Memorandum by Professor Gerry Stoker,
Chair and John Williams, Executive Director, New Local Government
Network (PSR 11)
Is the Government's strategy for public service
reform on the right track?
1. For the first time in over two decades,
reform of public services is centre stage in the public policy
debate. Since the 2001 General Election the Government has been
under considerable pressure to deliver significant improvements
in the quality of public services.
On the face of the available evidence about
the public's level of satisfaction with the performance of public
services, the Government is right to press ahead with a radical
2. There have been significant increases
in public spending delivered through the first Comprehensive Spending
Review (1999-2002) across the key public services. Nonetheless,
as this recent NLGN commissioned MORI survey demonstrates, there
is no doubt that positive perceptions of the public sector have
fallen significantly over three years.
3. The Government's overarching mantra of
"what matters is what works" has been its guiding intellectual
compass throughout the development and application of its public
service reform programme. Although few could argue with the pragmatism
of such a statement it does have its limitations. There is as
yet no clear intellectual rationale or rigour to the Government's
use of private sector involvement in public services. We will
argue that the Government must get beyond the "what matters
is what works" line to develop a more robust and coherent
vision of public service delivery in the 21st century.
What are public services in the 21st century?
4. It is difficult to have a debate about
the reform of public services without first trying to understand
what defines a public service today. The world into which public
services were born has changed irrevocably. The post World War
II era of collectivism gave birth to the great pillars of the
welfare state and the creation of key public services such as
the provision of education and health care, free at the point
5. Today what defines a public service is
often increasingly complex and blurred. Many would argue, for
example, that buses remain an essential public service but today
they are almost entirely provided by the private sector, whilst
the role of the regulator assumes the mantle of defender of public
service outcomes in critical areas such as electricity and telecommunication.
6. In seeking to define the role of public
services, it is worth remembering why they exist. Public services
are there to improve the quality of people's lives. They are not
primarily there for the producers of public services. Keeping
the user at the forefront of the debate about modern public services
7. Clearly, this broad "quality of
life" definition could be applied to a whole range of services
that affect the public from Tesco's supermarket to Lunn Poly Holidays.
So what defines a public service from any other service? A public
service could be defined as one that:
Relies upon an element of taxpayers
money to be provided (even in the short term) to establish or
sustain the service through part or whole subsidy;
Accepts a different and extended
type of accountability. Managers of public services have to justify
why they ration resources in the way that they do and those services
in turn are subject to a form of democratic accountability and
Has a defined customer base. Most
public services are unable to choose their customers and most
customers are unable to choose their public service supplier.
8. However, if the guiding principle of
public service reform is the satisfaction of end-user and the
wider community, then what do the public think defines a public
service today? In the NLGN-commissioned survey referred to above,
MORI tested public attitudes towards public service and the role
of the private or voluntary sector in helping to deliver those
services. The survey revealed that the public has a sophisticated
and complex view of what defines a public service. The two top
definitions of public service were:
"Available for everybody to use"40
"Important to the whole community"38
9. When asked if a key definition of a public
service is the management of the service by central government
or local councils, only 23 per cent of respondents agreed. Perhaps
even more revealing was that only 4 per cent of the public thought
that a key characteristic of a public service was that it had
to be provided free at the point of use. From prescription charges
to leisure services, the public are perhaps more aware than politicians
of the limits and realities of "free" access.
10. The survey then went on to test public
opinion towards the role of the private sector in delivering public
services. Although a small and defiant proportion of the population
(approximately 11 per cent) are opposed to private sector involvement
in public services (even if it is proven to be more effective),
the vast proportion of the public remain non-ideological and pragmatic
about their involvement. To that extent the public appears to
be singing from the same hymn sheet as the Government on the issue.
11. This accords with other public opinion
survey material in recent months, which shows that the role of
the private sector in public services is a low salience issue
for the public. Less than 1 per cent
of individuals spontaneously mentions this issue when asked to
say what are the most important issues facing Britain today.
12. There has been significant recent interest
in the term "public service ethos". In the discussion
about public service ethos, there exists a suggestion that motivation
for those who work in the public sector is somehow more "pure"
than those who work in the private sector. There is simply very
little evidence for this.
13. To attempt to make such a suggestion
is to denigrate at a stroke, the motivation of the millions of
people who work in the private sector. They may have a variety
of motivations for why they do their jobmaybe they enjoy
their job, are provided with more freedom to be innovative or
simply need to earn a living. None of these reasons makes their
motivation any less "pure". Second, over 1.5 million
people are employed in local government, performing a wide range
of tasks from the collection of rubbish to conducting land searches.
