Select Committee on Public Administration Appendices to the Minutes of Evidence

Memorandum by the GMB Union (PSR 24)

  The GMB—Britain's General Union—welcomes the opportunity to submit written evidence to the Public Administration Select Committee. The GMB represents approximately 200,000 employees in public services, many of whom have had direct experience of private sector involvement in service provision.


Principles and Strategy for Reforming Public Services

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

  Quality, reliability, accountability and value for money. It should also be about motivating and empowering public service workers to do their jobs well.

  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?

  There seems to be some confusion in government thinking. There has been talk of the value of public services and the public service ethos but also an ideological commitment to increasing private sector provision of public services. Private Finance Initiative procurement has, in the words of the Office of Health Economics, been "artificially promoted". The Government mantra has been "what matters is what works" whilst PFI credits in local government for instance have meant that local authorities have no financial alternative to outsourcing. The GMB would like to see a level playing field between public and private provision of services. A recent survey by the GMB of our senior officer and chief officer members in local government showed that over half believed that the Best Value regime was a route to privatisation "regardless of quality of service."

  The Government has been promoting change and experimentation in the public sector whilst imposing strict national targets in health and education and a rigid inspection regime in local government. The GMB agrees that standard setting is an important tool but believes that public service bodies should be allowed more flexibility in delivering these standards and operate within a financial regime which allows for alternatives to outsourcing and PFI deals.

  The GMB welcomes the Chancellor's recent statement of commitment to a publicly funded NHS.

  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?

  Local authorities should be allowed to develop their own strategies for public service reform, however, the current inspection and financial climate undermines this aim.

  The GMB supports regional government provided it has real legitimacy and democratic accountability. We believe that regional government should take powers from Whitehall and bring them closer to the electorate but should not replace local government. Effective regional government would allow for better co-ordination and planning of resources across regions.

  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?

  If devolved institutions have genuine powers then this would be an inevitable consequence of local democracy. This would be a positive opportunity to experiment with different models and tailor policies to particular local needs and priorities

  4.  How do we know if public service reform is effective?

  Effective consultation with service users and the workforce. The achievement of rigid national targets alone is not sufficient because concentration on targets alone can mean that other service areas may suffer. Public service workers are an untapped resource, and are not often enough fully involved in service review and reform. They are inadequately empowered to improve the services they provide. Public service workers are also service users and therefore have a unique insight into the effectiveness of provision and potential areas of improvement.

The Concept of a Public Service Ethos and the Involvement of the Private Sector

  This issue will be examined in the first part of the inquiry.

    —  Is the concept of a public service an anachronism?

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

  Public service ethos can be defined as a desire to contribute to the wider community. It is an ethos which seeks reward from a sense of purpose in a job rather than just individual financial gain. It is public service ethos which motivates low paid GMB members such as care assistants and hospital ancillary workers to continue with stressful jobs in often poor conditions when they could be earning more working at the local supermarket

  The primary purpose of any private company is profit—by their very nature, and company law, private companies are required to put the interests of their shareholders first. Railtrack is a prime example of a company which considered the payment of dividends to its shareholders a higher priority than investment in a safe and efficient rail network.

  Private companies are increasingly involved in school sponsorship—the payback being that they can get advertising materials for their products in front of schoolchildren ("Schools offer excellent opportunities. Not only are they a high traffic sales generator, but students are some of the best customers you could have." McDonalds Operations manual). This is an anathema to the public service ethos. The GMB is concerned that the public service ethos is being destroyed by stealth. We believe it should be nurtured and encouraged rather than subjected to cynicism.

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

  The voluntary sector ethos is similar to that of the public sector. Many people join the voluntary sector in a desire to "do something worthwhile" with their lives and give something back to society. The GMB is not so nai­ve to believe that all public and voluntary sector workers are paragons of virtue compared with those in the private sector. We do, however, believe in the ethos of an environment where the one overriding purpose is not the search for profit.

  The voluntary sector often acts as a powerful advocate for disenfranchised or disadvantaged groups in society. The private sector, understandably, only takes an interest in those it considers to be good potential customers.

