Select Committee on Public Administration Minutes of Evidence

Examination of Witnesses (Questions 200 - 219)



  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 legislation?
  (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 you.
  (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.

Mr Lyons

  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 training—off the job is an educational function—on 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 service job.

  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 the inputs.

  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 wrong way?
  (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 contracts—and by the way quite rightly—is 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.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 10 January 2002