Select Committee on Public Administration Minutes of Evidence

Examination of Witnesses (Questions 560 - 579)



  560. Yes.
  (Dr Pirie) The government used to run many industries and it used to run the major facilities. It used to manufacture aeroplanes, ships, cars and buses and it used to run airlines, it does not do any of those any more, do you say that means the boundary is pushed?

  561. I said how far would the Adam Smith Institute like to see that boundary move?
  (Dr Pirie) Many of these public services, health, education and welfare would benefit from having that boundary moved.

  562. Could you be a bit more specific? I mentioned earlier about the police service and we had the report yesterday on the police service which was quite critical in parts about high levels of absenteeism, sickness and poorly performing constabularies. Would you see the police service or part of the police service as right for privatisation?
  (Dr Pirie) We had another thing two days ago which moved the boundary in which a private hospital has reached a contract with the Department of Health?

  563. Can we just stick with the police for the moment?
  (Dr Pirie) I was going to point out that this is entirely for NHS patients, it is entirely free at the point of use and, on the other hand, it does represent private production coming into assist, if you like, to move the boundary of state monopoly production, of health care for NHS patients. In a similar way I think certainly the private sector can come in and do things under contract for the police force without prejudice to the status as a public body.

  564. Sticking with the police force, what core police function, if any, do you think the private sector can help with? I am not talking about parking tickets, directing traffic, but what we would ordinarily understand as core functions of the police? Does the private sector have a role, that is what I am trying to say?
  (Dr Pirie) There are many activities that police do which, in a sense, use over qualified people. You train a policeman to become a very efficient professional and then use them to monitor a tv screen. You could contract that out to people of lesser skills and keep the staff, the highly trained professionals, for frontline duty.

  565. Can I ask about the privatisation we have seen over the last decade, or so, are there any that have failed?
  (Dr Pirie) I think putting Railtrack into administration is indicative of failure there. The tension between the group owning the track and the groups running the trains has obviously not produced in practice the creative tension it was designed to, striking bargains off each other. The point is that they were, in a sense, kept separate, one was virtually run under the direction of the government, the other commercial companies seeking profit, the train operators. The proposal for Railtrack to have the same thing, just run as a non-profit body does strike the Adam Smith Institute as offering no solution to those problems, whereas the government when they privatised the air traffic control they came up with a brilliant solution, 44 per cent to the airlines, five per cent to the employees, the rest is private and it is run by a body who are very interested in having the safest and most efficient air traffic control systems we could have, namely plane operators. Why not have the same model with Railtrack, a consortium of train companies, 46 per cent, five per cent to the staff and surely you would have a Railtrack, who is very interested in running the most efficient service?

  566. I understand that. Michael Jacobs told us that organisation such as NATS cannot fail, they cannot be allowed to fail. Sticking with NATS after the events of 11 September NATS has now come cap in hand to the government asking to be bailed out and you tell us that the NATS model is a good one?
  (Dr Pirie) Yes.

  567. If public money is still required, given that the service cannot be allowed to fail, then we just hand over public money.
  (Dr Pirie) I take the view that any model of air traffic control after September 11 requires to meet new standards which would require extra money.

  568. Okay. Are there any other privatisations which have failed, we all know Railtrack is an easy one. Putting Railtrack to one side, are there any other privatisations that, in your view, the Adam Smith Institute's, have failed?
  (Dr Pirie) None that I can think of.

  569. What about BT? A lot of people are very critical of BT, 10 years after the privatisation we still do not have a broadband network in Britain and BT has been dragging its feet. Can you tell us that the privatisation of BT is a success?
  (Dr Pirie) Yes, indeed. It is not just BT, we privatised that particular area and we now have one of the most competitive phone markets in the entire world. It is a great success. It is not BT leading the pack, it is the newer and more innovative companies who contributed to this.

  570. BT is very successful in the terms that you would define it. You tell us here that you want choice and competition in the market, giving ordinary people the chance to help frame their future, redesigning public services, injecting innovation and customer responsivenes and you tell us that BT fits the bill.
  (Dr Pirie) No, I do not. I think other companies are more innovative.

  571. The privatisation of BT has failed in some respect?
  (Dr Pirie) No, it has succeeded. We privatised the telephone service and others were allowed to come in and take it up and they proved themselves in practice better than BT.

