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Some academies have awarded valuable contracts for services to companies owned by their sponsors without the proper competitive tendering process that they are supposed to operate. According to an article in the Guardian last week, that has happened in the

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Grace Academy in Solihull, the King’s Academy in Middlesbrough and the West London Academy. In some cases, the DfES was persuaded to waive the usually strict rules about tendering to allow that to happen. The DfES has refused to answer questions about whether these are one-off situations or whether the practice is widespread.

In these matters, as in all the other situations I have mentioned, the confidence of the public will be gained only if transparency and fairness are the watchwords. Examples such as these undermine the confidence of the public in these public/private arrangements and make them suspicious that someone is lining his pocket at the expense of taxpayers. I accept that, in most cases, that is not so. Most companies and voluntary organisations give good value and a fair deal, but we need to be convinced that the monitoring of this brave new world of private delivery of services is rigorous and that the levers available to correct poor delivery are powerful. I beg to move for Papers.

11.52 am

Lord Warner: My Lords, I am sure that we are all grateful to the noble Baroness, Lady Walmsley, for giving us this opportunity to discuss the important issue of how we monitor our public services. However, the issues that she raised in her speech and that are implicit in her Motion on the private provision of public services are, I suggest, equally important to all providers of public services, whether public, private or third sector.

There is something slightly quaint about singling out private sector providers for special attention. As the noble Baroness said, in many parts of public services, such as health, adult social care, children’s services and criminal justice, a mixed economy of providers has been the reality for some time. As someone who has, in a variety of roles, spent over two decades promoting such a mixed economy, I believe that if it is done properly, the public can only benefit.

I want to concentrate on this wider context and the arrangements necessary to ensure quality, value for money and transparency among all types of public service providers. I shall deal briefly with a great myth that continues to be aired noisily by those who regard private provision of public services as, to coin a phrase, the Great Satan. Good and bad public and private providers of services exist; they have always existed and, no doubt, they will continue to exist. The trick is to weed them out or not to appoint them in the first place.

My experience as a long-standing public servant is that there is not much to choose from between a public and a private monopoly for giving the public a raw deal. I have seen and contracted for private providers in health, adult social care and custodial services that match and exceed their public service counterparts. I have also seen the reverse. The evidence on private and hospital-cleaning contractors, for example, is that they are both as good and as bad as their public counterparts. Very often, it is more a matter of the quality of the contract and its management than anything else.



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Let us never forget that group of small business men with profit-and-loss accounts—we call them GPs—who have been providing our primary care in the NHS for nearly 60 years. More recently, in the field of elective surgery we have seen the introduction of independent sector treatment centres, which has finally convinced some sceptics in the NHS that you can separate emergency and planned surgery lists and that that leads to fewer cancelled operations and increased adoption of day surgery. In all these examples and many others, fair and well drawn contracts, issued on a competitive basis and properly enforced, are critical to success. No one is arguing with that, but even-handedness is the key.

The ISTC example illustrates the benefits of competition in improving value for money in public services, but we have seen the same results in other areas. My experience as a Minister, as a director of social services and as the first chairman of the Youth Justice Board leaves me in no doubt that a degree of contestability is critical in most of our public services if we are to foster innovation and improve productivity.

As public expectations of our public services rightly grow, the biggest challenge is to respond more effectively and productively than has sometimes been the case. That is why a twin-track approach of investment and reform in areas as diverse as health and probation is important in improving these services. Both services have had a lot of extra money, but they still have some way to go in delivering the productivity improvements that need to accompany that investment. Probation is a good example of where more properly commissioned and contracted private and voluntary sector services, as envisaged in the Offender Management Bill, might also help to reduce the use of custody.

We have a long and honourable tradition of voluntary organisations providing public services, which the noble Baroness rightly alluded to. Among the best things that I did as a director of social services in Kent was to contract out to Age Concern many day centres for elderly people and to hand over family support work to voluntary organisations. The result was services that were more responsive to the users than the previous public service provider had been.

Of course, not every voluntary organisation is an excellent service provider. I have terminated contracts with voluntary organisations, just as I have terminated contracts with public providers. It comes down to the processes by which you monitor, contract and collect information. To make things more complex, we are now in an era of joint ventures between the different sectors, and we have an emerging social enterprise sector. There is no point in concentrating on the private sector alone. We are moving into a period when a far more complex range of people, in joint ventures in some cases, will provide our public services under contract. This means that we need approaches and arrangements for guaranteeing quality and value for money that operate even-handedly across all providers of public services, irrespective of their governance systems. That is particularly crucial now that the public

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are largely indifferent about who provides those public services—and they are still public services, commissioned by public bodies that are accountable for spending the money that they use to award those contracts.

In the NHS, for example, people across the social classes want more say on where and when they are treated. We are moving towards a situation where people want more choice. That is why the Government are right to promote choice across the public services. This is a means of improving user experience. There is nothing that so interests people as getting a good deal. Leaving them to make some of those choices and to report on their experience is a good way of driving up the quality of our public services. Choice for users is a mechanism by which we can often make improvements. This approach is also generating more and better information for service users. I cite, for example, a pioneering website called “Patient Opinion”, set up by a Sheffield GP, which allows patients to post their own hospital experiences and encourages hospital improvements. We need more of those improvements. We can trust the service users to drive the quality and VFM agendas.

