Supplementary Memorandum by Minister of
State for Local and Regional Government to Support Joint Memorandum
from Minister of State (Health) at the Department of Health, Minister
of State for Local and Regional Government and Minister of State
for School Standards (CVP 24 (b))
THE CASE FOR USER CHOICE IN PUBLIC SERVICES
1. Improving public services remains the
Government's key second term objective. While arguments will no
doubt continue about international affairs including the war in
Iraq and relations with both the USA and Europe, as well as the
ephemera of day to day political life, every serious commentator
knows that the Government will ultimately be judged on its stewardship
of the economy and the delivery of public services.
2. The two are inherently linked. A strong
economy provides the wherewithal for investment in public services
while quality public services underpin a successful modern economy.
Everyone can see the benefits of prudent management of Britain's
economy feeding through into substantially increased funding for
education, the NHS, crime reduction, transport, housing, local
government and many other public services. At the same time very
few people are so naïve as to believe that money alone is
the key to improved services.
3. But when the debate turns to this issue—how
do we drive improvement and raise standards in public services—there
is more scope for disagreement. Indeed, arguments rage about the
importance and value of targets, of performance management systems,
of inspection, of intervention and from the opposite perspective,
the need for devolution, localism and flexibility.
4. This debate between advocates of "centralist"
as against "localist" models is of course nothing new.
The pendulum has swung one way or the other at various stages
in the evolution of public services over the past two centuries.
However, while greater emphasis may be placed at any one point
in time on one or the other, there is an inexorable logic which
points towards the needs of both centralist and localist elements.
Without over riding national standards it is difficult to avoid
postcode lotteries under which standards of service in some locations
may fall far below what would be generally seen as acceptable.
Indeed as is highlighted time and again by local scandals—for
example a chronic failure of child protection—the British
public look to central government to ensure the maintenance of
universal standards.
5. However, there is growing recognition
that devolution to the front line and discretion to innovate in
response to local pressures or needs is equally critical to delivering
high quality services. Large centralised bureaucracies may provide
safeguards against unacceptable variations in standards from area
to area, but they rarely provide the incentive for people to develop
innovative new ways of doing things. Furthermore, they can all
too easily stifle the energy and initiative of people who have
a clear vision about how they can meet local needs more effectively.
6. So it is not surprising that a new consensus
is emerging based around the need for national standards, but
accompanied by devolution to the front line and flexibility for
people to respond to local circumstances. These indeed are the
first three of four principles set out by the Prime Minister a
little over two years ago as the fundamental pillars of public
service reform.
7. However, there is much less consensus
about the fourth principle which the Prime Minister advanced—that
is choice for the public to ensure that services are genuinely
responsive to users' needs and aspirations. When it is put in
these terms it is difficult to see why the extension of choice
should have become such a controversial issue. But it has. Indeed
few if any attempts to extend choice to the public in respect
of public services have been easy to initiate let alone to implement
successfully. When in 1999 I advocated the introduction of choice-based
lettings schemes for council and housing association homes, the
initial response was one of overwhelming suspicion and doubt.
At the best, I was told I was wasting my time as it would never
work. At the worst, it was seen as a threat to fairness and equality
which would undermine everything that social housing was designed
to offer.
8. Why is there such hostility to the concept
of choice? In part it is simply suspicion of change particularly
when change threatens long standing traditions. But it goes much
deeper. There is a real fear that choice is not only incompatible
with the principle of public services delivered on the basis of
need, but also that its extension will subvert the very foundations
of the welfare state.
9. It is true that choice played little
part in the ethos of the welfare state as it emerged in the early
to mid 20th century, other than in respect of the rather important
point that the state provided an option for people who would otherwise
have been left destitute. The driving motivation of those like
Rowntree and Beveridge who sought to overcome the "evils"
of that era, was a concern to guarantee minimum standards which
they believed could be scientifically measured so that no-one
would be left living below the subsistence level, or in squalid
or unsanitary conditions, or exposed to life-threatening disease
or danger.
