Memorandum by the Local Government Information
Unit and the Democratic Health Network (PSR 15)
The LGIU is an independent policy and information
organisation with over 150 local authority members and the local
government trade unions. We have done a considerable amount of
work around the issues covered by the inquiry and have recently
produced a publication on public private partnerships that highlighted
the issues of democratic accountability and the public sector
The Democratic Health Network (DHN) was set
up by the Local Government Information Unit (LGIU) to provide
policy advice, information, research and the exchange of good
practice on the developing relationship between local government
and health. The DHN has over 100 members, the majority being local
authorities, but also including health authorities, over 20 primary
care groups and trusts and community health councils and trade
We very much welcome the Public Administration's
Committee's inquiry into public sector reform and particularly
into the effects of private sector involvement in the delivery
and financing of public services. There are clear issues here
around accountability, probity and possible conflicts of interests
that the government so far has not seemed to put high on its agenda.
1. What should be the principles guiding
the reform of public services?
The objectives of public service reform should
be to deliver universally accessible, high quality, responsive,
sustainable services, based on need and social justice. Public
services need to be properly financed and publicly accountable.
The primary principle should be the needs of
users and communities are paramount. It should preclude domination
of any vested interests, including commercial interests, that
would work against the public good. The principle of subsidiarity
should be enshrined in the reform of all sectors of public service
whilst protecting the concept of universality and social justice.
Reform should not further fragment provision.
Accountability should be improved. Reform should
seek to enhance citizenship and the role of representative democracy.
It should promote participative democracy and decision making.
Users and citizens should be consulted and involved in the procurement
and delivery of services and in proposals for reform.
Reform should not be implemented at the expense
of the workforce and should ensure there is a partnership between
public service workers, users and the government to improve the
effectiveness of services.
The system should demonstrate probity and integrity,
and maximise the opportunities for public scrutiny.
2. Does central government have clear principles
and an effective strategy for reforming public services? Does
it need to have a strategy at all, or is it better to let public
bodies make their own arrangements for improving services?
The government is clearly committed to the reform
of public services, with the modernising government agenda at
national and local level. There are stated objectives, such as
"joining-up" government, focusing on users of services,
improving quality, strengthening democracy, and adopting a more
strategic approach. It is not clear, however, that it has clear
principles that underpin its agenda for reform.
There are tensions in how the government is
approaching the modernisation agenda. The emphasis on achieving
efficiencies through the imposition of national targets and indicators
is not totally consistent with strengthening democratic accountability,
particularly at the local level. "Joining-up" government,
when it is demonstrated by an endless stream of new initiatives,
can lead to fragmentation, not coherence. There often seems a
lack of focus and priority.
Even where there has been a degree of "joined-up"
provision, there are potentially problems. There are questions
over political and managerial accountability and responsibility
when a variety of partners are delivering a service.
Care Trusts, established under the Health and
Social Care Act 2001 illustrate this possible blurring of accountability.
Although the rationale, to provide seamless services between agencies,
is sound, there is a possibility of confusion of responsibilities
between the different elements of the trust. Our primary concern
is that Care Trusts will dilute local democracy and political
accountability by creating new forms of quangos to take over some
of the responsibilities of local councils.
In relation to the role of the private sector
and the attitude to public services, messages coming from the
government are sometimes inconsistent and ambiguous. The Prime
Minister and ministers say they value public service and the people
who work in it, but they also tend to make comparisons between
what they see as an "entrepreneurial" and "dynamic"
private sector with a conservative, backward looking public sector.
The government seems to have moved from a position
where they advocate private sector involvement where they perceive
services to be failing to one in which they want to see the private
sector involved in successful services as well.
The Prime Minister claims there should not be
any barriers to private sector involvement, but the Secretary
of State for Health insists PFI will not be extended to core clinical
services. This indicates an acknowledgement of a public belief
that some public services, to retain their unique characteristics,
should be delivered from within the public sector. In education,
there is some ambivalence over whether private companies should
employ teachers, an illustration of the same point.