  In the private sector competition drives improvement—if a customer receives poor service they look elsewhere. Large companies in the private sector would generally prefer not to have competition—this is why competitors are so often bought out. Cartels and monopolies have great appeal for private companies. This is why anti trust and monopolies and mergers legislation exists. To give the private sector a monopoly on a 30 year PFI contract is the worst of all worlds—"customers" are unable to shop around for schools or hospitals yet they will be run for a profit motive. Some areas of social provision require accountability, and not merely accountability to shareholders—this way only the wealthy have a voice and major stakeholders are excluded.

  Is a public service ethos necessarily a good thing? Can it be an obstacle to the effective delivery of services to the public?

  The GMB believes that a public service ethos is positive. This ethos remains strong among GMB workers in front line such as nursery nurses and homecare assistants. They often work extra hours , or run marathons to pay for extra equipment for their hospital. If you ask our low paid NHS ancillary workers why they remain the common reply is because they want to work for the National Health Service. This is one reason (amongst many others) why so many of our members resent being transferred to private contractors.

  A criticism often levelled at public sector services has been a lack of focus on the customer and a lack of flexibility. This has to be seen in the context of declining resources, constant criticism, restructuring and reorganisation. Demotivation is hard to overcome once entrenched in any workforce. It has led to a bunker mentality in some areas. This is often caused by outdated management practices, blame culture and hierarchical structures. Every mistake made leads to an inquiry and resulting new "procedures". Services become process rather than outcome led. These problems need to be addressed. Handing over services to private contractors may often seem an easy solution but the GMB does not believe that it will produce the step change required for our public services. It will certainly not harness the idealism of many public service workers.

  10.  Would the creation of a single public service help a public service ethos?

  The GMB does not believe that this would improve matters—it would risk the creation of a monolithic bureaucracy. There does, however, need to be more co-operation between independent services—one stop shops for housing and benefit advice for instance.

  11.  Is it possible for profit-oriented organisations to maintain the public service ethos?

  The problem for private providers is that their primary loyalty is to shareholder interests. Not for profit organisations are more likely to retain public service ethos. Workers transferred to the private sector find conflicting loyalties and they become isolated from other public service workers. When hospital cleaners transfer to a contractor they are no longer part of the same team as other hospital workers. Council workers lose the sense that they work for the community. This undermines joined up thinking by public sector providers and leads to fractured services. The GMB considers that profit-orientated organisations are less able to respond to changing service needs due to the prescriptive nature of contracting.

  The GMB would question whether private contractors would go that extra mile in times of civil emergency or crisis. There have been reports from North Durham Hospital that doctors were forced to use ambulances move patients around the hospital because the PFI provider stated that this task was not included in the portering contract (Guardian 23 July 2001). Such situations can be put right (often expensively) but it illustrates the inevitable differences of ethos between private and direct provision.

  The potential conflict of interest between the profit motive ethos and service need were illustrated by the leader of Falkirk council at a meeting of the Scottish Parliament Local Government Committee on 15 May 2001. He stated that the PFI contract to run schools in Falkirk had been expensive and had led to a number of problems concerning extra curricular activities and the out of hours use of school premises. He stated "there are additional charges for out of hours services at PFI schools" and that the PFI contractor has priority use of schools out of hours for profit making activities. On one occasion children's luggage was left in the street after they returned from a field trip because they were not given access to the school. The public service ethos which motivates teachers and other staff to engage in extra curricular activities has now been undermined by the profit motive. The GMB believes that such scenarios will be replicated across the school sector with the expansion of PFI.

  12.  What measures, if any, need to be put in place to ensure that the search for profit does not undermine the public service ethos?

  The GMB would argue that when public services are run by for-profit organisations, purpose and ethos is inevitably changed. The purpose of a cleaning contractor in a hospital is ultimately to make profit. The purpose of an NHS cleaning team is to keep the wards clean. Four out of the five NHS Trusts that recently received "red lights" for poor cleanliness used private contractors for cleaning. One of the reasons given for this was that lines of management and accountability were undermined by the use of private contractors.

