A Piece of Paper and a Team of Lawyers isn't Enough

31 May 2001
Labour has such enthusiasm for private sector contracts

Almost half of all tax revenues, excluding social security payments, now go directly to profit-making companies for the purchase of goods or the contracting of services. In the mid-1970s it was just over a quarter. A growing proportion of this is irrevocably committed for decades into the future.

Even though this means that a significant amount of public money is leaking out of the public sector and into already well-stuffed private coffers, for Tony Blair this is not privatisation. He makes much play of the difference between selling off public services and bringing in private companies to manage public services.

There is indeed a difference. But it depends on a very weak foundation. Democratic control of services increasingly rests on contracts with legally binding targets, between government, local and national, and private companies, mostly large corporations such as Serco, Balfour Beatty and Arthur Anderson.

Can such a contract effectively and sustainably impose one set of ethics, those of public service, on to a powerful organisation driven by a different logic, the goal of private profit? Can a piece of paper and a team of lawyers require an organisation accountable to one set of masters, its shareholders, to be genuinely accountable to a different constituency: a local community or other public users?

New Labour extols the efficiency of the private sector but this is treating us like idiots, unable to weigh up the evidence before our eyes. The chaos of the Tory sell-off of private transport heads the list of shame. But it is followed quickly by cases where New Labour has brought in private companies to manage: the mess the French computer firm Sema made of disability benefits; the misery which Arthur Andersen left in its wake with the national insurance system; the poor results of handing housing benefits over to Capita, CSL and Seimens.

Then there is the constant flow of day to day private sector management failures. In Newcastle users of recently privatised homecare complain of deteriorating services due to high turnover of personnel and the subsequent loss of relationships between clients and staff. Numerical targets are being met but not the needs of vulnerable people. In Birmingham, there is outrage at the shifting of the elderly from public to private homes, with no negotiations with the old people or their families. A contract may require "consultation" but if this meant that the residents views had to be respected, most private companies would probably walk away or seek to subvert the process once the contract had been signed.

Examples like these indicate that contracts between public officials and private companies are precarious mechanisms for democratic control. First, there are many aspects of a high quality service which cannot be legally summarised. These might include the comfort that comes from continuity of care; the lifting of the spirit that comes from a beautiful park; the creative benefits of a local library where staff welcome and stimulate children's browsing. More often than not, lawyers delete such references as difficult to codify let alone make legally binding. Mere attendance or user figures cannot measure satisfaction; there may be no alternative.

Second, genuine democratic control by users as well as politicians requires open access to information. Most private companies refuse to give this on the grounds of "commercial confidentiality". Yet access to information is a fundamental condition of democracy.

Third, where is the impetus to develop a service to meet the changing needs of communities going to come from? In theory, market competition is a source of innovation. But the relation of public service deliverers and their clients is not a simple market/customers relation. And the kinds of big corporations now contracted to deliver so many of our social services are not facing serious competition. Having locked the local authority/hospital/government department into a contract, they are going to make sure it's costly to dismiss them. The contract may speak of consultation but market research methods - focus groups and surveys - are not adequate means of engaging people's creativity.

Finally if, as almost every senior public official admits, handing management over to a private company means that the wage bill will be cut, how realistically will the insights and skills of stressed and demoralised frontline workers be harnessed to improve the service to the public?

It's not that the elected representatives were particularly well able to control the old public sector departments. Neither was the old public sector quick to work with users and local communities. Public officials presumed they knew best. And it's true that traditional methods of public management failed to release the creativity of their workforce, stifling, for instance ideas about how a service or function could be improved. In fact, almost army-like hierarchies, often mirrored and reinforced by the defensive character of much public sector trade unionism, have meant that one of the public sector's greatest resources - its workers' knowledge - was squandered.

As the public sector grew, without any strengthening of the mechanisms of democratic control an ever-widening gap occurred between the people and the policies they voted for and the institutions that enacted them. In this gap anti-democratic interests took hold, whether through powerful private lobbies or bureaucratic empires.

Private companies pursue profit hence they seek to cut costs, which makes them "efficient" in money terms. But public service is about notions of efficiency which concern social needs that the market does not measure. "Value for money" cannot be measured by legally definable targets. It requires a constant process of evaluation in which the people using those services have some real power. The thinness of representative democracy needs to be enriched by more direct public involvement in the implementation of policy. This is the last thing that a private company would accept, though it is quite compatible with social enterprises that share public service goals.

What are needed are policies which put the people back into "the public". Here and there government policy makes commitments to such a goal, for instance in its new deal for communities. These take up many of the ideas of decentralization, community planning, workers and users involvement, which Mrs Thatcher squelched in radical local authorities in the 1980s.

But they will need to be fought for. A legal contract is not a sufficient protection of democracy. New Labour's contempt for the public sector and consequent determination to contract private companies overpowers these democratic themes. What matters is not only "what works" but who decides what works and with what values.

Copyright 2001 The Guardian