‘Open Public Services’ White Paper: the risky road to privatisation

The government’s delayed White Paper on ‘Open Public Services’ was published in July writes Richard Hatcher.

Commentators have been divided on its significance. Tessa Jowell, the Blairite former Cabinet minister, claimed that it contained ‘nothing new’. The paper’s ideas for personal budgets, more choice and more staff forming social enterprises were ‘lagging behind the action taken by the last Labour government’. But Alan Downey, head of KPMG’s public sector business, said it ‘marks a watershed in the approach to the delivery of public services and could usher in a revolution that will transform the public sector landscape.’ ‘In the future public services – schools, university education, housing or the NHS – all will be opened up to a range of providers.’ The White Paper’s privatisation model is taken directly from a report published last year by three senior partners at KPMG called How to shift power from Whitehall to public service customers. In February this year David Cameron appointed one of its authors, Paul Kirby, as the government’s head of policy development. KPMG won the first contract for NHS commissioning following the abolition of primary care trusts and would be one of the biggest beneficiaries of open-door privatisation.

The dilemma of privatisation

The White Paper is based on five principles: increased choice, decentralisation to the lowest appropriate level, a range of providers, ‘fair access’, and accountability. They certainly signpost the road to the completion of the privatisation of public services which Blair began. But the unresolved dilemma in the White Paper is how far along it, and how fast, the Coalition government will dare to travel. The wave of popular and professional opposition which greeted Lansley’s NHS Bill rings loud alarm bells. It also risks provoking the Lib-Dem worm to finally turn, in spite of the palliative promises of equality of opportunity in Cameron and Clegg’s joint foreword.

And there are also problems of the actual viability and cost of letting the market rip, as the Southern Cross debacle demonstrates and as the Financial Times points out: more localism conflicts with value for money from centralised procurement; large-scale choice can create massive exit costs if providers fail.

That is why the White Paper is so reluctant to translate the principles into concrete policies, preferring to test the water with questions for consultation. The real test will be the resulting Bill in the autumn. How much market freedom will private providers be given? And will under-performers be allowed to fail, whatever the social cost?

Big business will get the lion’s share

John Cridland, CBI director general, complained that the government could have made it much clearer that ‘While it is right to recognise the benefits mutuals and smaller providers can offer, the principle of any willing provider also means that larger firms should be able to bring their expertise to bear, and when they achieve better outcomes they should be able to make a reasonable profit.’ But he is being disingenuous: all the evidence – including from the Department of Work and Pensions’ Work Programme, the government’s flagship new privatisation programme – is that, as Peter Holbrook, chief executive of the Social Enterprise Coalition, said, ‘when markets open up, large private sector providers move in and squeeze out smaller organisations. A very small proportion of the contracts went to social enterprises, despite it being hailed by government as a boost for the big society.’

One barrier for private companies taking over public services is TUPE, so it is not surprising that employment regulations are to be reviewed by the Department for Business, Innovation and Skills (BIS).

The privatisation menu

The White Paper divides public services into three different categories: individual, neighbourhood and commissioned.

Individual services are personal services in, for example, education, skills training, adult social care, childcare, housing support and healthcare. The market driver here is user choice, where possible through personal budgets (first introduced by Labour for social care under the 2001 Health and Social Care Act).

Neighbourhood services are services provided locally on a collective basis, such as leisure and recreation facilities. The Localism Bill provides mechanisms to hand over control of services to community groups and neighbourhood councils. But this means leaving local people to pick up the pieces of services that are now being starved by cuts – perhaps by volunteers substituting for redundant council workers.

Commissioned services are local and national services that cannot be devolved to individuals or communities. The White Paper lists, in addition to the Work Programme which is already running, customer contact; planning; property and facilities management; back-office transactional services; family support; support for looked-after children; trading standards and environmental services; housing management; and a trial with Sure Start centres.

The principle here is competitive commissioning and payment by results. Payment by results favours big companies because only they have enough capital to invest up-front. But it distorts service provision by tying it to targets which are both easily quantifiable and low enough to ensure profitability.

A state regulated market

The White Paper admits that ‘in the transition to achieving full individual choice there will continue to be a need for the Government to intervene in cases where providers are failing to meet minimum standards or failing to make adequate improvements’ (p.23). But the public sector will never be a self-regulating market, it will always require continuous government intervention. Far from getting rid of Labour’s top-down bureaucracy, the Coalition government will recreate it through a combination of accreditation of providers, prescribed targets, performance monitoring and coercive powers to deal with ‘market failure’.

Their local democracy and ours

One of the key themes of the White Paper – as of the Localism Bill – is local democracy. Local authorities ‘will hold providers to account through the process of local overview and scrutiny’. The government will consult on ‘whether or not the role of local councillors as citizen champions needs to be enhanced to ensure proper accountability of providers from all sectors – such as extending their powers of overview and scrutiny to other sectors, as is being done in the NHS; exploring how providers can enable greater user participation or management in all sectors, whether private, public or voluntary, community and social enterprise (e.g. tenant management organisations and parent/ community governors)’ (p.38). The most local forms of government – parish, town and community councils – will be reinvigorated. And ‘People should use their voice in designing and managing the services they use’ (p.11).

It would be easy to dismiss this as empty rhetoric designed to placate the more community-minded LibDems, a smokescreen to hide the intended handover of public services to big business. The reality is that local council procedures are hopelessly undemocratic, largely excluding any popular participation. Overview and Scrutiny is too under-powered and toothless to hold business to account. Elected mayors in the big cities would marginalise the role of councillors. Participation in management can mean no more than making your own cuts. There is not a single hint of how co-production of services by users and providers could operate.

But the White Paper’s claim to be empowering local communities, as well as employees through the formation of mutuals, throws down a challenge to the left. Critique is easy, but what is our alternative? Of course the first priority is to defend public services as they exist, but the reality is that they are still largely shaped by the statist Fabian social-democratic tradition that gave birth to them. When local councils act as relays of government cuts it brings vividly home to citizens how little democratic influence they have. The struggle against the Coalition’s privatisation agenda needs to be infused with a vision of radical popular democratic participation in local governance and service provision which can generate concrete alternative policies to assert working class interests.