  Measures need to be put in place to ensure that private contractors do not have the opportunity to increase their profits by cutting the terms and conditions of staff, or hiring new staff on worse terms and conditions than staff transferred from the public sector. This is the reason why the GMB, together with other public service unions and the TUC are supporting the adoption of a new fair wages resolution to guarantee that all workers involved in the provision of public services are entitled to decent terms and conditions. There is nothing more damaging to the public service ethos than the creation of two tier workforces and the perception by public service workers that their pay, holiday and pension entitlements are being cut to pay for increased dividends for shareholders.

  13.  Can lessons be learned from the experience of private sector involvement in public services in other countries?

  Other major European countries such as Germany and France have historically different structures for health provision for instance than the UK. The role of the private sector in their healthcare systems is greater than in the UK but the significant difference is that there has historically been more public investment in healthcare. The Conservatives have recently been saying that public spending on health in the UK is broadly comparable with that in France and Germany, the difference in investment in health is made by the private sector. This is clearly untrue. In 1997, according to OECD figures, public spending on health was 5.8 per cent in the UK, 7.1 per cent in France and 8.3 per cent in Germany as a proportion of GDP.

  In both France and Germany private healthcare acts as a top up for the better off members of society. In July this year it was reported that Germedic, a German private health company, were marketing their services to British Health Authorities in order to take patients on NHS waiting lists. Newspaper reports at the time claimed that the German healthcare system has 20 per cent overcapacity to fill. In August the GMB National Officer for Health visited Stuttgart to look at the German health system. She was told by health workers there that overcapacity is a feature of German private hospitals. In some areas Germans are waiting for treatment whilst private hospitals look to fill their spare capacity with profitable patients from the UK or Norway. It is not surprising that nearly 80 per cent of Germans believe that the Government should be responsible for providing healthcare (EU Opinion poll).

  In France, although the quality of healthcare is excellent, there is far greater health choice in wealthy areas because private hospitals will only open where there is a good client base. Divisions in access to healthcare according to wealth are becoming an increasing source of concern and is a weakness of a system of a public private mixed market. All emergency treatment in France is undertaken at public hospitals. The GMB spoke to the Federation Hospitaliere de France in September this year who told us that France would never allow private sector management of public hospitals because of their crucial role in providing emergency and long stay treatment. It is also worth noting that healthcare in France is not a free market—co-operation between private and public hospitals is tightly regulated by regional government to help plan healthcare provision.

  The GMB believes that the UK can learn a great deal from countries such as France and Germany but there is no evidence that these countries have high standards because of the role of the private sector. Sweden has high health standards and the highest percentage of health care workers in the EU. The private sector, however, plays a very small role in the Swedish health sector.

  Swedish health authorities have experimented with private sector management of hospitals. It should be noted, however, that in Sweden it is considered essential that that local councils (who have responsibility for health) retain control of the hospital buildings as a safeguard against underperforming contractors. There is far more accountability in this system than under the British Private Finance Initiative. Even so, the Swedish Government passed legislation in response to public concern which bans the private sector from being involved with the operation of "emergency hospitals".

  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 conflict of interest where private sector people have influence on government policy decisions relating to public service reform. There should adequate guidelines surrounding the employment of civil servants by private contractors when civil servants have been involved in policy in this area.

  The GMB believes that vested private sector interests have too much influence over government policy in this area. The privatisation of the Treasury PFI task force to create Partnerships UK has meant that PFI contractors such as Jarvis and Serco have direct influence on "government" promotion of this policy through their part ownership of PUK. The GMB believes that PFI has effectively been a means by which taxpayers subsidise private companies with little independent scrutiny or open debate.

  In October the government announced the creation of a "strategic partnering taskforce" to provide "support" to local authorities on developing partnerships. Out of 27 members of the taskforce, 24 come from the private sector. Members include contractors such as Amey, CSL and Hyder Business services as well as KPMG who have benefited enormously from consultancy in the PPP area. This again represents powerful vested interests involved in policy development.

  The GMB does not believe that the Government should commission any more reports on the effectiveness of the Private Finance Initiative from consultants that themselves receive financial gain from the policy.

