Select Committee on Public Administration Appendices to the Minutes of Evidence

Memorandum by the Trades Union Congress (PSR 40)


  1.1  Introduction: The TUC welcomes the debate that the government has initiated on the reform of the public services. This presents an opportunity to address the legacy of twenty years of under investment and develop the argument that continuously improving public services requires a higher level of resources. The TUC is committed to quality public services delivered directly by public servants. We recognise that in many cases public services fall short of expectations and we accept that unions have a responsibility to work with government and others to deliver the improvements demanded by the electorate.

  1.2  It is unfortunate that much of the debate over the past eight months has focused on the role of the private sector in driving forward public service modernisation and reform. To a significant extent this is a diversion from the central question which is: how can public services be improved from within? For example, the private healthcare sector simply does not have the capacity to be the source of performance improvement in every NHS trust. Despite the publicity attached to the announcement of the new BUPA diagnostic and treatment centre in Surrey, that facility has only 36 beds and will have only a marginal impact on waiting lists in the district.

  1.3  It would be helpful therefore if the discussion could now be conducted on the basis of evidence rather than assertion and a sober assessment of the role that the private sector will play in delivering the government's plans.

  1.4  Principles: The starting point for the TUC is to ask why certain services are public services in the first place? What was it that motivated the great reformers from the mid-nineteenth to the mid-twentieth century to place their faith in non-market forms of service delivery? How far is that experience still relevant?

  1.5  The most straightforward answer is of course that the market had either failed to provide these services at all or had done so in a way that failed to reflect the values of a democratic society where all citizens had a right to be treated with equal concern and respect. On a purely practical level the process of urbanisation could not have continued without determined action to protect and promote public health—hence the creation of the public utilities. Similarly, an increasingly complex capitalist society with a sophisticated division of labour could not thrive if it relied on the voluntary and private sectors alone to provide education to the majority of the population. Other examples can be quoted ranging from the fire service to the police to air traffic control. In the first two of these cases private sector solutions had been tried and found wanting before the state intervened.

  1.6  Many of these developments took place in an ad hoc and piecemeal fashion and a considerable distance was travelled from the establishment of the Metropolitan Police by Sir Robert Peel to the foundation of the National Health Service by Aneurin Bevan. Nevertheless, it is important to identify the principles that underpin the notion of public service and can act as a guide to the development of policy in the future.

  1.7  In the TUC's view at the root of the case for public services today is the notion of citizenship—the idea that individuals cannot fully flourish in a democratic society without universal access to collective goods like health care, quality education and basic utilities. Citizenship also explains why these services are subject to political choice rather than the vagaries of the market. It is for citizens to decide through the electoral process what priority should be given to particular services and how in broad terms resources should be allocated. The contest between the political parties is therefore focused on competing notions of citizenship, the balance between individualism and collectivism and the policy instruments that should be used to secure a good life for all citizens. At the most recent general election the public delivered a very clear verdict that they preferred high quality public services and a sustained programme of investment to cuts in taxes and public spending. Fundamentally therefore, the government is right to say that the goal underpinning public service reform must be improvements in the quality of service delivered.

  1.8  The Prime Minister has sought to develop this thinking and in his speech on public service reform delivered in October 2001 he said that public service reform rested on four key principles:

    —  High national standards and full accountability

    —  Devolution to the front-line to encourage diversity and local creativity

    —  Flexibility of employment so that staff are better able to deliver modern public services

    —  Promotion of alternative providers and greater choice

  1.9  The TUC would question whether, taken together, these principles are coherent and clear enough to deliver a successful programme of public service reform. The thinking behind government policy often appears confused and rather contradictory. For example, in a local government context high national standards might constrain local political choices. The trade union movement argued consistently against the centralising policies of the previous Conservative governments and made the case for more local freedoms. But a corollary of the ability of electors in some authorities to choose higher levels of local taxation and spending must be the freedom of others to make somewhat different choices and select other priorities.

  1.10  Similarly, the implementation of clear national targets in the NHS, for example the reduction of waiting lists, may have had the effect of limiting local creativity as other, perhaps more appropriate, priorities were abandoned to meet the requirements of national policy. There is a strong feeling amongst public servants that there are too many national standards, too many performance indicators and a plethora of national government initiatives all apparently directed at solving the same problems. A more focused and coherent approach from the government would do much to ease this sense of frustration—and the recent DfES initiative on addressing teacher workload demonstrates that some progress is being made. Fewer targets properly resourced would be a good principle for the government to apply more generally.