The government's mantra is "what matters
is what works" but this claim fails to find room for the
view implicit in the Secretary of State for Health's commitment
described above, that there is something special, unique and desirable
about public services delivered by the public sector. The government
is reluctant to test out "what matters is what works",
in that it is unwilling to enter into a serious debate about its
policy on private provision and financing of public services;
it will not constructively address the debate about the possible
consequences of the commercialisation of public services; and
it does not attempt to justify its assertions about the "efficiency"
of the private sector.
This is particularly true of the private finance
initiative, where it is clear that the economic case for PFI has
not been made. The substantial research into major PFI schemes
by Professor Allyson Pollock's Health Policy Unit at University
College London has been dismissed without proper discussion. The
government supported most of the IPPR's report into its commission
on public private partnerships Building Better Partnerships
(IPPR 2001), whilst ignoring the IPPR's views on the weakness
of the macro economic case for PFI.
The government's position on the role of the
private sector has to be seen in the context of the increasing
liberalisation of trade and the privatisation of public services
globally. Corporations have rapidly expanded their share of markets
through takeovers and entering new markets. Global privatisation
has been the major opportunity for the private sector to grow.
The current World Trade Organisation's (WTO) negotiations over
the next stage of the General Agreement on Trade in Services (GATS)
could result in new services being opened up faster to market
access, with education and health being the major areas of potential
growth. There is a danger that growing pressure on the government
to open up public services to the market will exacerbate concerns
about accountability and democracy.
The LGIU believe that there should be principles
that underpin public service reform, and that there needs to be
a degree of central regulation and inspection, but that there
should also be much greater freedom at the local level for communities
to innovate and improve services. Too heavy prescription stifles
initiative. Having "solutions" imposed, without even
clear evidence that they work, (such as enforced outsourcing)
diminishes local democracy and the ability of local government
to find its own ways forward.
3. Do the devolved institutions and local
government have clear principles and effective strategies for
reforming public services? Could there be a role for strengthened
regional institutions? And 4. What would be the consequences if
there were significant differences between the policies adopted
by central, devolved, regional and local government on public
service reform issues?
It would be misleading to say that local government
as a whole has clear principles for reform, although it is probably
fair to say that there is a consensus in local government that
reform of services should be undertaken in partnership with local
government and not imposed on it; and that reform should therefore
recognise the differences between localities and between councils.
Devolution adds a new dimension to the debate
around public sector reform and the Committee's recognition of
this fact is welcome. Contradictions inherent in the UK government's
approach to public services are now compounded by a regular failure
to clarify that responsibility for the public sector is now shared
amongst the governments of the UK. The substantive areas of responsibility
devolved to the new administrations are those in which the public
sector plays the key policy and delivery roles. Divergence in
the approach to public services is almost inevitable. It is arguable
that the success of devolution should be measured by the extent
of the resulting differences.
Some very real constitutional and financial
checks on divergence remain. Gaps in the areas of responsibilities
devolved render meaningless any development of an all-encompassing
approach to public sector reform on the part of the National Assembly
for Wales. Further, in the absence of primary legislative and
tax raising powers, the National Assembly's approach to public
services must be achievable within existing legislative and financial
The National Assembly for Wales has recently
published its Plan for Wales 2001 in which public services take
the primary focus. It is already evident, particularly in the
areas of health, education and local government, that the approach
is different with, significantly, little if any attention being
devoted to the private sector. This seems entirely consistent
with the wider social priorities and values in Wales where there
is a closer individual engagement in the public sector (comprising
a higher proportion of the workforce in Wales than England), limited
enthusiasm for private sector "alternatives" (few grant
maintained schools) and a notable tradition of collectively provided,
community-based resources in both rural and industrial areas.
Notwithstanding the checks on any radical departure
on the part of the National Assembly for Wales from a UK agenda,
the use of available powers suggest that there will be some divergence
and this is entirely consistent with the intended consequences
of devolution. Powers passed to this more local, democratic body
are better able to address a smaller nation's needs and priorities.
Devolution provides opportunities from within the UK for the development
of different policies, different models of operation and greater
local innovation. It will also, no doubt, generate cross border
jealousies and tensions between administrations. The public sector
has much to gain from an invigorated political debate and a wider
range of more immediately comparative experience.
