Select Committee on Public Administration Appendices to the Minutes of Evidence

Memorandum by the Local Government Information Unit and the Democratic Health Network (PSR 15)

  The LGIU is an independent policy and information organisation with over 150 local authority members and the local government trade unions. We have done a considerable amount of work around the issues covered by the inquiry and have recently produced a publication on public private partnerships that highlighted the issues of democratic accountability and the public sector ethos.

  The Democratic Health Network (DHN) was set up by the Local Government Information Unit (LGIU) to provide policy advice, information, research and the exchange of good practice on the developing relationship between local government and health. The DHN has over 100 members, the majority being local authorities, but also including health authorities, over 20 primary care groups and trusts and community health councils and trade unions.

  We very much welcome the Public Administration's Committee's inquiry into public sector reform and particularly into the effects of private sector involvement in the delivery and financing of public services. There are clear issues here around accountability, probity and possible conflicts of interests that the government so far has not seemed to put high on its agenda.


1.   What should be the principles guiding the reform of public services?

  The objectives of public service reform should be to deliver universally accessible, high quality, responsive, sustainable services, based on need and social justice. Public services need to be properly financed and publicly accountable.

  The primary principle should be the needs of users and communities are paramount. It should preclude domination of any vested interests, including commercial interests, that would work against the public good. The principle of subsidiarity should be enshrined in the reform of all sectors of public service whilst protecting the concept of universality and social justice. Reform should not further fragment provision.

  Accountability should be improved. Reform should seek to enhance citizenship and the role of representative democracy. It should promote participative democracy and decision making. Users and citizens should be consulted and involved in the procurement and delivery of services and in proposals for reform.

  Reform should not be implemented at the expense of the workforce and should ensure there is a partnership between public service workers, users and the government to improve the effectiveness of services.

  The system should demonstrate probity and integrity, and maximise the opportunities for public scrutiny.

2.   Does central government have clear principles and an effective strategy for reforming public services? Does it need to have a strategy at all, or is it better to let public bodies make their own arrangements for improving services?

  The government is clearly committed to the reform of public services, with the modernising government agenda at national and local level. There are stated objectives, such as "joining-up" government, focusing on users of services, improving quality, strengthening democracy, and adopting a more strategic approach. It is not clear, however, that it has clear principles that underpin its agenda for reform.

  There are tensions in how the government is approaching the modernisation agenda. The emphasis on achieving efficiencies through the imposition of national targets and indicators is not totally consistent with strengthening democratic accountability, particularly at the local level. "Joining-up" government, when it is demonstrated by an endless stream of new initiatives, can lead to fragmentation, not coherence. There often seems a lack of focus and priority.

  Even where there has been a degree of "joined-up" provision, there are potentially problems. There are questions over political and managerial accountability and responsibility when a variety of partners are delivering a service.

  Care Trusts, established under the Health and Social Care Act 2001 illustrate this possible blurring of accountability. Although the rationale, to provide seamless services between agencies, is sound, there is a possibility of confusion of responsibilities between the different elements of the trust. Our primary concern is that Care Trusts will dilute local democracy and political accountability by creating new forms of quangos to take over some of the responsibilities of local councils.

  In relation to the role of the private sector and the attitude to public services, messages coming from the government are sometimes inconsistent and ambiguous. The Prime Minister and ministers say they value public service and the people who work in it, but they also tend to make comparisons between what they see as an "entrepreneurial" and "dynamic" private sector with a conservative, backward looking public sector.

  The government seems to have moved from a position where they advocate private sector involvement where they perceive services to be failing to one in which they want to see the private sector involved in successful services as well.

  The Prime Minister claims there should not be any barriers to private sector involvement, but the Secretary of State for Health insists PFI will not be extended to core clinical services. This indicates an acknowledgement of a public belief that some public services, to retain their unique characteristics, should be delivered from within the public sector. In education, there is some ambivalence over whether private companies should employ teachers, an illustration of the same point.