  572. BT is now reconfiguring itself because the people at the top of BT realise that perhaps it has not delivered the improvements that people have the right to expect?
  (Dr Pirie) This is what happens in the private sector, companies deliver and they are rewarded. BT has fallen down in one or two cases.
  (Lord Lipsey) I do not think it is necessary to prove that privatisation succeeds that every single private company is perfect in every regard, which transparently they are not. You have to ask yourself two questions, one, if they had remained in public ownership would we now have a better situation in those industries or would we have a worse situation? You remember the work carried out by Richard Pryke in the 1980s on the components of public ownership, which described in graphic detail the disaster that nationalised industries were becoming. Two, taking the programme as a whole, and not every single company, have we benefited? Are they better run than they would have been? Obviously Railtrack we can debate all day and night. If you make a huge programme of organisational changes of this kind you will have one or two failures within it. You have to look at the picture in the round. I would say absolutely dogmatically that things are better than they would have been. I speak as somebody who spent a large part of my life opposing those things, I was wrong and I think the party I belong to were wrong.

  573. Can I put the same question to you about the boundary between public and private, because it has changed dramatically over the last 10 or 20 years, do you think there are areas of public sector provision that would benefit from being transferred to the private sector?
  (Lord Lipsey) Not much. I do not think it is worth the bother. There are a few bits where I think private insurance has a greater role to play myself, for example, in the care of the elderly. I believe that resources should be concentrated on the poorest, who are under-served, and if the rich people want to protect their inheritance from paying fees in nursing homes they should be insured privately. It is only a very modest adjustment of the boundaries. I think we should regard the present boundaries as pretty well a settlement that will endure and, therefore, concentrate on the measures of both the private and public sectors to make each bit of that equation work better. That is nothing to do with whether you employ private companies more in the delivery of public services, that is part of what goes with that.


  574. So we clear our minds on this particular issue, I am not sure we are talking about the same thing, when I look at what you say at the Adam Smith Institute in your recent publication on the reshape of public services you say, "there is a chance to modernise the public services in the same way that the state industries and then the utilities were transformed under the impact of policies influenced by market ideas", so the analogue log is that we privatised all that stuff 10 years ago and now we do something very similar, a market revolution in public services. This is a million miles way from David Lipsey saying, let us stay in the boundaries as we are. What do you mean by all this?
  (Dr Pirie) I was the co-author of that piece and I cannot remember whether I wrote those words myself. What I mean by that is that the state model, the top down model, was the money and the orders flowing down to the bottom, the production of a school place or a hospital treatment at the end of it which the parent or patient accepts. It has to be replaced by one in which people make choices between different types of school, between different hospitals with the advice of their doctors. The funding instead of being directed with orders down is directed by the choices of those consumers at the bottom. I would like to see them literally turned upside down.

  575. It is a conceptual trick to say that.
  (Dr Pirie) May I elaborate?

  576. Indeed.
  (Dr Pirie) If, for example, state schools became freestanding, self owned trusts, non-profit organisations with the ability to determine their own programme and tried to attract students and their funding depended on their success of attracting students then we would have a model very similar to the one I have described. Provided that new schools can start up fairly easily entry into market, provided that was there, provided that schools which failed utterly would close down we would have a corresponding model.

  577. We would have market competition in education with all schools competing against each other and having complete control of their own admissions, that would have to come out of all this.
  (Dr Pirie) In practice.

  578. The idea of universities having to take people here and there, we will just take the people we want.
  (Dr Pirie) In practice most schools choose to be two thirds community, they recognise there is not much value if you are not rooted in the community, if you do not take your students from the locality.

Mr White

  579. In my constituency I have three secondary schools, all of which are over-subscribed and the problem is what to do with the people who cannot get into those schools. Is it really the fundamental situation that you if you want choice you have to have over capacity in the system, but the other alternative to that is you have to be efficient, creating better efficiencies and therefore reducing the over capacity and total antipathy for the issues of choice, which require over-capacity.
  (Dr Pirie) It is the education format that is part of the Baker Bill. Unfortunately it did not really make enough provision on the demand side, easing the ability to start new schools. If you have three schools all of which re over-subscribed there is obviously a crying out demand for a new school to be started.

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