The mixed market of service provision that has been generated
in local government during the past 15 years means that today,
public and private sector employees often work side by side to
achieve common goals and objectives.
14. The recent development of a diverse
market in education support services has involved a significant
recruitment of public sector managers to the private sector. Those
people who allege a more "pure" motivation of public
sector staff should be asking themselves, what drives those senior
managers to work in the private sector? Are they driven by a less
"pure" motive than their colleagues who choose to stay
directly employed by the public sector? These people are of course
continuing to make a very important contribution to delivering
public service outcomes, as does the teacher who chooses to work
in the independent sector. What is more likely to these two people
is a desire to have access to more resources, space to experiment
with new teaching methods or more opportunities to export their
vision of raising educational attainment to a wider audience.
If the public regards some public sector workers as "heroic"
it is more likely to be in sympathy with the poor and stressful
conditions within which they are expected to work.
15. Critics of a more diverse market in
public service provision have asserted that the very existence
of "profit" muddies the motivation of the people who
are employed by the private sector to deliver public services.
However, this assertion is flawed on four counts:
It fails to recognise the fact that
most public sector organisations that operate on the scale of
multi-million pound businesses, need to function as a business
with, in theory, the same disciplines, performance management
frameworks and customer responsiveness as a business;
The existence of the need for a return
on investment is a clear incentive mechanism for continuous improvement
in public services and for the private sector to deliver on the
outcomes or outputs that the public authority commissioner has
Profit is nearly entirely recycled
back into the British economy. A proportion will be paid in tax,
a proportion to shareholders (80 per cent of whom are large pension
investors) and the remainder re-invested into the company;
Profit has always existed in parts
of public services. If a school had been built under a traditionally
procured contract, profit would have been made by a variety of
different organisations such as the architects, engineers and
builders etc. Very few people today continue to suggest that central
government should "nationalise" the entire supply chain
that public services need to access in order to deliver a service.
16. Profit is not a barrier to the delivery
of effective public service. What is needed is a public service
and not a public sector ethos. We would argue that the idea of
a public service ethos is less important as a description of the
motivation of public sector workers and more important as an aspirational
concept for all those involved in public services.
Public service ethos should embrace:
A commitment to treat service users
with respect, due to their position as taxpayers and citizens;
A full and diverse public accountability
for service provision;
To work in a joined-up manner with
other public service providers in the case of emergency services
and where effective achievement of outcomes demands it.
17. NLGN is committed to the modernisation
of local government. We believe that significant improvements
can be made to people's quality of life through the creation of
effective, responsive and accountable local government. Local
government is responsible for £72 billion of public expenditure
per annum and has a key role in the delivery of a wide range of
public services alongside the development of the local spatial
environment, which affects the quality of life of every individual
18. Local government continues to be at
the forefront of the reform of public services:
More citizen-to-government contact
takes place at between local government and its' citizens than
any other level of government in the Britain. Over one billion
calls are made each year between the public and local government2;
Service delivery performance in local
government remains variable at best and appalling at worst. Of
the one billion calls referred to above, over 200 million are
left unanswered. The recent Audit Commission report, "Changing
stated that in terms of service delivery performance, "two
thirds of councils were coasting". Yet those that were performing
well, "knew the value of working with the private sector";
There is significant experience in
parts of local government of the role of the private and voluntary
sectors in helping to bring about improvements in public services.
19. During the past decade local government
has become the test bed for the emergence of a mixed market in
the provision of public services. What has clearly emerged during
that time is evidence of a growing maturity in the relationship
between parts of the public and private sectors reflecting a better
understanding of how to achieve service improvements.
20. Under the CCT (Compulsory Competitive
Tendering) regime, relationships were commonly adversarial and
local authorities used enormous amounts of creative political
and managerial energy doing their best to avoid compliance with
the law. By the time the current Government enacted the Local
Government Act 1999 and replaced CCT with Best Value, both the
public and private sectors welcomed the change. Best Value requires
councils to make a much more rational "make or buy"
decision based on an assessment of current resources and what
is more likely to secure the best level of service for the public
service in the future.
21. As a result of Best Value, there is
growing evidence of an increasing range of service delivery partnerships
being entered into voluntarily with the private sector, although
the total number of contracts being tendered by local authorities
has fallen by 23 per cent4.
What is the rationale for a greater involvement
of the private or voluntary sector in the delivery of public services
in local government?