  The government's mantra is "what matters is what works" but this claim fails to find room for the view implicit in the Secretary of State for Health's commitment described above, that there is something special, unique and desirable about public services delivered by the public sector. The government is reluctant to test out "what matters is what works", in that it is unwilling to enter into a serious debate about its policy on private provision and financing of public services; it will not constructively address the debate about the possible consequences of the commercialisation of public services; and it does not attempt to justify its assertions about the "efficiency" of the private sector.

  This is particularly true of the private finance initiative, where it is clear that the economic case for PFI has not been made. The substantial research into major PFI schemes by Professor Allyson Pollock's Health Policy Unit at University College London has been dismissed without proper discussion. The government supported most of the IPPR's report into its commission on public private partnerships Building Better Partnerships (IPPR 2001), whilst ignoring the IPPR's views on the weakness of the macro economic case for PFI.

  The government's position on the role of the private sector has to be seen in the context of the increasing liberalisation of trade and the privatisation of public services globally. Corporations have rapidly expanded their share of markets through takeovers and entering new markets. Global privatisation has been the major opportunity for the private sector to grow. The current World Trade Organisation's (WTO) negotiations over the next stage of the General Agreement on Trade in Services (GATS) could result in new services being opened up faster to market access, with education and health being the major areas of potential growth. There is a danger that growing pressure on the government to open up public services to the market will exacerbate concerns about accountability and democracy.

  The LGIU believe that there should be principles that underpin public service reform, and that there needs to be a degree of central regulation and inspection, but that there should also be much greater freedom at the local level for communities to innovate and improve services. Too heavy prescription stifles initiative. Having "solutions" imposed, without even clear evidence that they work, (such as enforced outsourcing) diminishes local democracy and the ability of local government to find its own ways forward.

3.   Do the devolved institutions and local government have clear principles and effective strategies for reforming public services? Could there be a role for strengthened regional institutions? And 4. What would be the consequences if there were significant differences between the policies adopted by central, devolved, regional and local government on public service reform issues?

  It would be misleading to say that local government as a whole has clear principles for reform, although it is probably fair to say that there is a consensus in local government that reform of services should be undertaken in partnership with local government and not imposed on it; and that reform should therefore recognise the differences between localities and between councils.

  Devolution adds a new dimension to the debate around public sector reform and the Committee's recognition of this fact is welcome. Contradictions inherent in the UK government's approach to public services are now compounded by a regular failure to clarify that responsibility for the public sector is now shared amongst the governments of the UK. The substantive areas of responsibility devolved to the new administrations are those in which the public sector plays the key policy and delivery roles. Divergence in the approach to public services is almost inevitable. It is arguable that the success of devolution should be measured by the extent of the resulting differences.

  Some very real constitutional and financial checks on divergence remain. Gaps in the areas of responsibilities devolved render meaningless any development of an all-encompassing approach to public sector reform on the part of the National Assembly for Wales. Further, in the absence of primary legislative and tax raising powers, the National Assembly's approach to public services must be achievable within existing legislative and financial parameters.

  The National Assembly for Wales has recently published its Plan for Wales 2001 in which public services take the primary focus. It is already evident, particularly in the areas of health, education and local government, that the approach is different with, significantly, little if any attention being devoted to the private sector. This seems entirely consistent with the wider social priorities and values in Wales where there is a closer individual engagement in the public sector (comprising a higher proportion of the workforce in Wales than England), limited enthusiasm for private sector "alternatives" (few grant maintained schools) and a notable tradition of collectively provided, community-based resources in both rural and industrial areas.

  Notwithstanding the checks on any radical departure on the part of the National Assembly for Wales from a UK agenda, the use of available powers suggest that there will be some divergence and this is entirely consistent with the intended consequences of devolution. Powers passed to this more local, democratic body are better able to address a smaller nation's needs and priorities. Devolution provides opportunities from within the UK for the development of different policies, different models of operation and greater local innovation. It will also, no doubt, generate cross border jealousies and tensions between administrations. The public sector has much to gain from an invigorated political debate and a wider range of more immediately comparative experience.