Choice and contestability are two key drivers for improved public services, but they cannot do the job on their own. We also need better commissioning and contracting, good and open performance measurement, and more effective and even-handed regulation. The Government have been working hard to improve those arrangements and I am glad to have had the opportunity to play my part in bringing about those improvements.

Local government has done much good work in improving public sector commissioning and contracting, and we all have a lot to learn from its experience in that area under successive Governments—I am not making a party-political point. Other public services could well learn from that experience, too. However, we have to recognise that outsourcing is not a dirty word; it is a way of getting a job done more effectively than often a particular public corporation can do. Done properly, outsourcing is a sensible way of using public money. Saving up our pennies to buy a massively expensive piece of capital equipment that can quickly become out of date is poor value for money; that approach is often better replaced by leasing arrangements, where the lease requires the provider of that expensive kit to train the staff, maintain it and keep it up to date.

These approaches that involve the private sector can bring huge benefits to the public sector and achieve better value for money. However, none of these changes in any way diminishes the public accountability of the public body that accounts for the expenditure of that money. Nothing in any way removes Parliament’s ability to scrutinise that way of providing public services.

I want to spend a few moments talking about targets, which has become a dirty word in public services. It is naive and disingenuous to suggest that targets have no place in this area. As an aside, I was mildly amused to hear that the Leader of the Opposition is very keen to abolish all targets in the health service but wants to introduce them for climate change. There is an interesting approach on these issues when you are in opposition, compared with

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when you are in government. The much dreaded targets in the NHS have actually reduced waiting times and cancer deaths and improved the quality of our A&E services. We must be selective in the way that targets are used, but they are a way of driving up improvements in our services.

We need good performance, assessment and measurement in our public services and we need to make sure that that work is often done on an independent basis by independent bodies, such as Ofsted and the Healthcare Commission. They have a responsibility to put their findings into the public arena and to make that information available to the public, which also feeds into helping the public themselves to improve the choices that they make in the use of public services.

Let me finally say a few words about regulation. In this country, too much public inspection and regulation has been allowed to become over-bureaucratic and, in some bodies, has delivered a degree of mission creep. The Government are right to have tried to tackle this problem. They should be commended for the Better Regulation Task Force and its work and for trying to integrate and focus many of our public inspectorates. In health and social care, there will be a new combined regulator, which will have to behave even-handedly with service providers, whether they come from the public, private or voluntary sectors.

This is an issue for debate and I am sure that we will debate it further, because the Government will need to legislate in this area. My critical point is that, in regulation, we need to adopt an even-handed approach to providers. There need to be the same rules for entry to the market for providers, whoever they are and wherever they come from. There need to be the same rules for removal from the market for failing bodies. This needs to be even-handed and we should not perpetuate the myth that somehow one particular type of provider is supremely better than another type of provider because they come from either the public sector or the voluntary sector. That is simply not true; there is no historical evidenceto support it. This is all about good contractingand commissioning of services, good performance measurement and assessment, and good regulation on an even-handed basis.

12.06 pm

Baroness Miller of Chilthorne Domer: My Lords, my noble friend Lady Walmsley raised a number of important issues in an excellent opening speech to a very important debate. The fact that the noble Lord, Lord Warner, called the issues that she raised quaint smacks of enormous complacency in a number of areas, two of which I will explore in my speech. I want to concentrate on the lack of transparency in two areas.

First, the line between the public and the private has become so blurred that it is very hard for the public to follow lines of accountability; that is not acceptable. It is clear to the public that they pay for such services, especially at this time of year when council tax bills land on their doormats and their tax

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returns have just been filed. A blurring of that line undermines the very reason behind a democratic structure at national and local level. The problem for the public is that the line between the public and private sectors in the provision of what are traditionally known as public services used to be defined by who delivered the service. The noble Lord, Lord Warner, is right that the model where the public sector both commissioned and delivered the service is very old-fashioned. I am not commending a return to the days when DLOs delivered everything without question. However, the public are not aware of who is delivering the service beyond the fact that they are on the receiving end. They see the lorries of the waste collector or the vans of the sub-contractor and that is the nearest that they come to knowing who is delivering the service. The niceties of who has commissioned the service and of the contract are not something that they are privy to.

Does that matter if the service is excellent? Do the public want to know who is delivering the service? The noble Lord, Lord Warner, said that the public are indifferent. In the short term it is true; they only want to know if something goes wrong. In the long term the blurring of the line, if it is not replaced with anything else, has enormous implications for the important connection between the public and their services, and for democracy itself. Of course, we have moved on from the days when DLOs delivered everything, and the days under the Conservative Government when compulsory competitive tendering ruled the day and the work went to the lowest-price bidder, no matter that the lowest price often represented the worst value. Authorities were unable to question that.