10. The underlying ethos was one of "levelling
up" to a minimum acceptable standard. But there were also
pressures which favoured a "levelling down" approach,
reflecting the strongly egalitarian spirit which characterised
left of centre politics in the mid 20th century. So it was not
uncommon to hear arguments at that time in favour of state provision
not as a safety net ensuring a minimum standard below which no-one
could fall, but as a uniform good standard which should apply
to everyone. To those who held such views choice was seen as a
threat, in that it would allow those with greater means or simply
more influence or persistence than others to secure for themselves
or their children advantage and privilege and so undermine the
principle of a uniform good standard. This was the core of the
argument for the abolition of private or denominational schools,
for example.
11. But, of course, the world has moved
on and many of the premises which underpinned the early to mid
20th century welfare state now look very dated. Confidence in
the capacity of any state to impose benign, egalitarian policies
from the top down eroded as quickly as the support of the people
of Eastern Europe for their communist regimes. Nearer home any
panglossian faith in the ability of officials in Whitehall or
the Town Hall to know best fell foul of the determination of community
groups to stand in the way of unwelcome redevelopment or motorway
construction schemes. We now recognise the importance of listening
to local opinion and of consulting and encouraging participation
rather than imposing top-down solutions.
12. Not only are people far less willing
today to accept the decisions of experts and officials, they are
also able to exercise far more choice in almost every aspect of
their lives. Growing affluence and widening educational opportunity
in the second half of the 20th century has profoundly changed
the expectations as well as the options available to the majority
of the British people. Whereas owning one's own home was only
feasible for under 10% of the population at the start of the 20th
century, by its end almost 70% of Britons were home-owners. Whereas
most children a century ago had no option but to follow their
parents into the single or dominant industry in their town or
village, by the year 2000 the vast majority of young people rightly
expected to determine their own career.
13. Such dramatic changes in the wider world
inevitably impact on peoples' perceptions of public services.
In a society where people take it for granted that they can exercise
choice in almost every aspect of their lives—where they
live, what job they do, where they go on holiday—it is counter
intuitive to suggest that they should not enjoy similar choice
in respect of public services.
14. So there are strong arguments for the
government to be seeking to extend choice into areas of public
service where it has not been the norm in the past. Equally it
is right to try to make choice more meaningful in areas where
it may in theory have been available, but where in practice it
didn't work. For instance, rather than structuring pension entitlement
on an assumption, which is far removed from today's reality, that
everyone will retire at the same age, it must make more sense
to allow greater flexibility and the option for those who choose
to continue working longer to receive a significant lump sum in
compensation. Similarly, there is an obvious logic in giving health
service patients greater choice over where they can have an operation
done if their local hospital cannot accommodate them within a
reasonable timescale. And in the case of social housing, there
is a clear cut case for giving applicants a degree of choice as
to where they live rather than requiring them to wait for an allocation
to be made to them.
15. Similarly providers of public services
need to be thinking creatively about how the public can most easily
access those services. Rather than requiring people to contact
a council during working hours, new technology makes it possible
for local authorities and other public service providers to offer
24 hours access via the internet or call centres. If after working
late and getting home at say 10pm I find that my dustbin has not
been emptied, why should I have to wait till the following morning
to notify the Council? And rather than having to make separate
approaches to different public services or council departments
when I have more than one query, why should I not be able to enjoy
a seamless service in which the public authorities are effectively
joining up their delivery. The best local authorities like Sunderland
are already making huge strides in this direction under an initiative
which in Sunderland's case is significantly called "People
First".
16. By extending choice in these and similar
ways we are not just going with the grain of 21st Century society,
we are also ensuring the long-term health and vitality of public
services. Public services do not occupy some parallel universe
where normal patterns of behaviour are miraculously suspended.
People who have the choice will walk away from services, whether
public or private, if they do not believe they are being treated
properly and getting value for money. This opting-out which has
occurred to different degrees with different services to date,
will if it continues, seriously if not fatally undermine the viability
of many public services.
