Examination of Witnesses (Questions 200
THURSDAY 15 NOVEMBER 2001
200. Surely the whole reason why we have so
many laws to protect the consumer against private business is
that it does not naturally put the consumer first.
(Mr Jones) The primary driving motive is that they
have to put the shareholder and the profit motive first. The only
way for the shareholder to get that profit is to put the paying
consumer first in the delivery of the service. Albeit that the
end result and the big driver is shareholder value, to get there
you have to put your payer first, otherwise you do not get paid.
201. I think you are trying to square a very
difficult circle here. We know, do we not, that if left to itself,
business will do all kinds of funny things that cheat consumers,
that diddle them, because that is how it is and that is why over
the years, over these many, many years, we have had to pass this
whole panoply of legislation to make sure that they do things
which are broadly in the public interest because they would not
do it otherwise. You cannot have it both ways, you cannot have
the idea that somehow they are naturally going to serve their
shareholders first, but also at the same time they are naturally
going to serve the consumer.
(Mr Jones) That shows a fundamental misunderstanding
of the business ethic. They actually have to drive the business
by whatever way they can to put the shareholder first. The biggest
driver is the paying consumer and if they do not put the consumer
first rather than the system, then they do not get paid. If you
contrast that with the public service, there it is the system,
it is the deliverer. The whole debate about PPP has been "How
is this going to suit employees of the National Health Service?".
You never hear "Is that going to improve it for the patient?".
202. Why do you think we have consumer protection
(Mr Jones) Simply because in a free market economy,
because they are human beings, both consumers and the deliverers
are human beings, you do need a set of rules and you need a level
playing field and you do need to protect from excesses. There
is nothing wrong with that in a free market economy; as you heard
Chris Haskins saying that you do need anti-trust legislation because
of the Rockefellers in America in 1909. Of course you do, but
that is part of a mature democracy and a free market economy.
It does not mean that every businessman is at it every minute
of the day; this awful, dreadfully offensive word used by a previous
Minister, "rip off".
203. I just find it a puzzle as to why if they
are putting consumers first we need to protect consumers against
(Mr Jones) Because in a completely free market economy,
they do not need complete protection all of the time; that is
what a market economy does. But you do need a set of rules. That
does not mean that the ethic, the ethos of putting the consumer
first in the delivery of the service is for some reason wrong,
because that is exactly what they do. Contrast the fact that they
do not in public services, they put themselves first.
204. Let me try a couple of other things on
you. We heard Martin Taylor just now saying that we should not
get involved with the private sector in terms of financing, but
only in terms of using their management skills, yet much of what
we are doing with the private sector is in terms of financing.
Has he got it right?
(Mr Jones) Actually there is room for both. If you
look at some of the projects it is about access to capital. I
can think of one or two major ones which you will no doubt come
on to later where it is completely about access to capital. That
is where the private sector money can come alongside and then
a fusion of management from both public and private. In hundreds
and probably thousands of PPP contracts every day, the capital
adequacy side of it is secondary to the management expertise.
In that respect he would be right in saying that it is not the
money, it is more the management and the culture. It is both really.
205. We are trying to do a bit of ground clearing
here. We are trying to find out whether this thing called a public
service ethos exists and whether it exists only uniquely in the
public sector. What is your view on this?
(Mr Jones) I wonder exactly what public service ethos
means. If you mean that for 60 years people have developed a culture
in the public sector where actually it is quite a lot of self-service
as opposed to public service, then I am not too sure that the
ethos should rightly be called public service. For example, I
hear union officials saying that they are all for reforms in the
NHS but not at the cost of the jobs of their members. That is
not public service. That is service of a vested interest, which
by the way I do not blame them for, because as a lobby group a
union would look to protect their vested interest. That is not
public service, that is self service.
206. We asked John Edmonds that precisely when
he came along and he said directly that if the public interest
required reforms which were against the interests of his members
he would be in favour of them.
(Mr Jones) Then I admire him for that. That is not
what Roger Lyons said at the MSF conference at Eastbourne in April.
If John Edmonds said that, then I admire him for it and I would
also agree with him. That is a public service ethos saying we
can deliver it better if there are some reforms going on here.
207. Is there not something particular about
what public services are, which is so different from how private
sector organisations are that they just have to behave differently
and therefore they have to have different attitudes amongst the
people who work inside them?
(Mr Jones) No. If you go down the path of believing
it is special, then it is a very easy step to get to a monopolistic
subsidised environment where you move away from competitive behaviour,
you move away from the impetus of delivery and you come into some
self serving arena. Then what goes out of the window is service.
208. I am surprised that you resist the idea
that there is something distinctive about public sector organisations.