  1.11  Encouraging flexibility to enhance service delivery might appear uncontroversial—no one after all would support rigidity and poor services. However, it is important to understand that one person's flexibility can be another's reduction in conditions of employment. In far too many cases the quest for more flexible service delivery has focused exclusively on cost reduction. In local government for example, the abolition of Compulsory Competitive Tendering and the introduction of Best Value has not been matched by any significant change in management style or procurement practice. For many trade unionists the experience has been "more of the same" rather than a determined shift away from the policies of previous Conservative governments. It is welcome of course that the government is alert to these problems and has instituted a review of Best Value. The issues covered by the review include measures to eliminate the two-tier workforce (which is discussed further at paragraph 2.11 below) and a willingness to accept the case for greater trade union and employee involvement in the Best Value process. The progress made so far in local government should set the pace for the remainder of the public sector. Flexible and responsive services can only be delivered by a well-motivated, highly skilled and well-rewarded workforce and the evidence suggests that effective trade union and employee involvement is a necessary condition for the fulfilment of this goal[18].

  1.12  The Prime Minister's final principle, "promotion of alternative providers and greater choice", owes much to thinking developed in the USA in the early 1990s—the process known as "reinventing government"[19]. Essentially, the argument runs as follows. Public services delivered by directly employed public servants are prone to "producer capture" and stultifying bureaucracy. The consistency demanded by bureaucratic procedures limits the scope for innovation, creates perverse financial incentives and produces "one size fits all" solutions. Continuing with the existing model of public service delivery will fail to meet the expectations of service users and will compound the existing problems of the public sector—in particular, there will be a general resistance to higher levels of taxation if the public sector continues to be sclerotic and unresponsive to the changing needs of users.

  1.13  The solution therefore is to remove "bureaucratic constraints", create a new body of public sector entrepreneurs and inject a healthy dose of competition into the public sector. Proponents of this argument suggest that it goes beyond traditional classifications of left and right since it seeks to deliver public services albeit using public, private and voluntary means. No doubt the argument is well intentioned and, in the early 1990s, seemed to be a useful device to rebut New Right arguments that private provision secured by individuals was invariably superior to anything procured by the state for citizens. Nevertheless, the notion that "alternative providers" or "contestability" will of themselves deliver greater quality and "choice" remains an assertion rather than a verified fact. There is a strong case for saying that the approach embodied in this principle displays a misplaced faith in market solutions and a considered disregard of the limited capacity of the private sector.

  1.14  The greatest weakness in this view is that it potentially impoverishes the concept of citizenship by reducing citizens to consumers—it still relies heavily on an essentially neo-liberal assessment of the role of public sector and continues to embrace notions like "producer capture". The Prime Minister expressed the argument thus in his October 2001 speech:

"We are making the public services user-led; not producer or bureaucracy led, allowing far greater freedom and incentives for services to develop as users want".

  1.15  Neo-liberals have always believed as a matter of ideology that market solutions are invariably superior, that markets operate as a "continuous referendum" on corporate performance and that where public services are provided they should to the greatest extent possible incorporate market principles. The concept of "choice" suggests that health care and education can be treated in the same way as any other consumer good. Parents can choose schools and patients hospitals in the same way as consumers choose to shop at Tesco, Sainsbury or Waitrose.

  1.16  There are three further significant problems with this approach. First, it ignores the fact that public services are subject to a regime of democratic accountability that embodies political choice and is at least as rigorous as anything that the market might deliver. Second, it is not clear that greater "choice" is what citizens want from public services. In health for example, citizens are rightly demanding access to high quality care when they need it. People are looking for improved facilities, shorter waiting lists and waiting times, faster diagnosis, more rapid treatment and an overall improvement in the UK's health outcomes. Offering people a choice between one hospital and another seems marginal to the concerns consistently expressed about the NHS. Similarly, in education what most parents really want is a quality education for their child at a local school—that this may not always be available does not mean that it is not a real desire.