6. Is the concept of a public service an
No, it is not an anachronism. The public sector
still has distinct purposes, conditions and tasksthe provision
of public or social goods and services, the development of values
of democracy and citizenship and the realisation of justice and
equity (Ransom and Stewart 1989).
The market cannot provide all goods and services.
Certain services require political legitimacy to be effective,
such as planning which involves restrictions on individuals; some
services cannot be charged for on an individual basis, such as
street lighting; other services cannot be divided into units or
services that someone can buy and then sell on to another person,
such as the provision of a park. Finally, there are services and
goods, such as education, where it is in the interests of society
for all individuals to have access to over and above what the
market might support.
In an era in which the concept of human rights
has been enshrined in national legislation, it is not anachronistic
to believe that there are some goods so closely linked to human
rights (the right to health, the right to education) that the
provision of such goods should be protected from market values
and that the providers of these goods should be primarily motivated
by a concept of public service, rather than, say, by the need
to make a profit.
The encroachment of the private sector and private
sector values threaten to undermine the fundamental principals
that underpin the public sectorthat publicly funded services
are not about making profits but are about ensuring that collective
interests are maintained. Private sector models place a lower
priority on equity and they can reinforce existing inequalities.
The enabling model, with the separation of purchaser and provider,
the growth of quasi-markets, and the stress on competition and
performance measures, dilutes professionalism, voluntary co-operation
Many people who work in the public sector clearly
recognise the concept of public service in the work they do. The
Commission for Local Democracy, set up by the LGIU, in the mid-1990s,
commissioned research (with the Institute of Chartered Secretaries)
into the public sector ethos in local government. This was carried
out by Lawrence Pratchett and Melvin Wingfield of De Montfort
University. Some of their findings, after detailed research in
several councils, where that staff still strongly believe in traditional
values such as honesty, integrity, professionalism and integrity;
that salary is not the main factor when deciding to become local
government officers; serving the community is one of the best
features of working for local government; and a majority did not
want to work in the private sector.
7. Is there a public service ethos, and how
can it be defined?
Pratchett and Wingfield looked closely at whether
there is a public sector ethos and whether if so, is there a specific
local government variation of it. They conclude that there are
certain deep-rooted values that underpin the culture of local
government and inform the day-to-day activities of those employed
in it, but that the public sector ethos is ambiguous and may be
subject to different interpretations over both time and location.
The LGIU accepts this is the case, but there
are also recognisable elements across the public sector, with
the sharing of particular values and behaviour, such as the recognition
of the legitimacy of the political process, the importance of
community and integrity, a sense of social justice and objectivity.
There are a range of cultural values that have underpinned the
attitudes and behaviour of those who work in the public service.
The Neill Committee's definition of the seven principles of public
lifeselflessness, integrity, objectivity, accountability,
openness, honesty and leadershipis still relevant.
Accountability is traditionally seen as to the
public through the legitimacy of democratic institutions and loyalty
to the institution, the concept of democracy and to the community
served. The concept of loyalty to the community is perhaps particularly
important in local government. Pratchett and Wingfield describe
the distinctive features of local government that lead to a sense
of public service ethos that differs significantly from other
areas of public administration:
"Unlike other public sector organisations,
local government is exclusively focused upon local communities
and is directly involved in local issues. This inherently local
focus is unique to local government."
Local government is distinguished from other
public services that impact on localities by the democratic basis
of its institutions "and its legitimate focus on all issues
that affect the locality".
Locally, elected local authorities ensure that
accountability for the provision of services is to the communities
that are served and elected councillors are drawn from those communities.
Democracy relies on the active involvement of citizens in determining
policy and local authorities have a crucial role in fostering
active citizenship. Local government is more than a instrument
to deliver services. Its ethos is inextricably tied to its democratic
8. How is the public service ethos different
from the private (or voluntary) sector ethos?
We believe that the concept of working for the
common good as an overriding objective is a defining characteristic
of the public sector ethos. The obligation to secure profits for
their shareholders creates a permanent conflict of interest with
the obligations of private providers to act for the common good.