17. In areas where educational performance
is below average and many parents feel apprehensive about sending
their children to a local school, the impact of parental withdrawal
can be devastating. Schools are subject to a downward spiral,
losing pupil numbers and any prospect of a balanced intake as
more parents who have the money, the energy or the ability to
secure an alternative option do so. This may involve the choice
of a private fee-paying school, or it may involve moving home
to a different catchment area, but either way it will contribute
to further erosion of educational opportunities in the already
disadvantaged location.
18. To argue that this will only be countered
by restricting choice and so forcing parents to use the local
school is not just wrong, it is delusional. For, in an increasingly
affluent and mobile society, more parents will find ways to secure
an alternative option outside the state section if denied choice
within it. Those who argue on the basis of a romanticised view
of how mid 20th century education operated, for seeking to restrict
choice have no more prospect of success than King Canute. The
tide cannot be halted. But it can be channelled in the interests
of better educational prospects for all, and that is the overwhelming
argument for seeking both to increase choice and to make it more
meaningful by intervening positively to turn around schools which
are for whatever reason failing to attract a reasonably balanced
intake of pupils.
19. I have seen at first hand the impact
of impact of such an approach in my constituency of Greenwich
and Woolwich, where continuing improvements in the performance
of most of our local schools, supported by an effective and interventionist
local education authority, have begun to reverse a long term trend
whereby better off parents with aspirations for their children
tended to move themselves or seek schools for their children in
the outer suburban areas or surrounding counties. Indeed one of
the most encouraging recent signs has been the success of a newly
opened sixth form college in Greenwich attracting a significant
intake of pupils from adjacent boroughs. This whole process is
vital to ensuring a balanced intake of pupils in our area.
20. The issue of balance is crucial. Where
services become solely the preserve of the poorest and most disadvantaged
it is difficult to avoid the consequent stigmatisation and social
division. That is not to say that all public services should seek
to be universally available, and used by almost everyone as is
the NHS. By definition social housing is only going to cater for
around 20-25% of the population, and in future this percentage
will probably fall even lower. But so long as the housing is not
physically separated—as sadly was the pattern when the fashion
was mono-tenure council estates—there is no reason why social
housing should become synonymous with social exclusion. On the
contrary well integrated mixed developments comprising some housing
for sale and some for rent, and perhaps some shared-ownership
housing bridging the tenure gap, can and do provide balanced communities
and extend choice. It is of course absurd to suggest that people
must always fit into one economic category. Today's tenant can
and should be able to become tomorrow's owner-occupier and mixed
communities provide easier options for people to move between
tenures as their needs or aspirations change. Indeed it should
be a two-way process making it easier for example for elderly
home-owners to trade in some of the equity in their home to benefit
from services such as repairs, maintenance, gardening or support
which will make their lives safer and more comfortable, and which
can more easily be provided in a mixed tenure community with an
effective estate management framework.
21. So while it is essential to avoid social
polarisation and the ghettoisation of public services, this doesn't
point, as some would argue, to an alternative based on universal
provision. As long as public services are of sufficient quality
to attract a range of users and are not segregated from alternative
types of provision it is possible for public and private services
to co-exist and for a variety of different public, private or
not-for-profit models to operate side-by-side. Indeed in some
instances the availability of a range of different providers—housing
associations, housing co-operatives and council housing for example—can
act as a spur to improve standards.
22. The key issue is for the service to
be driven by a user not a provider perspective.
23. This was the motive which led many organisations
working with disabled people to campaign for greater choice in
the support services they receive. The outcome in the form of
direct payments to enable the users to choose and pay for the
care service they want has been a very significant development
for two reasons. In the first place it has clearly improved the
satisfaction of users with community care service in those areas
where direct payments have been piloted. But even more significant
has been the demonstration that extending choice to poor or ill-informed
service users does not inevitably result in "bad" choices
undermining the provision of quality services. On the contrary,
it has been rightly recognised that service users who have no
previous experience in choosing a provider do need expert advice
on how to assess the options available, but where such advice
is available, there is no evidence that users have made poor or
inappropriate choices of care providers. Indeed, the availability
of choice is likely to drive improvements in standards as existing
providers can no longer assume that they will get the contract
as of right.