  1.17  The rhetoric of choice is very often used to conceal a policy of growing inequality in the provision of public services—the challenge for policy makers is to raise standards across the board, not to create islands of well-resourced excellence in an ocean of otherwise mediocre performance. This challenge is related to a third point—public services are intended to deliver equality of access and close the gap between the life chances of the rich and the poor. Perfect markets depend on participants possessing perfect information—but in the case of public services, as with markets more generally, it is certain that service users will not all be equally well informed, determined or articulate and will not all be equally able to "shop around" for the alternative provider that suits them best. There is a real risk that the introduction of greater "contestability" and more "alternative providers" will create "choice" for the few and continued mediocrity for the many. Public services rooted in the notions of democratic accountability and citizenship are therefore more likely to achieve the objectives that the government seeks—social inclusion and opportunity for all—than a reliance on a hefty dose of entrepreneurship.

  1.18  If the principles identified by the Prime Minister constitute only a partial guide to action, is there an alternative approach that provides a better basis for public service reform? The answer has to be yes—and it should be borne in mind that many of the elements of the approach can already be found elsewhere in government policy.

  1.19  First, the TUC agrees with the government about the need to tackle the legacy of public sector under-investment. In large measure this problem is a result of the relative weakness of the UK economy over the past forty years and the anti-public service policies pursued by the Conservative governments between 1979-97. Whilst the Government has made a start on dealing with the massive level of under investment in both capital stock and the funding of services, there is still a considerable way to go before the UK achieves the Government's targets of European levels of funding and of capital investment. For instance the capital per hour worked in non-market services in the UK in 1995 was less than half the amount in France, less than a third the amount in Germany and less than one seventh of the capital deployed in Japan[20]. It is essential for the renewal of our public services that this massive discrepancy is put right. The top priority must be to sustain the big increases in public investment scheduled for the current spending round into the next three year period—this will be a central feature of the TUC's submission to the Third Comprehensive Spending Review. Under-investment is a far more serious problem than any alleged risk of "producer capture".

  1.20  Second, for more than twenty years all the incentives for public service managers have focused on cost reduction, getting more for less and getting by with a declining stock of capital assets. A determined effort needs to be made to shift these incentives in the opposite direction. The focus must be on quality, continuous improvement and the rapid and efficient implementation of capital investment programmes[21]. There are real questions about the capacity of public service managers to respond to the scale of this challenge without significant investments in management training. The Audit Commission and the Public Services Productivity Panel may both have a role to play here in assessing performance and identifying/disseminating Best Practice. There is also a need to raise management standards through the establishment of centres of excellence. The NHS University is a very encouraging start and more needs to be done in a similar vein.

  1.21  Third, the real source of innovation and reform will come from within public services rather than directly from the private sector. Of course, it is important for the public sector to learn from best practice wherever it may be found, but that does not mean that there should or indeed could be a massive extension of private sector involvement in direct service provision. As the Wanless report[22] has noted, the extent of private healthcare provision in the UK is very limited and it is extremely unlikely that the NHS Ten Year Plan can be delivered through increasing reliance on the private sector. Indeed, it is far more likely that the public sector has more to learn from itself than it does from the private sector. That means however that a much greater effort must be made to identify best practice and facilitate effective networking. Once again a good start has been made by the local government Improvement and Development Agency, which has developed an innovative peer review model to identify weaknesses in performance and identify possible solutions. The Centre for Management and Policy Studies is developing a comparable approach in central government departments and agencies and the Commission for Health Improvement could play a similar role in the NHS.

  1.22  Other possibilities might be to allow successful public service organisations to second staff to others who are performing less well. In local government a relaxation of the limitations on the power to trade might enable successful local authorities directly to take over services in under performing organisations. All of these options should be actively considered and are more likely to deliver improvements in service delivery than either an increased but essentially marginal role for the private sector or an attempt to make markets for alternative providers.

  1.23  Finally, any process of modernisation and reform will fail unless it engages the commitment and enthusiasm of the workforce. That is why a properly implemented programme of trade union and employee involvement is essential for the successful management of change. Framework agreements to permit developments of this nature have already been concluded in the home civil service, the NHS and local government. The challenge of course is to take these admirable statements of national policy and apply them to every public sector workplace. Exhortation has proved to be an inadequate force for change and a more rigorous approach must be adopted. Once again there could be a role for the Audit Commission here if organisational performance included benchmarks for effective trade union and employee involvement.