Ending monopolistic provision: a
monopolistic or oligarchic provision of any service, whether in
the public or private sector is more likely to lead in the medium
term to weak performance. This applies equally to services in
the public and private sector. In many local communities several
important services are currently only available through one supplier
ie the local authority. In such circumstances there is an even
greater case for Government intervention to create a more diverse
supply market to promote innovation and greater cost effectiveness
in public services;
Capital investment and shared risk:
investment through PFI or PPPs has delivered a substantial number
of improvements in the infrastructure of public service in recent
years ranging from the refurbishment and rebuild of secondary
schools in Glasgow to the delivery of a new fleet of waste disposal
trucks in Lambeth. These projects are often delivered to time
and on budget. Risk, across a whole range of areas, is shared
with the private sector partner;
Innovation and challenge: one of
the most important by-products of a contestable supply market
is greater product innovation and challenge. All of us find it
difficult to challenge what we do or change how we do our jobs.
People are often understandably defensive about the quality and
nature of their work and without an element of competition, radical
challenge to any service is unlikely;
Focus on core business: most unitary
local authorities in England and Wales deliver around 700 different
services. It would be almost unthinkable for a private sector
company to attempt to specialise in the delivery of such a wide
range of services and yet we expect local authorities to do just
that. In the 21st century a local authority's core business is
to be a guarantor of service outcomes and the leader of the community.
Partnership with the private or voluntary sector can help to lever
managerial time to take on and tackle these challenges;
Access to specialist skills: choice
and innovation in product development will often require the use
of specialist organisations or individuals that no local authority
would want or could often afford to develop "in house".
Partnering with the private or voluntary sector can often provide
access to a wide range of skill sets that a local authority would
be unable to justify developing and maintaining as part of an
Access to economies of scale: there
are 388 local authorities in England. Each constitutes a potential
individual unit of economic and service provision. It would be
an expensive luxury for the public sector to pay for the delivery
of 388 local online strategies. Joint commissioning or procurement
of services has the potential to lever significant additional
resources to the public sector, which can then be ploughed back
into front line local service delivery. For example, the business
case prepared by PWC for the aborted joint corporate services
deal between four southern local authorities, showed potential
annual savings of circa 30 per cent in administration costs. Scale
those figures nationally and the savings can create opportunities
for greater spend in other parts of the public sector that need
Efficiencies: through business process
re-engineering or the application of new service delivery platforms
and improvements in the management of the organisation, a contestable
supply market should help contribute to improvements in public
Enhanced performance management:
something that is still weak in many parts of local government
and in general only exists in response to the need to monitor
BVPIs rather than being part of the culture of the organisation.
Performance management and the establishment of rigorous baseline
data sets is more developed as a critical measure for success
in the private sector;
Greater performance accountability:
contractual relationships/partnerships will always contain measures
for redress and rectification in the event of failures to deliver,
as befits a split between purchaser and provider. Realistically
internally delivered services lack such accountability and redress
is more limited or tenuous.
22. The transfer of staff from the public
to the private or voluntary sector can be a difficult process.
Staff are naturally fearful of transferring, driven in part by
a perception that there may be changes to their terms and conditions.
It is essential that if a council decides to engage in a public-private
partnership that they seek to overcome this by:
Being clear with staff and the wider
community about why they are seeking to work with an external
partner and what they are hoping achieve;
Providing staff with an open channel
of communication (from seminars to hotlines) so that they get
accurate and updated information rather than via the rumour mill;
Involving staff right the way through
the process of selecting a preferred partner and negotiating the
23. On the issue of TUPE transfer agreements
and the emergence of two-tier workforce, it is important that
transferred staff have their terms and conditions protected. Improvements
in public service should not come at the expense of staff terms
and conditions. This should apply to new staff as well as existing
staff. There is plenty of evidence of good practice with regard
to this issue in local government. Lessons need to be shared between
local authorities and the public sector about how transfers are
effectively dealt with in practice.
24. On a more positive note, staff that
transfer to the private sector, rather than being "protected"
from such a move, may actually benefit. In many cases they may:
Be better managed than they were
by their public sector employer;
Receive access to additional training
Have greater freedom and responsibility;
Gain access to a wider range of career
Local authorities have the legal powers to take
these issues into account when they decide to award a contract
to an external partner. A failure to achieve the right outcomes
for staff could be a reflection of the public sector's procurement
capacity or a limited supply market.