6.   Is the concept of a public service an anachronism?

  No, it is not an anachronism. The public sector still has distinct purposes, conditions and tasks—the provision of public or social goods and services, the development of values of democracy and citizenship and the realisation of justice and equity (Ransom and Stewart 1989).

  The market cannot provide all goods and services. Certain services require political legitimacy to be effective, such as planning which involves restrictions on individuals; some services cannot be charged for on an individual basis, such as street lighting; other services cannot be divided into units or services that someone can buy and then sell on to another person, such as the provision of a park. Finally, there are services and goods, such as education, where it is in the interests of society for all individuals to have access to over and above what the market might support.

  In an era in which the concept of human rights has been enshrined in national legislation, it is not anachronistic to believe that there are some goods so closely linked to human rights (the right to health, the right to education) that the provision of such goods should be protected from market values and that the providers of these goods should be primarily motivated by a concept of public service, rather than, say, by the need to make a profit.

  The encroachment of the private sector and private sector values threaten to undermine the fundamental principals that underpin the public sector—that publicly funded services are not about making profits but are about ensuring that collective interests are maintained. Private sector models place a lower priority on equity and they can reinforce existing inequalities. The enabling model, with the separation of purchaser and provider, the growth of quasi-markets, and the stress on competition and performance measures, dilutes professionalism, voluntary co-operation and trust.

  Many people who work in the public sector clearly recognise the concept of public service in the work they do. The Commission for Local Democracy, set up by the LGIU, in the mid-1990s, commissioned research (with the Institute of Chartered Secretaries) into the public sector ethos in local government. This was carried out by Lawrence Pratchett and Melvin Wingfield of De Montfort University. Some of their findings, after detailed research in several councils, where that staff still strongly believe in traditional values such as honesty, integrity, professionalism and integrity; that salary is not the main factor when deciding to become local government officers; serving the community is one of the best features of working for local government; and a majority did not want to work in the private sector.

7.   Is there a public service ethos, and how can it be defined?

  Pratchett and Wingfield looked closely at whether there is a public sector ethos and whether if so, is there a specific local government variation of it. They conclude that there are certain deep-rooted values that underpin the culture of local government and inform the day-to-day activities of those employed in it, but that the public sector ethos is ambiguous and may be subject to different interpretations over both time and location.

  The LGIU accepts this is the case, but there are also recognisable elements across the public sector, with the sharing of particular values and behaviour, such as the recognition of the legitimacy of the political process, the importance of community and integrity, a sense of social justice and objectivity. There are a range of cultural values that have underpinned the attitudes and behaviour of those who work in the public service. The Neill Committee's definition of the seven principles of public life—selflessness, integrity, objectivity, accountability, openness, honesty and leadership—is still relevant.

  Accountability is traditionally seen as to the public through the legitimacy of democratic institutions and loyalty to the institution, the concept of democracy and to the community served. The concept of loyalty to the community is perhaps particularly important in local government. Pratchett and Wingfield describe the distinctive features of local government that lead to a sense of public service ethos that differs significantly from other areas of public administration:

    "Unlike other public sector organisations, local government is exclusively focused upon local communities and is directly involved in local issues. This inherently local focus is unique to local government."

  Local government is distinguished from other public services that impact on localities by the democratic basis of its institutions "and its legitimate focus on all issues that affect the locality".

  Locally, elected local authorities ensure that accountability for the provision of services is to the communities that are served and elected councillors are drawn from those communities. Democracy relies on the active involvement of citizens in determining policy and local authorities have a crucial role in fostering active citizenship. Local government is more than a instrument to deliver services. Its ethos is inextricably tied to its democratic basis.

8.   How is the public service ethos different from the private (or voluntary) sector ethos?

  We believe that the concept of working for the common good as an overriding objective is a defining characteristic of the public sector ethos. The obligation to secure profits for their shareholders creates a permanent conflict of interest with the obligations of private providers to act for the common good. This can be illustrated by the Judicial Review[1] of Northumbrian Water's decision not to extend water fluoridation in the North East, in 1998. The Judge, Mr Justice Collins, said that the water company "cannot be said to possess powers solely in order that it may use them for the public good. It has its commercial obligations to its shareholders. It must exercise its powers in accordance with those obligations". He added "with some regret" that the current legal situation makes it "open to the water company to adopt the attitude that it has", and that this was "an inevitable consequence of privatisation".

