Select Committee on Public Administration Appendices to the Minutes of Evidence

Memorandum from The Local and Regional Government Research Unit, Cardiff University (PSR 4)

  The Local and Regional Government Research Unit, at Cardiff University, is undertaking a series of research projects to evaluate current approaches to modernising and improving public services in the UK. These include:

    —  Evaluation of the long-term impact of Best Value on local government in England, commissioned by the Department of the Environment, Transport and the Regions.

    —  Feasibility study of the evaluation of the Local Government Modernisation Agenda, commissioned by the Department of the Environment, Transport and the Regions.

    —  Strategy and performance in local government, funded by the Economic and Social Research Council.

    —  Evaluating the Effectiveness of Local Scrutiny Committees, funded by the Economic and Social Research Council.

    —  Lessons from community planning in Norway and Scotland, funded by the Economic and Social Research Council.

    —  Investigation of the links between Best Value and other initiatives, funded by the Improvement and Development Agency.

    —  The use of evaluation by central government, funded by the Joseph Rowntree Foundation.

    —  The value of internal service providers, funded by the Public Services Network.

    —  Performance management and effective local governance, funded by the Economic and Social Research Council.

    —  The impact of inspection on local government, funded by the Joseph Rowntree Foundation.

    —  Evaluation of the Neighbourhood Support Fund, funded by the National Youth Agency.


  This project, funded by the Public Services Network (formerly the Association of Contract Service Chief Officers), aims to investigate the rationale for internal service provision within local government and to analyse the characteristics of effective in-house services.

  In the last six months we have emailed questionnaires to 210 Direct Service Organisation managers in the UK, achieving a response rate of just over 40 per cent. Interviews were then conducted with service managers and politicians in six case study authorities with in-house teams that have a reputation for cost-effective service provision. The research is still ongoing but we have reached some interim conclusions that may be relevant to the committee's deliberations.


  Traditionally, the case for public sector delivery has hinged upon the need to preserve the much debated, but rarely defined, "public service ethos" (CPPP, pp. 130-132). In practice it has not been clear what is meant by the public service ethos, whether it is distinctive to the public sector (Brereton and Temple 1999) and in turn whether it should be taken as a summary case for the benefits of public sector delivery. Our research found little evidence of a distinctive public service ethos. Few of the people we talked to had any clear conception of what it might mean in practice. We suspect that this notion has therefore outlived its usefulness.

  Two assumptions underpin the current fashion for the private delivery of public services: first, that an institutional division between the commissioning and providing of public services makes for good public management (see CPPP, p.28 and pp. 42-43); second, that the ownership of those responsible for delivery is of little relevance to the quality of outcomes. Or as the Commission on Public Private Partnerships puts it: "The British public is arguably more interested in the quality of public services than with who is providing them" (CPPP 2001, p.17). However, our research evidence causes us to call these assumptions into question.

  Proponents of a split between the commissioning and providing of services claim that strategy is improved by the fact that commissioners "are not distracted from strategic planning... by having to manage a service delivery organisation" (CPPP 2001, p.42). But this is a suggestion supported only by one strand of the strategic management literature and it was not borne out by our research. Fewer than a third of the respondents to our survey believed that the effectiveness of the services they managed was enhanced by the existence of a strict client contractor split. Instead we found evidence that good strategy may be seen as emerging from operations (see Mintzberg, 1994).

  It follows that where strategy is, or should be, informed by operational matters then a split between purchaser and provider could damage the public sector's capacity to make strategy. There may be important strategic benefits associated with the in-house provision of services.

  The managers we interviewed believed that the strategic ambitions of private companies and local authorities were very different (see also Pollock et al, 2001). Although something of a caricature, private sector strategy was seen as focused on the maximisation of profits. Public sector strategy, in contrast, focused on solving social problems and creating public value (see Moore, 1995). Part of the case for public sector delivery, as put to us by in-house services in local government, amounts to a reaffirmation of the merits of a unitary organisation. The in-house providers we talked to believe that they make a significant contribution to their parent organisation's strategic capacity.

  Our case studies highlighted at least five areas where well-managed unitary organisations, with directly employed service providers, could have a "comparative advantage" over their externalised and networked peers:

  1.  Responsiveness: an organisation which employs its own people, has its own depots and transport is more flexible than one which procures these services through other agencies. Strategic responsiveness counts most in emergencies or whenever there is a major change in the operational demands made of the organisation.

  2.  Learning and innovation: unitary organisations may be better equipped for innovative engagement with their strategic priorities than are external contractors. Learning and innovation are premised on a sense of purpose. The contingent character of networked organisational forms can make learning and adaptation difficult.

  3.  Procurement: we are doubtful that specialised services can be satisfactorily procured by officers trained only in the general skills of purchasing and supply. An "intelligent client" requires both an intimate knowledge of the services on offer and, crucially, the capacity to provide the service in-house as a last resort.

  4.  Communications: a unitary organisation will find it easier to talk to front line staff. Good communications are more important in public organisations because of the absence of market signals. Without sales indicators, managers need feedback from the front line to judge whether they are providing their clients with the right kind of service.

  5.  Discretion: contracting works best when services can be tightly specified (Donohue, 1989). This is why the traditional local authority blue-collar services were the first subjected to CCT. But it was a mistake to think that good waste management involved nothing more than collecting black sacks and dumping them in a landfill site. As the policy complexity of these blue-collar services is rediscovered, it is increasingly apparent that there are real problems in a narrow contracting approach. Local authorities should neither be providing services nor procuring them; they should be solving problems.

  Our research does not suggest that in-house provision is inherently superior. Many of the managers of the in-house operations that we have studied regarded competition as useful discipline. 94 per cent of the respondents to our survey believed that CCT had made their service more effective by making it more competitive. Most of the managers we interviewed supported the notion of a mixed economy of provision and some made extensive use of external providers. We also found evidence that the requirement in the Best Value framework to compare the cost and quality of alternative forms of provision has called into question some traditional assumptions about the inherent superiority of in-house operations.

  There are, of course, cases where the strategic advantages of unitary organisations are outweighed by bureaucratic and cultural rigidity. Economies of scale mean that in-house operations serving a single authority may find it impossible to compete with larger commercial operations. However, our study does indicate that in some circumstances, well-run in-house services are at least as effective as the private sector alternatives. Where this is the case they can offer significant strategic benefits that authorities would sacrifice if they opted for external provision.

  Expectations of public services are undoubtedly rising and local authorities find themselves at the sharp end of a demanding agenda for change. There is though little evidence from our work to suggest that "hollowed-out" local authorities—stripped of their operational expertise and physical assets—will necessarily prove better able to improve services and provide community leadership.


  Brereton, M and Temple, M. (1999) "The new public service ethos: an ethical environment for governance", Public Administration 77(3): 455-474.

  Donohue J.D. (1989) The privatisation decision: public ends, private means: Basic Books.

  CPPP (Commission on Public Private Partnerships) (2001) Building better partnerships: IPPR.

  Mintzberg, H. (1994) The rise and fall of strategic planning: Prentice Hall.

  Moore M.H. (1995) Creating public value: strategic management in government: Harvard University Press.

  Pollock, A., Shaoul, J., Rowland, D., and Player, S. (2001) A response to the IPPR Commission on Public Private Partnerships: Catalyst Trust.

October 2001

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