Select Committee on Public Administration Minutes of Evidence

Examination of Witnesses (Questions 600 - 617)



Annette Brooke

  600. Would I pay a different level of tax in Chepstow?  (Mr Jacobs) Ultimately I think that is an option, yes.[3]  (Lord Lipsey) As a former Chairman of the Fabian Society, Beatrix and Sidney would be cheering in heaven at Michael's earlier remarks about the extraordinary superiority of state taxed financed services and then about the role of localism within it. Listening to him I found that localism comprises restoring regional health authorities, which we just got rid of in favour of having a greater devolution of primary health trust, that is an inexplicable paradox. I also think that it is a false avenue to go down the way of saying it is accountable so long as it is democratic. Due to the practical limitations of democracy, first of all, you cannot help but observe that there is not an enormous enthusiasm on behalf of the British people for further elections and for further elected officials. I speak as Chair of Make Votes Count; even where we changed the electoral system you do not see them queueing up to vote, even in general elections. Quite what form of democracy that is going to allow the people of Chepstow and the people of Gloucester to sit down and decide what drugs should be available in their areas and make an informed choice, let alone how that is implemented through the local medical structures is beyond my democratic imagination. The final thing I want to say is I would be very, very careful in this whole field of transformational rhetoric, that is to say if only we put the consumer as king or locally devolve this the services would be absolutely wonderful. I am afraid that public service reform requires a complex mix of a great many different ingredients introduced on a trial and error basis. I totally agree with Michael that we need more money in public services and we do not get it. We talked about contestibility, that is an extremely important element. We talked about private sector involvement. We should be talking about the appropriate national target to make sure the money is not being wasted. We have not talked at all about improved public sector management skills. You talk about what is going to make the difference, we have it from Whitehall downwards, better public managers. When you look across local government, as in my company we do, you find a range of management skills, if you could possibly get the worst local authorities managed as the best are you would change the public services. Yes, finally, we do want a revived, a reinvented and a redefined public service ethos as an ingredient in all of this. Let nobody think that any of these things are miracle ingredients that are going to turn around public service, we have to do them all simultaneously without going dashing off in pursuit of one particular hare.

  601. We talked quite a lot about schools and barriers to entry, while you were talking it popped into my mind that exploring the situation with pre-school education would be rather interesting in as far as you do not have the same barriers to entry. Quite honestly I think the private sector faired pretty badly in all those years, I wonder whether you would like to comment on that?  (Dr Pirie) Can you give me the context of that question?

  602. If we are looking at whether greater preschool education is a good thing and clearly contributing to society as a whole for years and years we have had sort of private sector/voluntary sector play groups as the main provision, and very easy to set up—  (Dr Pirie) Pre-schools?

  603.—and all of those things that private sector could offer, but for most children in they country did not actually have the choice of going to a good pre-school, the market did not provide that?  (Dr Pirie) I thought you were saying that what was provided was bad, you were not saying that.

  604. I am saying it is a very low quality but it is only with massive public sector involvement, money and inspection that standards have risen. If you take a whole sector like that—I know it is a digression but I think it is a really interesting model to look into because it is something that great changes come about here and it has been state driven the change that has come through.


  605. What you are describing is market failure remedied by public action.  (Dr Pirie) The Adam Smith Institute published about 10 years a book called Pre-schools for All, advocating that there should be pre-schooling available for all children of the appropriate age. We, in a sense, were aware that the supply was simply not there.  (Lord Lipsey) You are absolutely right about what happened, it is not very surprising but this is a group with very limited market power. When people have young children one person has to give up work and they still have a mortgage and the expenses of children and therefore you did not have much effective demand. If you have much more generous support to parents as individuals so they had more effective demand I do not know whether the private sector would have failed in the same way. If you cannot do that what you do is have publicly organised provision. We are doing very well on that, Sure Start is a great thing.

  Annette Brooke: Yes, exactly.

Brian White

  606. Were you here when I asked Will Hutton about have we got obsessed with ownership rather than liberalisation, and would you like to comment on the differences between the two in respect of public sector inputs?  (Mr Jacobs) I would like to say a bit about public ownership. I do believe that having institutions which are owned by the public, whose accountability is to the public, and which express non-market values, is important in itself. I do not think this means that we have to have 100 per cent public services run by them. I do not know how low they would need to be in terms of the percentage of total public services for society to change. But, I do think that it is important that we have institutions in society which are differently constituted from private sector ones, which operate with different kinds of motivation and values and different forms of accountability and which embody our collective sense of being a community. I am always struck by the way in which, however bad our schools and hospitals are, we use that phrase, "our schools and hospitals". We never talk about "our Railtrack" or "our Tesco", however good Tesco is. Most of us, whether it is Tesco or Sainsbury's actually have some kind of brand allegiance to a particular supermarket chain.