25. Secondments have been put forward by
some as a possible way of overcoming a number of the political
difficulties of transferring large numbers of staff from the public
to the private sector. Liverpool City Council's strategic partnership
with British Telecommunications, where 800 staff have been seconded
to a joint venture company, is an example of this within local
However, secondment on such a scale over the
length of time proposed (ie several years), does have a number
of significant drawbacks:
For staff: it potentially creates
a glass ceiling for future promotion and training.
For the public sector: it creates
confused lines of accountability and is inevitably more expensive
because the private sector will be expected to bear significant
additional risk if the major resource (human), is not within their
For the private sector: it is likely
to lead to less effective performance and a reluctance to commit
to long-term partnerships where secondments are insisted upon
instead of transfers.
26. As stated earlier, one of the most important
differences between a public and private service is the different
and in some ways enhanced levels of accountability for the delivery
of a public service to a broader range of stakeholders.
27. Private or voluntary sector organisations
that want to deliver public services have to be aware of, and
work within, these boundaries. However, ultimate accountability
for the delivery of a pubic service should always rest with the
commissioner of the servicethe public body. Working with
a partner to improve public services does not mean "outsourcing"
the accountability for the performance of that service. To this
extent, local politicians should take the lead in explaining to
the public why the council is engaging with a private or voluntary
sector partner and ultimately for the performance of that partnership
to the user and the community.
28. However, the picture of accountability
is a complex and developing one in local government. Recent changes
to political management structures and a clearer distinction between
executive and scrutiny responsibilities of individual councillors
have both helped and hindered the process of accountability for
the performance of PPPs. Accountability is assisted in that there
it is clearly easier to identify the lead members responsible
for managing the strategic elements of the partnership on a daily
basis. Yet the principle of setting up of any large-scale partnership
and the subsequent agreement to award a contract to a specific
supplier are done with the consent of the full council.
29. When it comes to scrutinising the performance
of the partnership, council members on the scrutiny panels often
believe that their role is to expose under performance in a public
forum, by cross examination of the contractor. Whilst the private
sector should be accountable for its performance in these environments,
it is important that the scrutiny processes recognises that lead
members are ultimate public face of accountability for the success
or otherwise of the partnership and that proper protocols are
in place to manage this process effectively.
30. Finally, to perform the role of service
champion and a commissioner of service outcomes, local authorities
should have the power to join up public service delivery agents
at the local level when the effective achievement of service outcomes
necessitates. As a greater number of services are either devolved
to frontline institutions or outsourced to voluntary or private
sector, the local authority needs new levers to help integrate
service delivery unit objectives around common community objectives.
That is why in a pamphlet published earlier this week5,
we called for the Government to impose a duty on other local public
bodies to have regard to the community plan of the local authority
as a practical tool for affirming local government's broader community
31. New models for the delivery of public
services are constantly emerging. In local government, the evolution
from the CCT regime to Best Value has helped stimulate a significant
improvement in the relationship between the public and private
sector. It has stretched the line of performance and liberated
innovative public authorities and private sector suppliers to
think afresh about the models that they wish to use to deliver
public service improvements. There can be little doubt that we
are only a small way along the journey of developing new service
32. In local government, the past 18 months
has seen the emergence of a new model for delivering public services:
strategic partnerships between the public and private sector.
NLGN produced the first major study in July 2001 on these partnerships
(a copy will be circulated to all members of the committee)
6. A second study is currently being undertaken and will be completed
by March 2002, which is examining in detail, how these relationships
are being managed to deliver more outcome focussed benefits for
the user and the community over the whole life of the contract.
33. What characterises a strategic partnership
between the public and private sector? They:
Often involve a number of the core
functions of a local authority.
Are often long term, multi-functional
Are developmental in nature and flexible
enough to respond to changing demands.
Often contain a shared element of
risk and reward.
34. To date a number of these partnerships
are on track to deliver significant benefits for the local community.
Sometimes the partnership has been constructed as part of the
town's regeneration strategy, providing a mechanism to grow the
business and develop new employment opportunities in some of the
most socially deprived parts of the country. The true test of
these strategic partnerships will be in 4-5 years time when they
will have to demonstrate that they have delivered on their primary
objectives and have been flexible enough to respond to changing
tastes or priorities.
35. In recent months there has been a growing
interest in the development of not for profit models or "public
public partnerships" to assist in the delivery of public
services. However, the disciplines of managing resources effectively,
motivating staff, delivering continuous improvements in services,
applying effective performance management regimes, promoting an
empowered can-do culture and responding to consumer changing tastes
are just some of the requirements that any organisation will be
expected to demonstrate. The critical policy question for central
and local government is, under what conditions are these characteristics
more likely to exist?