There are advantages in the public and private sectors working together; for example, in the management skills and financial acumen of the business community and by bringing better value for taxpayers. In the long term, however, we have a long way to go to get the model right. I do not believe that times have moved on significantly. In 2002, the Institute for Public Policy Research looked into some of the 378 PFI projects completed by central and local government and found that only 23 had been completed on time and had had an independent value-for-money examination by independent audit bodies. In 2003, the Audit Commission looked at the operation of the early PFI school contracts. It reached some important conclusions, such as:

Both those examples are from some years ago and I expect that the Minister will be able to say that matters have improved substantially in those bodies. However, in 2006, in its strategic plan, the Audit Commission recognised that there was a real problem with transparency. It said:

“Evolving” is a rather nice euphemism for saying that they are virtually non-existent and there is a very long way to go.



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At the moment, one reason why the public often choose litigation, encouraged by certain solicitors, is that it is the clear and obvious route. I do not think that any of us believes that litigation offers the most desirable way forward in public services. The accountability model would mean that the public were involved and understood how to break into the difficult cycle of drawing up contracts. When does anyone go to their local authority and say, “We would be interested in the contract being delivered differently”? It is hard enough for local authority members let alone normal people to know when to break into the cycle of a PCT and say, “What we are receiving is unsatisfactory. We would like it to be delivered differently”. Matters such as the contract cycle, who draws them up and how to make a difference are extremely opaque. That other line of accountability, the ballot box, also becomes undermined if the system is opaque as people will become apathetic, depressed and unable to address the issues. There is an enormous need for these matters to be much more clearly outlined.

I turn to another issue that my noble friend highlighted in her Motion: parliamentary accountability. I was struck by comments of Sir Peter Gershon, in November 2006, when he was talking about the public sector of environmental services. He said:

That is a worrying situation, but I am sure the Minister will have an answer for it. It is on the public procurement side of a fairly centralised system, but I deal with Defra, which has an extensive list of quangos—over 60—many of which are very large; for example, the Environment Agency, which is busy outsourcing. To have any idea of what is being purchased, by whom and to what effect becomes very complicated.

In not giving quangos complete independence, the Government remain able to keep a handle on them. However, they often choose that as an excuse to slope shoulders and claim that the Government are not responsible for what that particular body does. I give the Minister a couple of examples. One is the Food Standards Agency, which does a valuable job. The Government claim that it is independent—it is at arm’s length—yet it clearly is responsible to the Department of Health. How do the public concentrate on getting the Food Standards Agency, for example, to address the issues in which they are interested? The FSA has a better record than most in holding public meetings and making the records of them publicly available. Even within Defra there are several bodies which do not meet in public and do not have publicly available records. The picture is very complicated.



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I refer the Minister to a debate in which I was involved last year about accountability to Parliament of a public body. The Minister will recall there was a considerable debate around the cuts in funding to the Centre for Ecology and Hydrology. Its parent body—NERC—was created by royal charter, and NERC's website says it is accountable to Parliament. Yet it seemed that it was not that accountable. I accept that it needs to be responsible for commissioning scientific research without political interference, but we were talking about decisions of cutting public funding that had united both the scientific and the political establishments, and still the Science Minister, the noble Lord, Lord Sainsbury, was able to say:

but not for anything else. That means that even though a body may have a charter making it responsible to Parliament, Ministers can decide that where it is inconvenient it is not accountable to Parliament. In reply to a similar question from me, the noble Lord, Lord Bach, said:

That draws up the fact that, if a body is stated to be accountable to Parliament, certainly it should be.

I close by re-emphasising my support for the stand of my noble friend Lady Walmsley on very large private organisations such as Capita being subject to proper scrutiny. She was completely right when she said that that is the sort of issue that the Competition Commission should be considering and that if it was in any other sector, it would be called into question. The fact that the public are not aware of who is delivering the service, except when something goes wrong, means that there is not much demand from them for such scrutiny. It is not like the supermarkets, for example, where that is very plain, which is why the Competition Commission recognised that there was public concern. If the public heard and understood the points made by my noble friend today, they too would have deep concern and would fully back her call.

12.20 pm

Baroness Stern: My Lords, I am very grateful to the noble Baroness, Lady Walmsley, for initiating this debate and for her excellent opening remarks. Too rarely is there an opportunity to talk about a development that is profoundly affecting many areas of our lives. I will concentrate on one area only: criminal justice.

The Joint Committee on Human Rights, of which I am a member, is undertaking an inquiry into the treatment of old people in healthcare and social care settings. We have been hearing very interesting evidence and already we have heard enough to make it clear that our report will have to consider the accountability of private care homes. However, as we are at the evidence-collecting stage, I can do no more than whet your Lordships' appetites about that. We shall also shortly publish a report on the treatment of

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asylum seekers and there, too, we shall probably consider the accountability of the private companies that carry out forcible removals and are involved in other ways.

I turn to the situation in criminal justice and particularly the contracting out of prisons to private companies. I do not want to talk about the principle of those prisons, although I know that it is very controversial. I want to talk about quality, value for money and transparency—transparency in particular. How can we in Parliament know whether there is quality and value for money and whether we are being well served by those providers if it is difficult to find out about their performance?


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