This can be illustrated by the Judicial Review
of Northumbrian Water's decision not to extend water fluoridation
in the North East, in 1998. The Judge, Mr Justice Collins, said
that the water company "cannot be said to possess powers
solely in order that it may use them for the public good. It has
its commercial obligations to its shareholders. It must exercise
its powers in accordance with those obligations". He added
"with some regret" that the current legal situation
makes it "open to the water company to adopt the attitude
that it has", and that this was "an inevitable consequence
Unlike the public sector, that generally has
to provide a universal service, the private sector can select
its market and differentiate between users. Its ethos has primarily
to be to maximise profits and increase market share.
Although there are shared values between the
voluntary and public sectors, the voluntary sector has a different
basis of accountability, not being defined by political processes
and democratic accountability. The voluntary sector usually focuses
on specific needs. It grew up to fill gaps in the public and private
sectors. There is a danger that if it is used as an alternative
to the public sector, not an addition, it will be overloaded and
weakened. Its independence and ability to innovate could be undermined.
There are elements of the public sector ethos
found in private sector institutions, such as loyalty, but again
there is a totally different basis of accountability.
Integral to the public sector ethos is the concept
of equal opportunities. Public services are expected to cater
for the needs of everyone and represent diverse communities. Equalities
are central to the consideration of all services.
14. Do private sector people working in and
around government, including secondees, task force members and
others, undermine the public service ethos? Are special measures
needed to regulate their activities and prevent possible conflicts
There is a danger of potential and real conflict
of interests and of the perception of conflict of interest, particularly
with the rapid growth of private sector secondees to government
departments and of consultants in both local and central government.
In national government, employees from companies
that benefit directly from the award of large government contracts
are working across Whitehall. Staff are seconded from companies
that could benefit from changes in government policy (or indeed
suffer from them), or from the award of consultancies. There are
relatively few secondments from outside the private sector, such
as from the voluntary sector, environmental groups or charities.
Staff from companies who have won major contracts for PFI hospitals
have been seconded to the Department of Health and from major
construction firms to the Department of Transport.
Business appointees to government task forces
highlight a bias in favour of the private sector. In Ruling
by Taskforce (Politicos 1999), a survey of the 295 task forces
in existence showed that 35 per cent of all members were from
private business. In the DTI, 161 were from business, 22 from
the public sector, 14 from trade unions and two from consumer
groups. The Treasury's PFI Taskforce (whose work is now don by
the OGC and Partnerships UK) was composed of mainly bankers, financiers
and business professionals. There was no one who worked directly
in delivering front-line services such as health. The Urban Task
Force had six business representatives, one of whom chaired it,
two from national public bodies, and three academics, two from
the voluntary sector and one from local government.
In some parts of the public sector, staff go
straight from their jobs to companies involved in contracting
for public sector work. This seems most prevalent in local authorities,
especially in education. Several directors of education have been
recruited by private firms to run education contracts following
government intervention. Senior politicians and advisers go from
political posts straight into the private sectorthe most
recent example being the Prime Minister's adviser, Anji Hunter,
who is taking up a top position with BP. This "revolving
door" syndrome works at the European level as wellLeon
Brittan moved from the British government to the European Commission,
where he was responsible for trade liberalisation, to then go
on to an investment bank with the prime objective of opening up
The expansion of the private finance initiative
has opened up even more possibilities for conflict of interests.
Leading consultants advise consortia involved in public private
partnerships and also advise the government and local authorities
that are procuring schemes from these same contractors.
The regulation and decision making processes
in government are being steadily "privatised". Seventeen
per cent of all government audits are conducted by PriceWaterhouseCooper.
Who are also heavily involved in global privatisations. Although
consultants are described as technical and neutral, the leading
firms are highly political, promoting private finance, privatisation
and trade liberalisation internationally.
Major PFI contractors, such as Jarvis and Serco,
are shareholders in Partnerships UK, the body set up by the Treasury
to advise on PFI contracts, project manage deals and provide development
funding. The private sector has a 51 per cent stake in PUK. Even
though contractors with a direct interest would not take part
in investment decisions, there is a perception of conflict of
interest that could undermine public confidence.