36. We would argue that the triple issues
of contestability, diversity and skilled public authority commissioners
and procurers are, if delivered, more likely to bring about continuous
improvements in public service outcomes, regardless of the specific
models used. What is needed is:
Greater experimentation with a variety
of new models.
Systematic tracking of the performance
of all emerging models.
Contestable supply markets to drive
up improvements in performance.
37. To deliver and sustain continuous improvement
in public services, organisations that provide public services
in any form of models outlined above need to be motivated and
free to develop the capacity and tools needed to bring about change.
Motivation should be driven from three levels:
Top down: Government has three critical
roles in stimulating improvement. They can use policy levers and
funding mechanisms to incentivise performance or the collective
provision of services, set targets and monitor performance through
an inspection or local PSA regime and empower front line staff
to be innovative.
From the side: Constestability and
challenge needs to be generated through a diverse and competitive
supply market in local government and across the public sector.
Public authorities should be expected to make a rationale "make
or buy" judgement on the basis of the available resources
that they have access to and the needs of local consumers. If
a diverse and contestable supply market is desirable it is unlikely
to come about by chance or wishful thinking. Its development should
be actively encouraged and promoted by central and local government.
Bottom up: The user of the service
should have the tools to stimulate improvement in public services
through the ballot box, more accountable performance mechanisms
and greater choice over which supplier individual customers may
wish to use.
38. Central to the long-term agenda for
revitalising public services is the renewal of political and managerial
Leadership is possibly the most overlooked and
most important element of the improvement strategy. Impressive
step changes in public services have been brought about in recent
years by the vision and determination of local politicians and
senior managers to make tough choices and long term decisions
that will deliver improvements in public services and the well
being of the community. No improvement strategy can deliver significant
results without addressing how we encourage and sustain a higher
calibre of senior political and managerial leaders in our public
Managerial capacity in the public sector is
mixed. Often a track record of technical ability and professional
skills get you to the top in local government. There is not sufficient
focus on developing and rewarding corporate management capacity.
This could be addressed in the short term through improved fertilisation
across sectors. However, it is a reflection of the endemic short
sightedness of our national and local politicians that to this
day local government does not have and never has had its own national
graduate management programme. In the medium term local government
will grasp this and the nettle of competitive remuneration packages
for senior public sector managers, if it wants to compete for
the skills and talents of the next generation of managers.
Variable political leadership in local government
remains by far the largest stumbling block towards improvement
in public services and yet for obvious reasons it is the obstacle
that no national political party is prepared to seriously take
on. That is why NLGN supported recent moves away from the committee
system but why we continue to press for more radical solutions
to address the issue such as the introduction of directly elected
mayors, electoral reform and a reduction in the number of councillors
(balanced by an increasing number of representatives).
39. As stated, the Government's intellectual
compass for reforming public services has been to repeat the mantra,
"what matters is what works". However, such a pragmatic
attitude to reform does have three significant drawbacks:
It's important that the public, local
and central government, are able to "buy-in" to the
values that describe what public services are for and how they
are to be improved. This has to mean more than just providing
a "good" service. It must embody other values such as
a recognition of the different levels of accountability.
If the Government wants to develop
policy in order to arrive at a particular destination in the future
(eg where there exists a truly diverse and contestable supply
market in public service provision), then it is unlikely to get
there by adopting a pragmatic "wait and see" attitude.
To create such a market will require policies and implementation
strategies that may have to be advanced without first having the
"evidence" that it "works" within a particular
sector. The creation of a limited, uncompetitive market in some
public services (because the Government is waiting to see what
will happen), may lead to self-fulfilling prophecy of weak performance.
It may sometimes lead to the impression
that the Government is confused and unsure about where it wants
to go with public service reform. This only serves to unsettle
public sector employees who might be opposed to further reforms
and potential private sector suppliers who will be assessing their
company's long-term commitment to a market.
1 MORI Public Opinion Omnibus Survey, Autumn 2001.
BT/Henley Centre Study 2000. Back
Audit Commission, "Changing Gear Best Value Annual Statement
Audit Commission, "Changing Gear: Best Value Annual Statement
Stoker: "Beyond PSAs: the Case for Forerunner Councils",
NLGN, November 2001. Back
Allen, Filkin, Williams, "Strategic Partnerships for Local
Service Delivery", NLGN, July 2001. Back