  1.24  To summarise then, the TUC would argue that any programme for public sector modernisation and reform must:

    —  Recognise the importance of effective democratic accountability

    —  Be based on a continued effort to sustain high levels of public investment

    —  Recognise the need to build management capacity across the public services through the development of centres of excellence

    —  Develop the extent of networking so the best of the public sector can share experience more widely and directly tackle underperformance.

    —  Implement an effective approach to trade union and employee involvement.

  1.25  How do we know if public service reform is effective?: The simplest test of the effectiveness of public service reform might be said to be the government's popularity. If the electorate are generally content with the outcome then the programme can reasonably be said to be a success. There are other measures that might be applied like waiting lists, waiting times, improvements in educational standards or reductions in crime. Nevertheless, the ultimate test will be purely political—public service improvement is the core objective of the government's second term and progress will be measured by the outcome of the next general election.


  2.1  What is the "Public Service Ethos"?: For all the reasons set out in Section 1 the concept of public service is far from being an anachronism. It remains the case that the market will not of itself provide universal access to those services on which full participation in society depends. Indeed, the delivery of the government's manifesto commitments depends on a renaissance of the concept of public service.

  2.2  To a degree the notion of the "public service ethos" has become less clear in recent years because the process of privatisation has blurred the distinction between the public and the private sectors. At one time it would have been relatively easy to identify characteristics that applied across the NHS, central and local government, public utilities and the emergency services—but the fact that some of these activities are now wholly in the private sector has inevitably made the discussion more complicated. Nevertheless, it is still possible to make the case that there are values other than market values that society treats as important, that people do not invariably behave as the rational wealth maximisers of classical economics and that these non-market values contribute to a distinctive public service ethos.

  2.3  To take an obvious example first, the relationship between patients and health care professionals is not constructed as a purely market transaction based on contract. Instead, both parties are acting on the basis of trust—patients would be legitimately concerned if they were being treated by individuals whose only motivation was to make as much money as possible. The values that constitute the foundation of the relationship—trust, professionalism, concern and respect—are all essentially non-commercial and to introduce a wholly commercial motive would lead to a worse result for both parties. Similar considerations apply in education where schoolteachers are self-evidently inspired by considerations other than profit—and would respond to the imposition of demands to maximise shareholder value as an attack on teaching as a vocation.

  2.4  Adair Turner has expressed the argument well by referring to "intrinsic" rather than "commercial" motivations, adding that:

"There is a danger that the introduction of overt commercial relationships cannot be achieved without eroding those intrinsic motivations...... [I]t is wrong to imagine that healthcare can simply be a market like any other, and that the complete marketisation of patient/provider relationships would be desirable. The market economy is a tremendously powerful tool to achieve ends, but it should not pretend to reflect the full range of human motivation and aspirations." [23]

  2.5  The commercialisation of public services might also produce inefficient outcomes—Turner compares US healthcare "absorbing 14 per cent of GDP in total" with France and Germany, where healthcare accounts for 10 per cent of GDP "without commensurately superior results". Wanless[24] reinforces this view when he reflects on work carried out by OECD that indicates that publicly financed health services lead to generally better health outcomes "for a given level of expenditure".

  2.6  Put most simply then, the public service ethos is about the application of values other than those simply determined by the market. It reflects that wider range of human motivations and aspirations to which Turner refers.

  2.7  Of course it is possible for workers in the private sector to be motivated by such non-commercial considerations. For example, a worker repairing fallen power cables on a cold winter weekend may be just as concerned about restoring the electricity supply to vulnerable pensioners as the profits of National Grid plc. An air traffic controller employed by the public private partnership now operating the National Air Traffic Service will be no less concerned about passenger safety than was the case when the service was wholly in the public sector. A nurse employed in a BUPA hospital will be just as committed to patient care as a nurse working for an NHS trust. Yet in each of these cases it might be said that the public service ethos has been transplanted into the private sector—applying purely commercial considerations, pure market motivations, will mean that the essence of the service is lost.