24. There is a great deal of evidence supporting
the thesis that the absence of choice in many public services
has made it much easier for these services to be "captured"
by provider interests. Indeed, in a framework where there is a
single monopoly model of service delivery, it is far harder to
challenge accepted ways of doing things and to promote innovation
and change which may appear to threaten the interests of the providers.
Yet it is precisely the absence of innovation and change which
has contributed to the ossification of some public services. At
a time when prospective home-buyers are presented with attractive
and accessible information on the range of houses available for
them to buy, it is absurd that many councils continue to inform
applications for rented housing that their needs will be assessed
according to an opaque points formula and only then, if they are
lucky, they will be allocated a home considered suitable for their
needs. It is hardly surprising if people form a negative view
if the council shows so little interest in their own aspirations
and allows them no opportunity to exercise any say in the process.
Indeed such a process engenders the worst form of dependency culture
where people are discouraged from trying to improve their prospects,
but are left powerless while an anonymous bureaucracy determines
the outcome that will profoundly affect their lives.
25. Of course it doesn't have to be like
this. The more progressive local authorities and registered social
landlords are developing choice-based lettings systems which do
engage applicants positively and enable them to make informed
choices. Visiting the Housing Advice Centre in Camden or the property
shop in Sheffield and seeing attractive images of the properties
which are available to rent as well as details of the qualifications
which applicants are likely to need to bid for such a property,
is a revelation. It is a wholly different experience to that in
other areas where the "don't call us; we'll call you if your
name comes to the top of the waiting list" culture still
reigns. In Camden and Sheffield specialist help and support is
provided to help applicants including the most vulnerable, identify
and bid for options likely to be suitable for their needs. This
recognition of the importance of advice and assistance to help
a system of choice work well, particularly on behalf of the most
disadvantaged, is very significant.
26. Changing the way in which public services
are delivered can dramatically transform the relationship between
the providers and the service users—from passive dependency
to active participation in a process where the providers see their
role as responding to their customer's needs and aspirations,
and helping them to get the best available outcome.
27. There is still a great deal of hostility
to the use of the word "customer" in relation to public
services, as though the application of a similar ethos to that
which applies in a commercial transaction is somehow demeaning.
On the contrary, the discipline of knowing that a dissatisfied
customer does not have to put up with what is offered without
any alternative option is a powerful incentive to improve the
standard of service. Raising standards is the main objective and
choice is a powerful mechanism to achieve this. It is a means
to an end, not an end in itself.
28. This is of course an important distinction
between the different approaches of the political parties. To
many Conservative ideologues, choice is seen as an end in itself,
thus leading to various "voucher" schemes which either
proved unworkable or else fell foul, as did the Major's government's
nursery vouchers schemes, of unacceptably high transactional costs.
29. Extending choice should be all about
raising standards and extending opportunities to those who in
the past have not had the benefit of what is taken for granted
in middle class families.
30. So we should neither be apologetic nor
hesitant in advocating an extension of choice whenever practicable
to public services. But how can this best be achieved? There are
a range of options.
31. In the case of some services, such as
education or housing, it is possible to offer a range of options
from a single provider (LEA schools or council housing) or a wider
range of public or quasi public providers (including church schools,
6th form colleges, registered social landlords etc). One of the
particular attractions of a more pluralist model of public service
delivery is that it will encourage a new breed of social entrepreneurs,
eager to explore new ways of meeting social needs. The success
of not-for-profit organisations such as Greenwich Leisure Services
which took over the running of the local authority's leisure centres
and now provides similar services for a number of other councils
is a very instructive example. There is equally no reason for
excluding appropriate private options in certain areas (lettings
by private landlords).
32. In some cases however it simply would
not be practicable to offer individuals a choice between different
providers. The logistics and economics of refuse collection for
example militate against individual households selecting their
own bin collectors. However, there is no reason why single providers
cannot offer variations in the type or frequency of service—so
for example, providing options for separate collection of recyclable
or compostable materials, or offering more frequent collections
in certain areas where there might be a demonstrable need or where
the local community might be willing to pay for an enhanced service.
There are difficult issues which must be addressed on "pricing"
for services to which I will return, but the principle of offering
greater choice in response to the aspirations of the public must
be right.