It certainly looks like the private sector has
much greater access to the government and Whitehall than anyone
else does. Businesses with huge government contracts in sectors
such as defence, security and construction, are now moving in
to other sectors such as education. These companies spend vast
amounts on lobbying and they understand how Whitehall works. Even
the work of the policy think tanks most closely associated with
the government is often sponsored by companies involved in government
and local government contracting. It is not surprising that the
perception that the private sector is unduly influencing the government's
agenda is prevalent.
We believe that it is essential that there is
a strict code of conduct governing behaviour and ensuring transparency
and propriety. Civil Servants are covered by the civil service
code and local government employees will be subject to their own
code of conduct (introduced as part of the new ethical framework
for local government). There is guidance for civil servants in
dealing with lobbyists. MPs and councillors have codes governing
conduct and conflicts of interest. There does not seem to be,
however, an equivalent code for private sector secondees or consultants
working within local or central government or for private sector
members of government task forces.
There needs to be much greater regulation of
corporate lobbying, and of the relationship between government
advisers, lobbyists, consultants and local and central government.
We therefore welcome your committee's decision to carry out a
major inquiry into public appointments and patronage.
16. Do the views, motivations and attitudes
of public sector workers differ from those in the private sector?
Does any difference in motivation have an effect on the delivery
of public services? and, Is a public service ethos necessarily
a good thing? Can it be an obstacle to the effective delivery
of services to the public?
Not everyone who works in the public sector
will share the same values or motivation, but recent research
and surveys indicate that motivation in general is different in
the public sector from other sectors.
The Guardian's supplement, The Common
Good, March 2001, interviewed 200 people who were providing
a public service. The vast majority expressed commitment and satisfaction
with their jobs, even if they thought they were underpaid or their
service was underfunded. Like the interviewees in the earlier
Pratchett and Wingfield survey, they were not in the job primarily
for the money or even for job security, but because they wanted
to make a difference and "be useful". The interviewees
ranged across the whole spectrum, from street cleaners to the
managing director of the financial services authority. It seems
that many people who work in the public sector, even at a time
of rapid change, are motivated by a sense of community service
and altruism. There still seems to be among public sector workers
a strong belief that they work for the benefit of the whole community
and that this is closely associated with a "not for profit"
Perhaps the key issue is not the motivation
of individual employees, but what has been happening to the culture
of public services over the last 20 years. The New Public Management
stressed results, performance management and measurement, risk-taking
and entrepreneurship, above professionalism, voluntary co-operation
and trust. In local government, there has been a growing commercial
culture, starting with compulsory, competitive tendering (CCT),
the introduction of quasi-markets and the undermining of direct
service provision, externalisation, outsourcing and the introduction
of best value.
The development of the concept of the citizen
as consumer over the last 20 years has focused on information
for "choice" (such as league tables) and on redress
systems, (such as complaints procedures). The emphasis on results
and quality has had clear benefits in providing more information
to the public and in some cases helping to push up standards,
but the consumerist approach is not enough. John Stewart and Michael
Clarke, Public Administration, 1987, argued for a "public
sector orientation" which is distinguished from consumerism
by the recognition that the customer is many in the public sector,
that services are not determined by price but by collective choice
through political processes and that services serve collective
as well as individual interests. Their remarks are equally relevant
The objectives of the best value regime to continually
improve performance and quality reflect the developing stress
on results, but there are concerns about how best value is being
implemented. Best value extends the role of the market throughout
local government. The "commercialisation" of local government
is being used to further promote externalisation and private sector
led "solutions". The "new" values, such as
the desirability of enterprise and competition may not sit happily
with more traditional ones such as loyalty and integrity.
Private sector techniques borrowed by the public
sector, such as performance related pay, may not always be appropriate
in the public sector, where co-operative working and networking
are essential. For example, the government is developing policies
to improve the "seamlessness" of health and social care
services. These policies are unlikely to flourish where health
and social care organisations are in competition with each other
to secure market share or to take advantage of procurement opportunities
from the private sector. Nor is a spirit of collaboration and
co-operation likely to be fostered, even within public sector
organisations themselves, where they are being encouraged to compete
with each other to provide services, such as where an NHS mental
health trust finds itself in competition with a primary care trust
to provide adult mental health services to a local authority.