  2.8  It is also possible to argue that not all public services always apply the values inherent in the public service ethos. Critics on the Right would say that this demonstrates that the public service ethos is a chimera—but a better response is to note that the systematic denigration of public service for almost twenty years has inevitably had an effect on the motivation and commitment of public servants. An agenda focused on cost reduction is hardly likely to create an environment where trust, professionalism and the values of concern and respect can flourish. The failure of public services to display the public service ethos is more likely to be explained by inadequate resources, management weakness and hostile government policies than by the failings of individual public servants.

  2.9  Some might say that all of the above amounts to little more than the observation that public services should aspire to the high standards of "customer care" found in the private sector—but once again this is to miss the point. Citizens expect different treatment from public services. There is a real distinction between doing the weekly shopping or buying a new refrigerator—where "customer care" is important—and being treated in hospital or relying on the air traffic service. A further example might make the point clearer—the willingness of firefighters or other emergency service workers to put their lives at risk in the service of others goes beyond the requirements of courtesy and responsiveness which constitute good service in much of the private sector. That the general public understand this distinction is reflected in their at best ambivalent attitude to greater private sector involvement in the delivery of public services.

  2.10  Does increasing private sector involvement undermine the public service ethos?: If all of the above is correct then there is a serious question about the extent to which the public service ethos can be sustained in the face of increasing private sector involvement. This is not to argue however that the private sector has no role to play. The public sector has always procured goods from the private sector and private contractors have always undertaken major public sector construction projects. Equally, there is far more expertise in information and communications technology in the private sector and it would be absurd to expect that the whole of the public sector is well equipped to develop its own IT solutions. Nevertheless, recognition of these facts does not constitute an argument that the private sector should be given a role in the provision of core public services. All private companies exist to make a profit—that is their principal motivation, even though non-commercial considerations can intrude from time to time. Although private contractors might say they are committed to providing quality services they will always need to keep a watchful eye on the bottom line—and to that extent there will always be a real tension with the public service ethos.

  2.11  Trade unions are particularly concerned that the increasing involvement of the private sector has often led to a reduction in the terms and conditions for new employees. Workers transferred from the public to the private sector have their conditions of employment protected by the Transfer of Undertakings (Protection of Employment) Regulations 1981. This means that the new employer cannot vary contractual terms for any reason related to the transfer, although changes can be made subsequently within the limits of the common law. Unfortunately, employees recruited after the transfer enjoy no such protection and can be offered inferior wages and poorer conditions of employment—particularly pension benefits where the transferred employees are often members of final salary pension schemes and the new employees are offered an inferior money purchase alternative. It is encouraging that the government has accepted that this "two-tier" workforce exists and that action must be taken to prevent the phenomenon continuing. In local government this issue is being considered as part of the Best Value review and in the NHS an agreement has been reached that will ensure that around 80 per cent of non-clinical staff will remain directly employed by the NHS in PFI situations. Both initiatives are important steps in the right direction, but they constitute the minimum necessary to ensure fair treatment for all those employed in the delivery of public services.

  2.12  A far more important question in this context must be to ask, "what value can the private sector add? What can private companies do that cannot be done by the public sector?". The evidence on this point is patchy to say the least yet the government continues to believe that private sector managers have a distinctive contribution to make—hence the large number of private sector representatives on task forces and advisory bodies and the continuing commitment to the Private Finance Initiative and Public Private Partnerships. Whether PFI and PPPs genuinely deliver better value for money is an empirically testable proposition and the evidence is by no means persuasive. This is not an appropriate occasion to deal at length with the issue and the TUC has extensively reviewed both initiatives elsewhere. On the first point, reference has already been made to the need to raise the quality of public sector management, but the belief that the private sector has a readily available solution is a little too simplistic. It should be remembered that the UK has a general problem of management weakness—in both public and private sectors. Patient work in closing this gap should be a higher priority for the government than seeking the advice of private sector managers who may know little about the public service on which they have been asked to comment

  2.13  Finally, there is a legitimate concern that greater private involvement leads to greater inequality. Wanless quotes the OECD indicating that the "consequence of shifting from public to private [health] spending is to shift the burden from the relatively rich to the relatively poor". There is no reason to suppose that the balance will be any different in other parts of the public services where equality of access is a primary concern.