  607. We talk about "our football team", that does not belong to us.  (Mr Jacobs) That is an interesting case of an institution which as it manifests it is not belonging to you. But there is tremendous tension between fans and the new plc structures of football clubs which precisely illustrates my point. I would like a society which has public institutions that are publicly owned. In that sense I do think public institutions are in themselves a good thing. I am certainly willing to say that there are places where we should have different kinds of organisations running public services but I would not like to see a society in which the government was simply a contractor to wholly privately-owned or voluntary sector organisation.

Brian White

  608. Dr Pirie, you were an advocate of privatisation, is it the liberalisation aspect or the ownership aspect or a combination?  (Dr Pirie) A combination. Look, we have an apartheid system in both health and education. 90 per cent of our schools are owned and run by the state and 10 per cent are owned and run privately, we more or less have the same proportion in our hospitals. It is an apartheid system, the ones who use the private service are the privilege elite who have choice, and the others basically take what they are given in the state sector. There are opportunities on both fronts, ownership and run. I would be quite happy, indeed, I welcome to see that many of those institutions are now owned and run by the state, owned and run by themselves with the status of freestanding trusts, and I include hospitals and schools in that. They would not be publicly owned anymore, they would be self-owned with a board of governors responsible.


  609. It is the ownership that is the problem.  (Dr Pirie) That is the one. There is a second one coming, the reason that we have that apartheid system is that while there is a sum of money allocated to you on your behalf in health and education you can only spend it within public sector, you cannot transfer it outside to any of the alternative suppliers and therefore you are condemned to using a system outside that which the 10 per cent use. If we are unable to transfer your state allocation and either spend it within the state sector or spend it in the private sector that apartheid would be moved and we would all be using the same health service and the same education service.

Kevin Brennan

  610. It would be a good way to subsidise the elite, you would give them the voucher as well?  (Dr Pirie) The Treasury is always opposed to any means of giving as a unified health or education service because of what they term deadweight, that is the people who are already paying towards their children education would claim a state voucher or a contribution as well. The Treasury have also opposed it for the very reason you have said.

Mr White

  611. What is the role of the Treasury in your view?  (Dr Pirie) What should be or what is?

  612. What would you want the role of the Treasury to be? Should it have a role?

  The Treasury at the moment defines what public sector borrowing should be. It defines what public spend is. It goes right down to the local level in defining what local government should spend their money on, that is what it is at the moment. What do you think it should be or should it have a role?  (Dr Pirie) The Treasury raises the money and it allocates it to the departments, like education, which allocates it downwards to local education authorities, which allocates it to the schools. That is what I refer to as top down structure. I would like to see the Treasury collect the money and then have it allocated electronically as a result of choices made by participants.


  613. As David has written a book on Treasury I am not going to bring you in. We do want to go down this road at all.  (Lord Lipsey) The main role of the Treasury is to stop Michael. All services are going to be tax provided, they all require much more money, as you said earlier on, so we can have French levels of services, and so on. The proportion of GDP taken in tax will rise from 39 per cent to 49 per cent and the government that does it will get unelected. Stopping that is one of the things that the Treasury does. The second thing is that it does its best, and sometimes that best is very inadequate, to ensure that public money is well spent both in the sense of not being misallocated or stolen or anything like that, not an inconsiderable virtue given what happens in many other countries, and increasingly there is an efficiency agenda that makes people show the results they are getting from that public money. Those are both appropriate functions.

Brian White

  614. I had a number of questions, I will limit myself to one more, is part of the problem that we have these think tanks that come along with this fashionable theory that says we have to nationalise, as we did in the 1940s, and take away from local control, or we come to the 70s and 80s in which we have privatisation, so we go through the old and reorganised privatisation now we have other think tanks coming through. If we abolish think tanks would it be much better?  (Lord Lipsey) We should only abolish some think tanks!

  615. Is this not a problem, this is a serious issue, what is your role in this debate, because there is a real problem in following trends and following fashions?  (Lord Lipsey) The issues you are raising with us are issues that have to be teased out service by service, as well as generally, item by item with a great input and a variety of views and perspectives that is the way progress is made. If you leave it to civil servants and bureaucrats you get one set of outcomes and if you just leave it to politicians you get another set of outcomes. I think we get a better mix by adding to those two.  (Dr Pirie) When we were dependent on civil servants to produce the policy for the future we had really a very limited background, they tended to come from a very similar social strata and educational background. Now we have think tanks putting ideas on the shelves for legislators to put in their shopping baskets they represent a much greater variety of thinking and you have a much greater choice.  (Mr Jacobs) The role of think tanks may or may not be useful. But there is a substantive point here. I would be careful about theories of public services which start from the assumption that all of them are in terrible crisis and therefore move rapidly to the conclusion they need wholesale transformation into something else. If you like I do belong to a tradition which says that the founding principles of our public sector services are right. What we now need to do is improve their management and operation, both to root out failures that have emerged and to try and meet the greater expectations that we now have of them that have been transformed. I am very interested, therefore, in the debate that we have not had here, but perhaps you were having with Will Hutton and others this morning and elsewhere about how you improve management effectiveness, efficiency, and so on within the public sector. That is the work the Fabian Society is interested in and is doing. We are not talking about radical transformations, we are talking about how we improve these institutions as public service institutions. They are not like other institutions. If think tanks can do that kind of work, as well as the theoretical work that might get more public and media attention, then think tanks can do something useful.