The emphasis in both the NHS and local government
is increasingly on creating a competitive environment, "naming
and shaming" and rewarding high performers. The concept of
"earned autonomy" is already explicit in health and
is being advocated for local government. This kind of competitive
culture can undermine the development of "learning"
organisations and joined-up government.
Insisting that the public sector behaves like
the private sector must undermine the positive public administration
values of the past. An entrepreneurial, competitive, and risk-taking
culture raises the potential of corruption and the promotion of
sectorial interests and risks diluting the concept of public service.
There is no evidence that the public sector
ethos has been an obstacle to effective service delivery. Massive
under-funding, poor training and management, short-termism, and
ill thought out policies are more likely candidates.
Fragmentation of service delivery, resulting
in part from the increasing role of the private sector, can erode
the sense of belonging in and the collective continuity of a workforce.
People working in those parts of local government that were subject
to CCT were plunged into a competitive environment that weakened
any corporate sense that may have existed. Enforced competition,
the imposition of market values and now, best value, have undermined
the "not for profit" basis of public service:
"The organisational changes of local government
are leading to an inherent fragmentation of service delivery.
The threats to the public service ethos are manifest. The dual
impact of fragmentation and competition remove the certainty and
continuity that characterised traditional local government service
. . ."
(Pratchett and Wingfield 1995.)
Pratchett and Wingfield claim that "the
principal foundations of the public service are being eroded and
undermined by current changes in the organisation and management
of local government". The changes in local government since
the report was published in 1995, particularly the growth of the
role of the private sector, have increased the potential for the
eventual destruction of the public sector ethos.
It seems clear that the prevalence of private
sector values, such as the profit motive, cannot help but affect
individuals' personal motivation for the work that they do. This
is particularly serious when there is a crisis, as at present,
in public sector recruitment of staff such as nurses and social
care workers. There will only be positive reform, if those who
work in public service are motivated and committed to it.
18. If there are to be rules regulating private
sector involvement in public services, should they apply also
to, for example, the voluntary sector? Should there be less stringent
regulation where profit is not involved?
Regulations and guidance should apply to all
The accountability of the voluntary sector is
weaker than in the public sector. There are particular problems
when not-for-profit organisations are made to act like private
sector ones, (such as housing associations). They clearly need
to be subject to the same regulation as private companies and
Not all voluntary sector organisations are accessible
to public scrutiny or have good records on disclosure of information,
but the services they deliver can be highly sensitive and important
to individuals and communities. Without proper information and
openness, these organisations will not be accountable to the public.
NB The answers given here also cover questions
19, 20, 21 and 23.
25. Does the growth in private involvement
in public services threaten to reduce public accountability?
The increase of the role of the private sector
in the provision of public services, taken with the fragmentation
occurring at the local level, (with the growth of quangos and
loss of local authority functions) inevitably raises major concerns
about the dilution of political accountability. The main concerns
the growing distance between users
and the community from service providers with the providers being
at arms length from the communities that use their services in
the sense that they are neither elected nor appointed to represent
the interests of those service users. Rarely do the governing
bodies of private sector companies include users of the services
provided, while more and more public sector organisations are
doing so, with the results of improved quality and user-friendliness
a confusion of responsibilities;
a growth in secrecy surrounding contracts
for public services and a general lack of transparency, in particular
around negotiating contracts and formulating policy.
The development of the Next Steps agencies,
outsourcing and privatisation in central government, CCT and externalisation
in local government, partnerships, quangos, zones, and the private
finance initiative have led to a confusion of responsibilities,
particularly when there are service failures. Where does the responsibility
of ministers and councillors lie? How can they be held to account?
In central government, the concept of direct ministerial responsibility
and accountability has been steadily eroded.
In the new Care Trusts, councillors that are
appointed to management boards will be answerable to the Care
Trust and not to their local authority for decisions relating
to the work of the Care Trust. Members of Care Trust boards will
be accountable to the Secretary of State for Health and will have
a duty to put the interests of the Trust first in any decisions
they make. In such circumstances, it is difficult to see how councillors
appointed to Care Trust boards could be seen as representatives
of their local authorities or be in a position to have regard
to the local authority's interests in relation to functions delegated
to Care Trusts. Indeed, it is clear that any councillors appointed
to Care Trust boards will not be able to be mandated by their
local authority and may, therefore, find themselves with a conflict
of interests. It is hard to see how the council can be held responsible
for those aspects of social care that have been delegated to the
Care Trust. Or, if the Council is to be held responsible, it appears
to be a case of responsibility without power.