  Unlike the public sector, that generally has to provide a universal service, the private sector can select its market and differentiate between users. Its ethos has primarily to be to maximise profits and increase market share.

  Although there are shared values between the voluntary and public sectors, the voluntary sector has a different basis of accountability, not being defined by political processes and democratic accountability. The voluntary sector usually focuses on specific needs. It grew up to fill gaps in the public and private sectors. There is a danger that if it is used as an alternative to the public sector, not an addition, it will be overloaded and weakened. Its independence and ability to innovate could be undermined.

  There are elements of the public sector ethos found in private sector institutions, such as loyalty, but again there is a totally different basis of accountability.

  Integral to the public sector ethos is the concept of equal opportunities. Public services are expected to cater for the needs of everyone and represent diverse communities. Equalities are central to the consideration of all services.

14.   Do private sector people working in and around government, including secondees, task force members and others, undermine the public service ethos? Are special measures needed to regulate their activities and prevent possible conflicts of interest?

  There is a danger of potential and real conflict of interests and of the perception of conflict of interest, particularly with the rapid growth of private sector secondees to government departments and of consultants in both local and central government.

  In national government, employees from companies that benefit directly from the award of large government contracts are working across Whitehall. Staff are seconded from companies that could benefit from changes in government policy (or indeed suffer from them), or from the award of consultancies. There are relatively few secondments from outside the private sector, such as from the voluntary sector, environmental groups or charities. Staff from companies who have won major contracts for PFI hospitals have been seconded to the Department of Health and from major construction firms to the Department of Transport.

  Business appointees to government task forces highlight a bias in favour of the private sector. In Ruling by Taskforce (Politicos 1999), a survey of the 295 task forces in existence showed that 35 per cent of all members were from private business. In the DTI, 161 were from business, 22 from the public sector, 14 from trade unions and two from consumer groups. The Treasury's PFI Taskforce (whose work is now don by the OGC and Partnerships UK) was composed of mainly bankers, financiers and business professionals. There was no one who worked directly in delivering front-line services such as health. The Urban Task Force had six business representatives, one of whom chaired it, two from national public bodies, and three academics, two from the voluntary sector and one from local government.

  In some parts of the public sector, staff go straight from their jobs to companies involved in contracting for public sector work. This seems most prevalent in local authorities, especially in education. Several directors of education have been recruited by private firms to run education contracts following government intervention. Senior politicians and advisers go from political posts straight into the private sector—the most recent example being the Prime Minister's adviser, Anji Hunter, who is taking up a top position with BP. This "revolving door" syndrome works at the European level as well—Leon Brittan moved from the British government to the European Commission, where he was responsible for trade liberalisation, to then go on to an investment bank with the prime objective of opening up markets.

  The expansion of the private finance initiative has opened up even more possibilities for conflict of interests. Leading consultants advise consortia involved in public private partnerships and also advise the government and local authorities that are procuring schemes from these same contractors.

  The regulation and decision making processes in government are being steadily "privatised". Seventeen per cent of all government audits are conducted by PriceWaterhouseCooper. Who are also heavily involved in global privatisations. Although consultants are described as technical and neutral, the leading firms are highly political, promoting private finance, privatisation and trade liberalisation internationally.

  Major PFI contractors, such as Jarvis and Serco, are shareholders in Partnerships UK, the body set up by the Treasury to advise on PFI contracts, project manage deals and provide development funding. The private sector has a 51 per cent stake in PUK. Even though contractors with a direct interest would not take part in investment decisions, there is a perception of conflict of interest that could undermine public confidence.