33. Equally, it is possible to offer choice
between different providers where people collectively opt for
one or another. The scale on which such a collective choice needs
to be made (one street, a neighbourhood, a ward or whole local
authority area) will vary from instance to instance but providing
it is economically and logistically viable there is no reason
why different providers should not be considered, nor why residents
themselves shouldn't be able to exercise an influence on the outcome.
Indeed, a framework under which local residents might determine
whether or not to "trigger" a process of tendering for
a particular service or might opt for a neighbouring local authority
as a preferred provider could be a powerful incentive to drive
service improvement.
34. This process is often described as contestability
rather than choice, but the same basic principles apply—with
the user's interests being accorded a higher priority than the
provider's.
35. Of course there are important issues
to be faced in relation to the workforce. In the past, particularly
because it was associated with the Tory government's imposition
of Compulsory Competitive Tendering (CCT), the concept of contestability
was deeply unpopular not just with public sector trade unions
but also with many Labour councils. There were real and often
justified fears that the process of tendering predominately on
the basis of price would both drive down the quality of services
and the conditions of employment of the workforce. There was also
a concern about the emergence of "two tier" workforces
with new recruits being taken on by private contractors at significantly
lower rates of pay than those transferred from a former public
sector employer who will generally have been protected by TUPE.
It is precisely in response to such concerns that the government
has acted to tackle the "two tier" workforce with a
new code of practise in local government putting a clear emphasis
on the need for competition to be based on quality of service
as the terms and conditions of the workforce should across the
board be no less favourable under a new provider.
36. There are also important considerations
about job satisfaction. While the old certainties of monolithic
in-house provision have undoubtedly generated job security, patterns
of service delivery have often had a very negative impact on job
satisfaction. Repeatedly having to say "no" or to offer
excuses for an inadequate quality of service is demoralising.
So too is a reluctance to experiment with new ways of doing things.
This is not to say that innovation will only come through transferring
services to other providers. On the contrary there is a wealth
of good practise and numerous examples of imaginative new approaches
to service delivery within the public sector, and this must be
encouraged in the future. Choice and contestability have key roles
to play in this context, as the process of innovation is far more
likely in a climate where the providers are looking to see how
to make their service more attractive to their users in the knowledge
that others might take their place if they allow their own performance
to fall behind. A well-trained and well-motivated workforce is
of course a necessary pre-requisite to the sustained delivery
of high quality services and the impact of greater focus on satisfying
customer needs and aspirations will be to give an added advantage
to those providers who do invest in their workforce.
37. Those who are resistant to the idea
of extending choice in public services often make the point that
choice is only appropriate in a market framework governed by the
laws of supply and demand.
38. Allowing, indeed promoting a greater
degree of choice in such circumstances does of course raise difficult
questions. If successful schools are allowed to expand because
of high demand will this inevitably lead to the closure of other
less popular schools? In some cases the answer will be "yes".
Provided there is the scope for expanding successful schools in
the area to accommodate the level of demand this is not an outcome
to cause alarm. Indeed, there may be very real benefits in widening
opportunity to ensure that children from poorer backgrounds are
not elbowed aside by more pushy middle class families in the competition
for scarce places at popular and successful schools.
39. However, in other instances this may
prove counter-productive if over-expansion damages the ethos of
a successful school and undermines the very qualities that made
it work well. Equally an overdependence on one successful school
could ultimately lead to a local monopoly which could in the long
term prove counter-productive. In which case active intervention
to restore confidence in a failing alternative may be a better
option. So there is no single "one size fits all" answer
to such questions. But in all instances we should be approaching
these decisions from the perspective of what will deliver the
best choice from the users' point of view rather than what might
be the most convenient for the bureaucrats.
40. Of course there are implications for
the levels of supply. Meaningful choice does require an adequate
capacity, and the shortage of supply in some services is still
sometimes used as an excuse for not permitting users any choice.