  15.  Many companies are becoming increasingly aware of social and ethical issues. Does this make them more suitable for work in partnership with the public sector, or does it make no difference?

  Some companies have a distinguished record of social responsibility such as Rowntrees and Boots, but they are very much the exception in the UK. The quote from free market economist Milton Friedman "if businessmen do have a social responsibility other than making maximum profits for stockholders, how are they to know what it is?" sums up the attitude of many British companies towards social responsibility. Currently only 4.7 per cent of the total charitable donations in this country are given by business (UK Voluntary Sector Almanac).

  Private companies do not get involved in public service contracts for charitable reasons or out of any sense of social responsibility—they do it for profit. Balfour Beatty, a major PFI contractor, announced this year that its operating profit from building management and services increased by 57 per cent largely as a result of PFI. PFI appeals to such companies because it offers long term contracts with predictable margins and little risk. Social and ethical issues are irrelevant to "partnerships." An investigation by Health Service Journal (13 may 1999) showed that building contractors are "expecting returns of up to 20 per cent a year on the equity stakes they hold in (PFI) project companies." The GMB considers that this is unacceptable, especially since PFI is often subsidised by the taxpayer.

  The fact that there has been concern that the public sector needs to enhance its procurement skills illustrates that companies contracting for public services will always seek to negotiate contracts which will maximise profit—it would be nai­ve to expect any other outcome.

  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?

  Research conducted by Hay management consultants for the Cabinet Office has shown that for complex and senior jobs, base pay rates in the wider public sector are roughly 25-30 per cent below the comparable private sector rate (Strengthening Leadership in the Public Sector, PIU March 2001). Such workers are evidently motivated by something other than monetary gain.

  The GMB does not believe that the attitudes of our public service members automatically change when they are transferred to private contractors. Demotivation is caused, however, by the uncertainty of the transfer process and by the cuts in terms and conditions and pension entitlements that are so often a consequence of such a move. Motivation is further undermined by the creation of a two tier workforce.

  GMB members in the homecare sector who find themselves transferred to private contractors consistently complain that their ability to give quality time to clients is undermined by stringent rules concerning the amount of time they are allowed to spend on each job and the level of support that they are allowed to give.

  Private contracts are usually tightly specified and service level agreements written in stone. The GMB believes that this stifles innovation and flexibility in public service workers.

  The Government has ambitious plans concerning public service reform—it is essential that the workforce feel empowered and motivated to deliver the step change in service quality demanded of them.

  17.  There is conflicting evidence as to whether the public is in favour of private sector involvement in public services (MORI polling, June 2001). What in your view is the truth about public attitudes?

  We often hear that "the public do not care who provides the service as long as it's provided." The GMB believes that this is to miss the point. Our argument is that there is little evidence that improvements in service standards will be delivered by the private sector and that there is no public will for privatisation to be expanded . An opinion poll conducted by MORI for the GMB in August 2001 showed that for 65 per cent of respondents the involvement of the private sector in public services was an important factor in their voting intentions. The GMB does not believe that Labour was re-elected this year because the public wanted more privatisation.

  The electorate rarely if ever are given the opportunity to choose whether services are outsourced or not. No matter which political party controls a local authority the Best Value process and the local government finance regime will encourage outsourcing. It would be ridiculous to claim that the privatisation process is driven by the democratic process—it is driven by persistent lobbying by private companies at national and international level for government to open up lucrative public service "markets." The people of Islington and Lambeth who received eviction notices because their housing benefit had not been paid did not vote for the takeover of housing benefits by a private contractor.

  "Commercial confidentiality" often means that the full implications of PFI projects remain hidden to the public. The £900 million land deal associated with the Edinburgh Royal Infirmary PFI project only became known after a civil servant leaked the details to the press. When Kidderminster hospital was downgraded to help finance Worcester Royal Infirmary local residents certainly did care—electing anti PFI councillors to their local council and Dr Richard Taylor as their MP in protest. PFI continues at Worcester illustrating that the public have no say in privatisation issues. The same can be said for the London Underground PPP project which continues despite the opposition of the majority of Londoners. It is fatuous to speak of conflicting opinion poll evidence when the public clearly have no real influence on these matters.