  It certainly looks like the private sector has much greater access to the government and Whitehall than anyone else does. Businesses with huge government contracts in sectors such as defence, security and construction, are now moving in to other sectors such as education. These companies spend vast amounts on lobbying and they understand how Whitehall works. Even the work of the policy think tanks most closely associated with the government is often sponsored by companies involved in government and local government contracting. It is not surprising that the perception that the private sector is unduly influencing the government's agenda is prevalent.

  We believe that it is essential that there is a strict code of conduct governing behaviour and ensuring transparency and propriety. Civil Servants are covered by the civil service code and local government employees will be subject to their own code of conduct (introduced as part of the new ethical framework for local government). There is guidance for civil servants in dealing with lobbyists. MPs and councillors have codes governing conduct and conflicts of interest. There does not seem to be, however, an equivalent code for private sector secondees or consultants working within local or central government or for private sector members of government task forces.

  There needs to be much greater regulation of corporate lobbying, and of the relationship between government advisers, lobbyists, consultants and local and central government. We therefore welcome your committee's decision to carry out a major inquiry into public appointments and patronage.

16.   Do the views, motivations and attitudes of public sector workers differ from those in the private sector? Does any difference in motivation have an effect on the delivery of public services? and, Is a public service ethos necessarily a good thing? Can it be an obstacle to the effective delivery of services to the public?

  Not everyone who works in the public sector will share the same values or motivation, but recent research and surveys indicate that motivation in general is different in the public sector from other sectors.

  The Guardian's supplement, The Common Good, March 2001, interviewed 200 people who were providing a public service. The vast majority expressed commitment and satisfaction with their jobs, even if they thought they were underpaid or their service was underfunded. Like the interviewees in the earlier Pratchett and Wingfield survey, they were not in the job primarily for the money or even for job security, but because they wanted to make a difference and "be useful". The interviewees ranged across the whole spectrum, from street cleaners to the managing director of the financial services authority. It seems that many people who work in the public sector, even at a time of rapid change, are motivated by a sense of community service and altruism. There still seems to be among public sector workers a strong belief that they work for the benefit of the whole community and that this is closely associated with a "not for profit" motive.

  Perhaps the key issue is not the motivation of individual employees, but what has been happening to the culture of public services over the last 20 years. The New Public Management stressed results, performance management and measurement, risk-taking and entrepreneurship, above professionalism, voluntary co-operation and trust. In local government, there has been a growing commercial culture, starting with compulsory, competitive tendering (CCT), the introduction of quasi-markets and the undermining of direct service provision, externalisation, outsourcing and the introduction of best value.

  The development of the concept of the citizen as consumer over the last 20 years has focused on information for "choice" (such as league tables) and on redress systems, (such as complaints procedures). The emphasis on results and quality has had clear benefits in providing more information to the public and in some cases helping to push up standards, but the consumerist approach is not enough. John Stewart and Michael Clarke, Public Administration, 1987, argued for a "public sector orientation" which is distinguished from consumerism by the recognition that the customer is many in the public sector, that services are not determined by price but by collective choice through political processes and that services serve collective as well as individual interests. Their remarks are equally relevant now.

  The objectives of the best value regime to continually improve performance and quality reflect the developing stress on results, but there are concerns about how best value is being implemented. Best value extends the role of the market throughout local government. The "commercialisation" of local government is being used to further promote externalisation and private sector led "solutions". The "new" values, such as the desirability of enterprise and competition may not sit happily with more traditional ones such as loyalty and integrity.

  Private sector techniques borrowed by the public sector, such as performance related pay, may not always be appropriate in the public sector, where co-operative working and networking are essential. For example, the government is developing policies to improve the "seamlessness" of health and social care services. These policies are unlikely to flourish where health and social care organisations are in competition with each other to secure market share or to take advantage of procurement opportunities from the private sector. Nor is a spirit of collaboration and co-operation likely to be fostered, even within public sector organisations themselves, where they are being encouraged to compete with each other to provide services, such as where an NHS mental health trust finds itself in competition with a primary care trust to provide adult mental health services to a local authority.