With the private sector delivering more and
more public services, decisions are increasingly being made outside
the political realm and are not publicly accountable. What is
the basis of accountability of the private partner in a public
In local government, the issue of political
accountability becomes even more complex when local authorities
withdraw from delivering key services. Who is responsible when
a privatised care home is not delivering quality care? How can
councillors retain links with residential homes and their residents
when the council no longer manages them? PPPs can make it more
difficult for service users to know who is responsible for a service,
when responsibility is seemingly fragmented between different
partners, providers and clients. Accountability implies that citizens
and service users have the ability to call people to account as
well as the right to do so. They need to understand what the lines
of accountability are and to have proper access to information.
The interests of private companies and local
authorities and local people will not necessarily be the same.
Companies are primarily accountable to their shareholders and/or
directors. The prime objectives of a private company are to make
profits and win market share and those of the public sector are
to meet social and community needs. The accountability of private
companies to their shareholders is not always easy to reconcile
with the interests of users and communities.
In local government, councils are having to
balance different and possibly conflicting interests when partnerships
are developed. Councillors acting as directors in PPPs set up
as companies will have a fiduciary duty to the company under company
law that could in certain circumstances be in conflict with their
duty to the council and its taxpayers. Under current law the interests
of the company must prevail.
Councillors as community representatives are
in danger of being marginalised in PPPs or when services are externalised.
Even if the regulatory function remains in some form, there is
still a confusion of accountabilities. There is a danger that
the increased manageralision inherent in best value and the distancing
of service provision from democratic representation when services
are privatised will weaken the role of the councillor, particularly
"Accountability" is being redefined
in a climate where more and more public services are being privatised,
semi-privatised or contracted out. It is seen as being primarily
to the individual consumer, and is determined by the contract
and its specifications. Of course, services need to be as user
focused as possible and all councils can improve on how they inform
users and citizens and provide access to services. This model
of accountability stresses managerial accountability rather than
political, where elected representatives have delegated responsibility
for carrying out services to others. It is unclear what the links
are between managerial and political accountability. As private
companies run more and more services and gain greater influence,
the traditional channels of political accountability are being
Even without the complication of the private
sector, the concept of accountability in local government is already
confused. With increasing centralisation and the very low levels
of funding raised locally, who are councillors accountable toministers
or their electorate?
There are also difficulties in ensuring accountability
through enforcing contracts. It has not been easy for the government
or local authorities to extricate themselves from failing contracts.
There are documented, high profile cases where contracts have
failed, and where the public sector client have found it almost
impossible to get back the costs incurred and/or terminate the
contract. The Catalyst response to the IPPR report "Building
better Partnerships" (June 2001) gives details of several
of these, including the contract for the Passports Agency and
the one for benefits at Hackney Council. It is clearly very difficult
to terminate a contract that is providing a vital service for
thousands of peoplewhat about the disruption caused or
the difficulty of finding an alternative supplier? It is even
more complex where the failed service is part of a much larger,
There are clear problems of accountability when
companies involved in PFI or externalisations are subject to takeovers,
mergers or sale of equity. The government is encouraging the public
sector, especially local authorities to develop longer-term relationships
with private sector companies. Very long contracts are negotiated
with private providers where the government encourages the public
sector to build up relationships of trust, as compared to the
adversarial relationships under CCT. What happens to these relationships
when the original companies are no longer involved?
26. Do the demands of commercial confidentiality
threaten the accountability of public services when the private
sector become involved?
The public sector will become less open with
the growth of private involvement. That is not to say that the
public sector itself has always been a model of transparency and
openness. In local government there has been, however, an opening
up of decision making and an increase in public consultation and
participation. This must be threatened by the use of private finance
and private delivery of local services.
It is clear that public authorities, including
some councils, have hidden behind commercial confidentiality to
withhold information and to take decisions behind closed doors.