  2.14  Are "socially responsible" companies more appropriate partners for the public sector?: The question of private or voluntary sector involvement in the delivery of public services is much less controversial elsewhere in the EU than in the UK. It might be said that there are two potential reasons for this difference. First, conditions of employment are not subject to the progressive erosion that has been the case in the UK following public-private transfers. Collective agreements are generally applicable across an industry or sector and it is simply not possible for employers to cut costs by creating a two-tier workforce. Second, corporate governance arrangements across much of Northern Europe embody the notion of the company as a social as well as an economic entity. Two-tier boards, workplace codetermination and explicit social and environmental obligations work to ensure that the so-called Rhenish model of capitalism is shorn of the rough edges found in Anglo-Saxon systems. All these factors act to restrain the relentless pressure to maximise shareholder value and instutionalise non-commercial considerations in the process of corporate decision making.

  2.15  In the UK in contrast the pressure to squeeze value from organisations remains compelling, corporate governance arrangements protect the interests of shareholders above all other stakeholders and value is often maintained by reducing employment—a company's share price will generally rise after a major redundancy programme. To that extent therefore the peculiar nature of capitalism in the UK makes it harder to forge effective partnership between public and private sectors than might be the case elsewhere in the EU. "Corporate social responsibility" is an entirely voluntary activity in the UK with a remarkably unspecific content. In the absence of a wider change in the corporate governance regime it is hard to see how a company's self-reported "good" record on CSR would make that organisation a more appropriate partner for the public sector.


  3.1  A consistent theme throughout this submission has been that democratic accountability is one of the distinctive features of the public services. Yet accountability must go beyond simply voting periodically or making complaints to elected officials. Across the public services there have been a number of experiments exploring how citizens might be enabled to influence the design of the services they receive. The use of citizen's juries', scrutiny panels and regular, direct consultation with service users are all worth further development.

  3.2  The risk with increasing private sector involvement is that flexibility and responsiveness to public complaints will depend on the drafting of complex commercial contracts. It is entirely foreseeable that arrangements with the private sector could be more rigid than those found where public services are delivered directly by public servants. Indeed, it could be argued that this is a more serious form of "producer capture" than anything that has been experienced in the past. Similarly, the contract could become an even greater disincentive to innovation than any of the "bureaucratic" rules that have allegedly caused problems in the past. It would be paradoxical if, in pursuit of "user centred" public services, the government created less accountability and flexibility in public service delivery.


  4.1  The TUC would therefore argue that a rather different set of principles from those outlined by the Prime Minister must be adopted if the process of modernising and reforming public services is to be effective. There is much in current policy that points in the right direction, but the obsession with placing great emphasis on the marginal involvement of the private sector must be abandoned if progress is to be made. An emphasis on presentation rather than substance is undermining the confidence of public service workers who should be the government's natural supporters. The process of tackling a generation of under investment requires patience, dedication and a commitment to reinforce current spending plans in the third comprehensive spending review.

  4.2  At the heart of the TUC's case is the argument for more trade union and employee involvement in the process of reform. It is accepted that public services must change—but that change will not happen if public servants are alienated and feel themselves to be constantly under threat.

  4.3  Finally, the achievement of the government's manifesto commitments depends on a renaissance of the public service ethos. Reducing citizens to consumers and believing that private sector solutions are generally superior are obstacles in the way of successful policy implementation. Nor is it right to believe that private sector managers can be brought in as an instant solution for the improvement of public services. Most of the expertise needed can already be found inside the public services. The government must find a way to tap this great reservoir of knowledge and engage the commitment and enthusiasm of public servants in delivering change.

January 2002

18   See Partnership Works, TUC, January 2002. Back

19   See for example, Reinventing Government, Osborne and Gaebler, 1994. This influential work has the illuminating sub-title: How the entrepreneurial spirit is transforming the public sector. Back

20   Britain's productivity performance 1950-1996 an international perspective, Mary O'Mahony, NIESR (1999). Back

21   That the public sector is having trouble coping with this process can be seen in the high level of central government departmental underspends reported in the last year. Back

22   Wanless, Securing our Future Health: Taking a Long-Term View, November 2001. Back

23   See Turner, Just Capital, (2001), p.369. Back

24   Op cit. Back

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