  The emphasis in both the NHS and local government is increasingly on creating a competitive environment, "naming and shaming" and rewarding high performers. The concept of "earned autonomy" is already explicit in health and is being advocated for local government. This kind of competitive culture can undermine the development of "learning" organisations and joined-up government.

  Insisting that the public sector behaves like the private sector must undermine the positive public administration values of the past. An entrepreneurial, competitive, and risk-taking culture raises the potential of corruption and the promotion of sectorial interests and risks diluting the concept of public service.

  There is no evidence that the public sector ethos has been an obstacle to effective service delivery. Massive under-funding, poor training and management, short-termism, and ill thought out policies are more likely candidates.

  Fragmentation of service delivery, resulting in part from the increasing role of the private sector, can erode the sense of belonging in and the collective continuity of a workforce. People working in those parts of local government that were subject to CCT were plunged into a competitive environment that weakened any corporate sense that may have existed. Enforced competition, the imposition of market values and now, best value, have undermined the "not for profit" basis of public service:

    "The organisational changes of local government are leading to an inherent fragmentation of service delivery. The threats to the public service ethos are manifest. The dual impact of fragmentation and competition remove the certainty and continuity that characterised traditional local government service . . ."

    (Pratchett and Wingfield 1995.)

  Pratchett and Wingfield claim that "the principal foundations of the public service are being eroded and undermined by current changes in the organisation and management of local government". The changes in local government since the report was published in 1995, particularly the growth of the role of the private sector, have increased the potential for the eventual destruction of the public sector ethos.

  It seems clear that the prevalence of private sector values, such as the profit motive, cannot help but affect individuals' personal motivation for the work that they do. This is particularly serious when there is a crisis, as at present, in public sector recruitment of staff such as nurses and social care workers. There will only be positive reform, if those who work in public service are motivated and committed to it.

18.   If there are to be rules regulating private sector involvement in public services, should they apply also to, for example, the voluntary sector? Should there be less stringent regulation where profit is not involved?

  Regulations and guidance should apply to all sectors.

  The accountability of the voluntary sector is weaker than in the public sector. There are particular problems when not-for-profit organisations are made to act like private sector ones, (such as housing associations). They clearly need to be subject to the same regulation as private companies and government bodies.

  Not all voluntary sector organisations are accessible to public scrutiny or have good records on disclosure of information, but the services they deliver can be highly sensitive and important to individuals and communities. Without proper information and openness, these organisations will not be accountable to the public.


  NB The answers given here also cover questions 19, 20, 21 and 23.

25.   Does the growth in private involvement in public services threaten to reduce public accountability?

  The increase of the role of the private sector in the provision of public services, taken with the fragmentation occurring at the local level, (with the growth of quangos and loss of local authority functions) inevitably raises major concerns about the dilution of political accountability. The main concerns are:

    —  the growing distance between users and the community from service providers with the providers being at arms length from the communities that use their services in the sense that they are neither elected nor appointed to represent the interests of those service users. Rarely do the governing bodies of private sector companies include users of the services provided, while more and more public sector organisations are doing so, with the results of improved quality and user-friendliness of services;

    —  a confusion of responsibilities; and

    —  a growth in secrecy surrounding contracts for public services and a general lack of transparency, in particular around negotiating contracts and formulating policy.

  The development of the Next Steps agencies, outsourcing and privatisation in central government, CCT and externalisation in local government, partnerships, quangos, zones, and the private finance initiative have led to a confusion of responsibilities, particularly when there are service failures. Where does the responsibility of ministers and councillors lie? How can they be held to account? In central government, the concept of direct ministerial responsibility and accountability has been steadily eroded.

  In the new Care Trusts, councillors that are appointed to management boards will be answerable to the Care Trust and not to their local authority for decisions relating to the work of the Care Trust. Members of Care Trust boards will be accountable to the Secretary of State for Health and will have a duty to put the interests of the Trust first in any decisions they make. In such circumstances, it is difficult to see how councillors appointed to Care Trust boards could be seen as representatives of their local authorities or be in a position to have regard to the local authority's interests in relation to functions delegated to Care Trusts. Indeed, it is clear that any councillors appointed to Care Trust boards will not be able to be mandated by their local authority and may, therefore, find themselves with a conflict of interests. It is hard to see how the council can be held responsible for those aspects of social care that have been delegated to the Care Trust. Or, if the Council is to be held responsible, it appears to be a case of responsibility without power.

