the performance of public services
alongside more visible public private arrangements.
11. 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?
11.1 We do not believe that there are any
fundamental differences in the motivations of the vast majority
of employees in the public and private sectors. Many would therefore
be comfortable working in either sector, although the opportunity
to do so may not arise for them all.
11.2 The rewards and incentives which are
available to employees in the two sectors vary significantly.
In particular success in the private sector is likely to lead
to growth in the business and an increase in the resources available
to reward staff. In the public sector success rarely leads to
"growth in the business". In CIPFA's view it may be
possible to create this incentive in the public services by encouraging
the development of shared service partnerships between public
bodies (see para 10.3).
12. 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?
12.1 The public tend to be cautious about
change. As a result they are more likely to be relaxed about private
sector delivery of public services where there is long experience
of such involvement. In contrast there will invariably be a degree
of controversy where the private sector takes responsibility for
services that have traditionally been delivered by public servants.
12.2 Similarly, we suspect that the public
is likely to be more sceptical about dramatic or innovative step
changes in the style or mode of service delivery than a gradual
approach. To counter this natural tendency to resist change it
is important that sound business cases and implementation plans
are developed before new approaches are introduced.
12.3 Ultimately the public will judge any
new arrangements by their own experience of the quality of service
provided. If their experience is positive, initial scepticism
will be overcome; if it is negative, scepticism will be reinforced.
13. IF
THERE ARE
TO BE
RULES REGULATING
PRIVATE SECTOR
INVOLVEMENT IN
PUBLIC SERVICES,
SHOULD THEY
APPLY ALSO
TO, FOR
EXAMPLE, THE
VOLUNTARY SECTOR?
SHOULD THERE
BE LESS
STRINGENT REGULATION
WHERE PROFIT
IS NOT
INVOLVED?
13.1 In CIPFA's view, where public money
is involved it is essential that there are robust procedures for
ensuring that that money is safeguarded regardless of whether
a voluntary or private sector body is involved. These procedures
should be part of the organisation's underlying framework of corporate
governance and should include a structured and systematic approach
to assessing and managing risks according to their potential impact
and likelihood. There should also be sound systems of internal
control that ensure that all public funds are used economically,
efficiently and effectively.
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