The guidelines on disclosure and consultation, particularly relating
to the NHS are reasonably comprehensive but it and others such
as the Cabinet Office guidelines on contracts and the guidance
from the 4Ps on disclosure of information and consultation with
staff are not always adhered to. There is a lack of transparency
when protracted negotiations are taking place over very long-term
There has been a lack of public information
surrounding PFI contracts. There seems to be no information compiled
in an accessible form on contract failures and terminations.
24. What measures should be put in place
to ensure better accountability?
There should be stronger legal safeguards to
ensure greater transparency and the wider disclosure of information.
The IPPR in "Building Better Partnerships"
proposed a series of reforms to enhance the accountability of
public private partnerships, such as the mandatory framework for
disclosing information that exists in the NHS being extended to
all PFI projects; the responsibility held by different bodies
in a partnership being made explicit in the contract; and the
application of judicial review to service providers who are not
in the public sector being clarified.
The scrutiny of PFI and PPPs needs to be much
greater than it is at present. The National Audit Office and the
Public Accounts Committee examine PPPs but after the contracts
have been signed. They should be involved in major projects at
the earlier decision making phases. Their remit is, anyway, limited
to value for money issues. There may be a place for other select
committees to scrutinise key PPP proposals from a wider perspective
and at an earlier stage.
In local government, scrutiny committees should
be involved in the procurement of PPPs and PFI schemes. This means
that they should be scrutinising schemes from the beginning of
the process, the outline business cases, through the process of
procurement to implementation and monitoring.
The same levels of disclosure should apply to
all public service providers, regardless of sector, and contractors
should have to make a declaration of interests that is publicly
available for inspection. Partnerships should have to declare
what is published, where it is published, and should have transparent
systems of financial audit and probity. There should be equivalent
standards of probity for contractors providing public services
as those that apply in central and local government.
The LGIU, with the Democratic Audit, have been
prominent in work on the accountability of quangos, Stuart Weir
of Democratic Audit, has proposed that there should be an audit
of openness and accountability (Advance of the Quango State
by C Skelcher, S Weir, L Wilson, LGIU 2000, Democracy Audit,
ed S Weir and W Hall, Democratic Audit and Charter 88 Trust, 1994).
The accountability index advocated for quangos should be used
to determine the accountability and transparency of any proposed
partnerships and those that fail to meet certain criteria (such
as publishing an annual report, including service users on boards,
a public AGM and accessible meetings) should be rejected.
There is an urgent need for both local and central
government to think through what they mean by political and managerial
accountability, where private sector organisations, partnerships
and quangos are taking over increasing responsibility for the
financing, delivery and in some cases the policy direction of
Increasing private sector delivery and ownership
of public services and assets will lead to a loss of capacity
in the public sector, which will considerably weaken it, with
the ensuing dilution of democratic accountability. The private
sector taking over the responsibilities of the public sector with
increasing influence over policy again dilutes democratic accountability.
Pratchett and Wingfield concluded that it is
possible to argue that the cohesive force of the public sector
ethos has prevented the collapse of local government into an irretrievably
fragmented and divided arrangement of services. This must be the
case elsewhere in the public sector to some extent. If that was
the situation in 1995, the dangers must be much greater in 2001.
The LGIU believes that there has to be limits
to the role of the private sector. Even with tightening up of
regulation and insistence on greater transparency. Experience
so far indicates that some of the problems around the dilution
of accountability when the private sector takes over delivering
and financing services cannot be easily eradicated, particularly
if PPPs are to be extended further to cover critical, core servicesthe
problems are inherent and intractable. The more public services
are subcontracted to the private sector, the more the public sector
loses confidence and the capacity to deliver the services that
they are left with. The objectives of private companies to ensure
profit and market share, and those of public services, to meet
social and community needs, will not always be compatible.
The government's stress on efficiency, value
for money, and improving standards has not been balanced by an
equal concern for maintaining the public sector ethos and ensuring
public accountability. Public service reform requires both.
1 Regina v Northumbrian Water Ltd, Ex Parte Newcastle
and North Tyneside Health Authority, December 1998. Back