  With the private sector delivering more and more public services, decisions are increasingly being made outside the political realm and are not publicly accountable. What is the basis of accountability of the private partner in a public private partnership?

  In local government, the issue of political accountability becomes even more complex when local authorities withdraw from delivering key services. Who is responsible when a privatised care home is not delivering quality care? How can councillors retain links with residential homes and their residents when the council no longer manages them? PPPs can make it more difficult for service users to know who is responsible for a service, when responsibility is seemingly fragmented between different partners, providers and clients. Accountability implies that citizens and service users have the ability to call people to account as well as the right to do so. They need to understand what the lines of accountability are and to have proper access to information.

  The interests of private companies and local authorities and local people will not necessarily be the same. Companies are primarily accountable to their shareholders and/or directors. The prime objectives of a private company are to make profits and win market share and those of the public sector are to meet social and community needs. The accountability of private companies to their shareholders is not always easy to reconcile with the interests of users and communities.

  In local government, councils are having to balance different and possibly conflicting interests when partnerships are developed. Councillors acting as directors in PPPs set up as companies will have a fiduciary duty to the company under company law that could in certain circumstances be in conflict with their duty to the council and its taxpayers. Under current law the interests of the company must prevail.

  Councillors as community representatives are in danger of being marginalised in PPPs or when services are externalised. Even if the regulatory function remains in some form, there is still a confusion of accountabilities. There is a danger that the increased manageralision inherent in best value and the distancing of service provision from democratic representation when services are privatised will weaken the role of the councillor, particularly non-executive councillors.

  "Accountability" is being redefined in a climate where more and more public services are being privatised, semi-privatised or contracted out. It is seen as being primarily to the individual consumer, and is determined by the contract and its specifications. Of course, services need to be as user focused as possible and all councils can improve on how they inform users and citizens and provide access to services. This model of accountability stresses managerial accountability rather than political, where elected representatives have delegated responsibility for carrying out services to others. It is unclear what the links are between managerial and political accountability. As private companies run more and more services and gain greater influence, the traditional channels of political accountability are being by-passed.

  Even without the complication of the private sector, the concept of accountability in local government is already confused. With increasing centralisation and the very low levels of funding raised locally, who are councillors accountable to—ministers or their electorate?

  There are also difficulties in ensuring accountability through enforcing contracts. It has not been easy for the government or local authorities to extricate themselves from failing contracts. There are documented, high profile cases where contracts have failed, and where the public sector client have found it almost impossible to get back the costs incurred and/or terminate the contract. The Catalyst response to the IPPR report "Building better Partnerships" (June 2001) gives details of several of these, including the contract for the Passports Agency and the one for benefits at Hackney Council. It is clearly very difficult to terminate a contract that is providing a vital service for thousands of people—what about the disruption caused or the difficulty of finding an alternative supplier? It is even more complex where the failed service is part of a much larger, multi-service contract.

  There are clear problems of accountability when companies involved in PFI or externalisations are subject to takeovers, mergers or sale of equity. The government is encouraging the public sector, especially local authorities to develop longer-term relationships with private sector companies. Very long contracts are negotiated with private providers where the government encourages the public sector to build up relationships of trust, as compared to the adversarial relationships under CCT. What happens to these relationships when the original companies are no longer involved?

26.   Do the demands of commercial confidentiality threaten the accountability of public services when the private sector become involved?

  The public sector will become less open with the growth of private involvement. That is not to say that the public sector itself has always been a model of transparency and openness. In local government there has been, however, an opening up of decision making and an increase in public consultation and participation. This must be threatened by the use of private finance and private delivery of local services.