  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?

  A private care home should have the same standards expected of it as voluntary sector or local authority care home. The Care Standards Bill addressed such issues and was welcomed by the GMB. There should be a proper regulation framework for all public services whatever the provider.


  19.  What kinds of accountability are most effective?

  The GMB believes that the best kind of accountability is that of local democratic scrutiny and choice. We believe that this is being undermined by wholesale privatisation of services. Average turnout at local elections is declining and currently stands at only 30 per cent. This is partly due to a long process of reductions in local authority powers and increased central control of local government. With the expansion of PFI there is a danger that councils will only have to meet once every 30 years to renegotiate contracts.

  The GMB also believes that there should be more service user and workforce involvement in service reform and improvement. The Local Government Act 1999 gives local authorities a statutory duty to consult service users. The GMB believes that a similar statutory duty to consult the workforce would send a powerful signal that employee involvement is taken seriously in public services.

  20.  Is there sufficient coherence in the accountability arrangements for public services?

  There need to be more effective mechanisms for accountability in public services. This was well illustrated by the inquiry into the deaths of children at Bristol Royal Infirmary. There needs to be a greater push for internal accountability and a move away from old fashioned hierarchical structures which prevent non management staff from having adequate input into mechanisms for improving services.

  21.  Is there too much accountability, or too little?

  The GMB believes that there is too little accountability in the reform of public services. Traditionally the ultimate accountability has been local politicians, to their electorate. With the involvement of third parties (contractors) the public are now one step further removed from the service in terms of accountability.

  This year's Audit Commission report on Welsh Public Services ("Better Value Wales") stated that "private sector contributors claimed that the Welsh public sector had a pre-occupation with direct control over the way in which public services were delivered". (Para 4.8 "Doing business in Wales"). The GMB believes that this direct control is an effective tool of local democracy, and as the experience of housing benefits has shown, a far more effective way of delivering a service.

  22.  Does the new pattern of public service provision require new forms of accountability?

  The provision of public services by private contractors automatically creates a conflict of accountability between service users and shareholders. For private companies shareholders will always come first. One way to deal with this issue is through the creation of not for profit trusts or have companies owned by local authorities themselves. There are already a number of arms length companies and Leisure trusts operating in local government.

  23.  In the Government's overall programme of public service reform, is the need for accountability to Parliament and to other bodies properly taken into account?

  Recent events concerning the attempted removal of a few respected members of Parliamentary Select Committees suggests that there is not enough commitment from government for proper scrutiny of public service matters. The GMB believes that up until now there has not been real debate on the use of the Private Finance Initiative and a lack of proper research from public bodies which demonstrates that it provides either value for money or improved services. The GMB does not consider that reports commissioned from private companies with vested interests in PFI (such as Price Waterhouse and Mott MacDonald) constitute independent analysis by government bodies.

  24.  If the answer to the above question is no, what measures should be put in place to ensure better accountability?

  The GMB believes that more independent information should be made available to the public on the expansion of the use of the private sector to deliver public services. This is particularly the case in relation to the Private Finance Initiative. Justification for PFI has variously been given as the need to keep public spending "off balance sheet" (this has now been discredited), value for money (no independent evidence that this is the case), and the need to bring private sector management skills into public services (private contractors are hiring in expertise from the public sector in any case). The fact that taxpayers have not been given a clear, consistent rationale for this expensive scheme suggests serious lack of accountability.

  The GMB particularly welcomes this Select Committee's inquiry into public service reform.

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

  The GMB is concerned that private sector service providers are insufficiently accountable for the services they provide. We have already submitted to this select Committee evidence relating to Capita plc and the cancellation of its contract with Croydon LBC. Capita required a guaranteed base payment whether they provided an adequate service or not—which Croydon would not accept. Capita have also threatened legal action against Lambeth LBC if their failing benefits contract was terminated and ITNet threatened legal action against Hackney LBC after it was dismissed from that benefits contract.