If I fall out with a private business, as I was describing a moment
ago that I had, they can walk away from me and I can walk away
from them and we need never meet again, even at a gala dinner.
This is not true of any public service organisation. They are
committed to notions of universality, notions of equity, poor
and rich alike; wherever in the country you live you want the
same kind of service. These are quite different traditions.
(Mr Jones) Except of course if it is about free at
the point of delivery, if it is about universality, that does
not mean the route to get there has to be one of a monopolistic
removal of choice. It is perfectly possible, indeed we would encourage
a system where it is a public service inasmuch as it is free at
the point of delivery, it is safe, it is efficient, it is universal.
To get there, why should not the consumer have choice, why should
not the consumer take it from a provider who has been subjected
to the rigours of a private sector environment?
209. Yes, but you could never cease to do business
with the customer in the public sector in the way that you can
in the private sector.
(Mr Jones) You can if you give them choice. You certainly
can if you give them choice, choice of hospital, choice of doctor,
choice of school, of course you can.
210. To go to this question of the Health Service
and competition, you will never have the private sector training
surgeons and doctors and staff, will you? That is the difference.
The Health Service train all these people and therefore quite
properly are the monopoly. No-one offers an alternative.
(Mr Jones) I am agreeing with you. What is the problem?
211. My point is simply that the private sector
would never dream of doing that. They want to compete but they
do not want to train.
(Mr Jones) No, that is not a sequitur from
that. If you are saying that at the moment the function of trainingoff
the job is an educational functionon the job is run solely
by the Health Service and therefore for some reason it is public
service and continues as such, I have so many members of mine
who are undertaking PPP contracts where one part of the added
value they bring to it is on-the-job training of the people, while
people in the public sector were not getting the same quality
of training as they get in the private sector doing the public
212. With respect, Marks and Spencer are not
training up surgeons every day of the week.
(Mr Jones) No, but if you were in a position where
you were employed in the private sector on a public service contract
to train surgeons, if that were the case, which I accept right
now does not happen, no earthly reason why not. Someone skilled
in retail, Marks and Spencer, is probably training up retailers
every day of the week, but I have not seen a hospital trying to
train someone to do work in Tesco.
213. Because they do not want to work in Tesco
and they do not want to compete with Tesco.
(Mr Jones) Who does not? Marks and Spencer? They do.
214. No, the Health Service.
(Mr Jones) No, but then an airline does not compete
with a car factory.
215. We heard earlier on from Martin Taylor
that public finance is cheaper. That is what he said. Yet you
claim that PPP brings better value to the taxpayers.
(Mr Jones) Because there is a massive distinction
between cost and value. At the end of the day we can deliver a
contract. In fact one of our criticisms of the early PPPs, where
we accept that everything was not perfect and there were many
lessons to be learned by all sides, not least the private sector,
was that if you go just for the cheapest, be it in the cost of
finance or indeed in the cost of labour, if you go just for the
cheapest, it might on the headline look as though a good deal
was being had, but the best value might well not have been delivered.
Often you can get better management, you can get extraction of
better value, better customer service and better delivery and
although it looks as though you were paying more money at the
start at the end you would have got a better result.
(Mr Cox) Surely the issue is the cost and value of
the outcome, not the cost of the inputs. Money is just one of
216. I am not disagreeing on that. May I give
you a quote from Sir Ian Vallance your own President? He said
that there are some in the Treasury and DTI who need to be watched.
Did he have any particular individuals in mind?
(Mr Jones) You had better ask my President.
217. Has he not shared that with you at all
as President of the organisation?
(Mr Jones) No.
218. Is there anyone you think in either department
needs to be watched?
(Mr Jones) All of them need to be watched; all of
them do, all of the time probably.
219. What about Martin Taylor's argument which
I gave to you just a moment ago and John has just picked it up
again? Martin Taylor was basically telling us that a publicly
managed, privately funded Tube arrangement made no kind of sense
at all. He thought a publicly funded, privately managed system
made some kind of sense. Have we not got it completely round the
(Mr Jones) No. If you are looking particularly at
the Tube for a fusion of access to finance and management both
of the contractual work and then the eventual running of the Tube,
then if you could divorce the two, clearly for the access to capital
you are looking on a cost equation. What they are doing on the
contractsand by the way quite rightlyis that they
are saying there is a link involved between the capital providers,
then the contractual providers and then the eventual runners.
What you cannot do is extract best value and provision of capital
if you are going to divorce it from the private sector, linking
with the public sector, to deliver on the spending of the money
and the running of the Tube. If what you end up with is merely
going off to the private sector for access to capital like you
might go anywhere, then you leave a monopoly being run in the
public sector with the inefficiencies that will always bring and
indeed political motivation. You will not extract best value from
the money you have borrowed.