  It is clear that public authorities, including some councils, have hidden behind commercial confidentiality to withhold information and to take decisions behind closed doors. The guidelines on disclosure and consultation, particularly relating to the NHS are reasonably comprehensive but it and others such as the Cabinet Office guidelines on contracts and the guidance from the 4Ps on disclosure of information and consultation with staff are not always adhered to. There is a lack of transparency when protracted negotiations are taking place over very long-term contracts.

  There has been a lack of public information surrounding PFI contracts. There seems to be no information compiled in an accessible form on contract failures and terminations.

24.   What measures should be put in place to ensure better accountability?

  There should be stronger legal safeguards to ensure greater transparency and the wider disclosure of information.

  The IPPR in "Building Better Partnerships" proposed a series of reforms to enhance the accountability of public private partnerships, such as the mandatory framework for disclosing information that exists in the NHS being extended to all PFI projects; the responsibility held by different bodies in a partnership being made explicit in the contract; and the application of judicial review to service providers who are not in the public sector being clarified.

  The scrutiny of PFI and PPPs needs to be much greater than it is at present. The National Audit Office and the Public Accounts Committee examine PPPs but after the contracts have been signed. They should be involved in major projects at the earlier decision making phases. Their remit is, anyway, limited to value for money issues. There may be a place for other select committees to scrutinise key PPP proposals from a wider perspective and at an earlier stage.

  In local government, scrutiny committees should be involved in the procurement of PPPs and PFI schemes. This means that they should be scrutinising schemes from the beginning of the process, the outline business cases, through the process of procurement to implementation and monitoring.

  The same levels of disclosure should apply to all public service providers, regardless of sector, and contractors should have to make a declaration of interests that is publicly available for inspection. Partnerships should have to declare what is published, where it is published, and should have transparent systems of financial audit and probity. There should be equivalent standards of probity for contractors providing public services as those that apply in central and local government.

  The LGIU, with the Democratic Audit, have been prominent in work on the accountability of quangos, Stuart Weir of Democratic Audit, has proposed that there should be an audit of openness and accountability (Advance of the Quango State by C Skelcher, S Weir, L Wilson, LGIU 2000, Democracy Audit, ed S Weir and W Hall, Democratic Audit and Charter 88 Trust, 1994). The accountability index advocated for quangos should be used to determine the accountability and transparency of any proposed partnerships and those that fail to meet certain criteria (such as publishing an annual report, including service users on boards, a public AGM and accessible meetings) should be rejected.


  There is an urgent need for both local and central government to think through what they mean by political and managerial accountability, where private sector organisations, partnerships and quangos are taking over increasing responsibility for the financing, delivery and in some cases the policy direction of public services.

  Increasing private sector delivery and ownership of public services and assets will lead to a loss of capacity in the public sector, which will considerably weaken it, with the ensuing dilution of democratic accountability. The private sector taking over the responsibilities of the public sector with increasing influence over policy again dilutes democratic accountability.

  Pratchett and Wingfield concluded that it is possible to argue that the cohesive force of the public sector ethos has prevented the collapse of local government into an irretrievably fragmented and divided arrangement of services. This must be the case elsewhere in the public sector to some extent. If that was the situation in 1995, the dangers must be much greater in 2001.

  The LGIU believes that there has to be limits to the role of the private sector. Even with tightening up of regulation and insistence on greater transparency. Experience so far indicates that some of the problems around the dilution of accountability when the private sector takes over delivering and financing services cannot be easily eradicated, particularly if PPPs are to be extended further to cover critical, core services—the problems are inherent and intractable. The more public services are subcontracted to the private sector, the more the public sector loses confidence and the capacity to deliver the services that they are left with. The objectives of private companies to ensure profit and market share, and those of public services, to meet social and community needs, will not always be compatible.

  The government's stress on efficiency, value for money, and improving standards has not been balanced by an equal concern for maintaining the public sector ethos and ensuring public accountability. Public service reform requires both.

December 2001

1   Regina v Northumbrian Water Ltd, Ex Parte Newcastle and North Tyneside Health Authority, December 1998. Back

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