  616. I am conscious that the area that I wanted to ask you to say something about, the one that David referred to right at the beginning teasing us about market leading position on these issues, the public service ethos question, because I thought you all had something to say about that and I do not think we have explored that with you. The conversation we have tended to have with witnesses being, does this thing exist, if it does can you tell us what it is or is it just an aspiration that exists out there that if we can define it we might operationlise it and it might do some good. Is it possible, in a nutshell, to say anything that is in your head about that?  (Lord Lipsey) I think we can say what it traditionally was, it is something that is not quite often now used which means you are generally doing good things, the phrase, I think, the thinking behind it goes back to Weber and the characteristic of somebody who practices the public sector ethos is that they believe in equity of treatment as opposed to other things. They believe in the rule of law or rules in determining things and impartiality and due process. That was originally what characterised public sector ethos, that is its intellectual tradition. I think we found that there are lots of difficulties with that concept of public service ethos. One is that in practice you find that impartiality is undermined by the power of people who approach certain kinds of bureaucrats. If I say I am David Lipsey and I am ringing up to complain about rubbish collection nothing happens but if I say I am Lord Lipsey a lorry is round quite quickly.  (Mr Jacobs) I should try that.  (Lord Lipsey) Sometimes equity and the pursuit of rules lead to rigidity and failure to reflect the needs of the consumer, which is why I think that we need an updated concept of what the public service ethos is. I think it is quite wrong to say that the ethos of wanting to serve the public is confined to the public sector. Companies just are not what some people think they are, they are not groups of marauding profit margins—some city firms are—but most companies are not marauding round, short run, profit maximising, screw the customers organisations, if they were they would fail. The main thing you try to do if you are running a private company is to align your customers and your workers in a sort of common picture of what you are trying to do. A company board I was at yesterday, the whole thing is how you train staff, empathise with the needs of our customers to serve them better, unless the staff believe they are doing it for that, not just to make maximum dollar you ain't going to have a successful company for very long.

  617. I would feel inclined to stop there unless you want to say anything?

  (Mr Jacobs) I think everybody who works in caring services and nearly everybody who works in professional services have "intrinsic" motivations. They want to do the job well and there are standards that are applied to it. It does not matter what sector you are in. But there are also "extrinsic" motivations.[4] And these can then affect service delivery. I have a little anecdote about this. As we know dentists operate in and out of NHS, and most of them do both. A friend of mine who had a tooth knocked out recently was offered by her dentist the NHS treatment and the private treatment by the same dentist. The NHS treatment was a yellowing tooth cap that looked as if it had been removed from somebody else. The private one was a bright, white shiny cap. It was pretty clear which would be the nicer tooth to have. I do not believe it is beyond the resources of the NHS to buy white teeth caps. It seems to me there was an extrinsic motivation going on here. The dentist did not have the incentive to do this operation on the NHS. So I do think that we should be interested in the kind of organisation people work for. This, and the kind of contract it has within the public services, since that is what we are by and large talking about, will affect the kind of services that are provided. It is, very complex, and different for different kinds of services, but we do need to be aware of that possibility.[5]

  (Lord Lipsey) I went to see my wife who is in hospital, nothing serious, in Bart's last night and the

ward was clean enough to eat your dinner, and it came as a terrible shock to me after all I've heard. I have a note from her on my pager, "lady who cleans the ward has been doing it for 24 years, it is not contracted out". So the public service ethos survives and flourishes

  Chairman: That is a note to end on. Thank you. Give your wife our best regards, tell her we have enjoyed our communication with her this morning. We have not done justice to your contributions, we could gone on a lot longer, we scratched the surfaces only. I am grateful to you for all coming along. Thank you very much indeed.

3   Note by witness: But that is clearly a question of the constitutional powers available at different tiers of government. It isn't necessary in the devolution of decision-making over health service priorities. Back

4   Note by witness: Delivering from the kind of organisation you work for. Back

5   Note by witness: And, how extrinsic motivations can "contaminate" intrinsic ones. Back

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