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 24b)
'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 3 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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