  The most beneficial contract for a private sector provider would be one where they have guaranteed long term income with little accountability or consequence of failure. The GMB believes that there should be an independent inquiry into the type of contracts that public bodies are signing up to and mechanisms put in place to ensure that contractors are always fully accountable to the client body.

  The GMB believes that the expansion of the Private Finance Initiative will fatally undermine the democratic accountability of our public services. PFI contracts are by their nature too long and inflexible to allow for changing local priorities and service needs.

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

  This has proved to be the case in a number of PPP projects. The "secret" land deal associated with the Edinburgh Royal Infirmary PFI project has been previously mentioned under question 17.  The secrecy surrounding the Ernst&Young report on the London Underground PPP is a prime example of "commercial confidentiality" being used to undermine public accountability.

Service Users and Public Service Reform

  27.  Does the Government's public services reform programme have sufficient focus on users and consumers of those services?

  The GMB believes that service users have to struggle to make their voice heard on public service reform issues, the examples of Kidderminster hospital and the London Underground PPP were given earlier.

  The GMB agrees with the government that the focus of health reform should be patients and that the focus of education reform should be pupils. Our emphasis on the importance of decent terms and conditions for public service workers has led to accusations that we represent "vested producer interest." The Prime Minister himself has said that "I don't believe that that is the way to provide a better service, to reduce the terms and conditions of the staff. And I just think that's obvious" (Guardian interview September 2001).

  The GMB does not believe that the interests of users and consumers of public services and those of public service workers are mutually exclusive. We would like to be given the opportunity to work in partnership with the government in bringing UK public services up to standards of excellence—currently the term "partnership" is almost entirely used in the context of the private sector. The GMB does not believe that the Private Finance Initiative is partnership - it is a straight commercial transaction.

  The evidence of the Private Finance Initiative so far is that there is too much focus on the needs of the private sector provider and not enough on service consumers—the earlier example of the effect of PFI on extra curricular activities in Falkirk (question 11) is an illustration of this.

  The GMB recently had the opportunity to view aspects of private contractor bids for Newcastle City Council's schools maintenance PFI project. One contractor stated that "we understand and share the authority's view that a "best value" service is about quality, efficiency and competitiveness which consults and takes into account the views of the client." By client they meant the council—there was no mention of service users.

  28.  If not, how can the position of users and consumers be strengthened?

  Users and consumers need to be given real choices about options for service provision—not told that the only way to provide investment in services is to use the private sector. There must be mechanisms to ensure that the needs of service users are put before profit. There needs to be more openness, consultation, public access to information and accountability.

  29.  Should user rights be established in relation to public services?

  User rights can be a useful tool for promoting accountability.

  30.  If so, how could these rights be exercised in practice?

  Possibly through the imaginative use of service level agreements especially where service users are a "regular" clientele such as in care homes and schools. The statutory duty placed on local authorities to consult service users could be extended to all public service areas.

  31.  Could the Citizen's Charter/Service First approach be further developed?

  The fundamental flaw with the Citizen's Charter and similar initiatives is that they tend to measure response, rather than quality of response. An example of this would be that a phone help line may hit a target of response within 6 rings, but this does not measure the quality of the response given. Such targets are common in unimaginative service level agreements and frustrate staff whilst doing little to improve service quality.

  The GMB believes that there needs to be more emphasis on service user feedback as a measure of quality and less on the achievement of statistical target measures.

  32.  Are complaint/redress systems for public service users adequate and effective?

  This will vary between local authorities and public service bodies. One of the weaknesses of private service provision, especially over long term contracts is that it creates separate lines of accountability, encouraging both client and contractor to blame each other when things go wrong (as was the case with Lambeth LBC's benefits contract). It seems self evident that if a member of the public was to complain to their local councillor about services provided by a PFI contractor then the councillor will have far less influence on that service than if it was directly provided by the council. This will especially be the case if the contractor is performing to the strict terms of its service contract.

  Moves by the government to abolish Community Health Councils in the NHS do not inspire confidence in their commitment to service user rights and adequate redress systems.

November 2001

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 21 June 2002