There are certainly significant cost issues to be faced in extending
meaningful choice in certain services. Indeed some critics go
further and claim that choice leads to inefficiency and under
utilisation of assets. However from a different perspective the
absence of choice may well lead to far greater inefficiencies
by allowing providers to ignore market signals about what works
and what doesn't, so perpetuating outdated and inefficient ways
of delivering services. So short term economies achieved by restricting
choice may result in the loss of longer-term savings and benefits.
This is an issue which should be addressed on a case by case basis
rather than from the point of view of an ideological preconception.
41. The denial of choice can also lead to
some grotesque distortions in supply and demand, best illustrated
in the social housing field. For at the same time that there is
a high level of demand for affordable housing in the South of
England, thousands of affordable homes are standing empty in the
Midlands and North. Yet until very recently few effective mechanisms
existed to put those in need in one area in touch with options
available in another area. Of course the option of a move to solve
a housing need won't suit everyone but the important point is
that the choice should be made available. Even if this only has
a marginal impact on pressures in high demand areas, it is still
worthwhile as a means of satisfying some individual needs, as
well as helping to ensure better use of the total available stock
of dwellings.
42. One of the main arguments advanced by
opponents of choice it that where there is shortage, rationing
of supply is necessary and it is fairer to do this by reference
to needs through a bureaucratic system than through a market mechanism
which will give unfair advantage to those with greater wealth
or competitive skills. This would, of course, be true if rationing
were to be determined solely by price. A market driven purely
by ability to pay would undermine the principles of fairness and
social justice which led to the creation of most of our key public
services. But this does not have to be the case. The extension
of choice does not necessarily mean choice on the basis of ability
to pay. Freedom to choose a school for one's child in the state
sector is not dependent on price. Similarly direct payments to
recipients of community care simply empower the service users
to choose between different possible providers. They are given
the resources to commission the service rather than being dependent
on the council to tell them who will provide their care.
43. But in just the same way that sole dependence
on a pricing mechanism would be unacceptable, attempting to ignore
price altogether is also counter-productive. Why, for example,
should a middle-aged couple in a three bedroom council house (whose
family have grown up and left home) chose to move to a smaller
property if they end up paying the same level of rent? Price signals
do play a fundamental role in most decisions which we take, and
it is unrealistic to try to exclude them from public services.
44. The key task is to ensure that they
do not subvert the impact of those services either by excluding
those who cannot afford to pay the price or by giving disproportionate
advantage to those who have greater spending power. So it is not
unreasonable to ask parents to pay more for activities outside
the school curriculum—for example for their child to go
on a school journey—so long as the charge is not pitched
at an unreasonable level or provision is not made for all or part
of the cost to be rebated for pupils from poorer backgrounds.
45. In the case of our national museums
we have taken steps to ensure free access—to ensure that
their unique and magnificent collections are available to everyone.
This has been a huge success, but those same museums are able
to charge for special exhibitions bringing together works not
normally available at that museum. There is no inherent problem
in this approach which guarantees access to all but allows people
to buy extras if they so choose. Indeed it is likely to feature
much more in the pattern of service delivery in the future.
46. Indeed such an approach holds out the
prospect of a successful synthesis of two of the most powerful
drivers of social policy over the past century. On the one hand
there has been the commitment to social justice and fairness,
with the clear objective of ensuring that no member of society
is denied a reasonable quality of life and access to essential
needs. On the other hand there has been the fierce individualism
of people who have wanted to shape their own future according
to their own wishes rather than being forced to accept norms imposed
on them. Each of these powerful motive forces taken to extremes
can prove very destructive. On the one hand there is the awful
lesson of the enforced collectivisation in 1930s Russia and other
command economies. On the other the arrogant and blinkered pursuit
of self-interest which has characterised the extremes of uncaring
capitalism.
47. Our challenge is to chart a new way
forward between these extremes, and in the process to build a
new consensus. Indeed, this is one of the great opportunities
of the "Big Conversation" currently being undertaken
to help shape Labour's next manifesto. Recognition of the importance
of fairness and social justice as well as individual freedom and
opportunity is fundamental to achieving that synthesis, and the
pursuit of the choice agenda in public services is one of the
keys to success.
Nick Raynsford MP
March 2004
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