MARKETS IN PUBLIC SERVICES

The recent programme in Radio 4's excellent  'In Business' series, "Private prisons - who profits?",  to which I contibuted, can be heard again here:

http://www.bbc.co.uk/programmes/b091wb36

It is the only programme I've ever heard of that gives a reasonably comprehensive and objective view of the subject.  And naturally I was glad to be interviewed, and to have my book mentioned.

But with the entire prison system descending into violent chaos, Government clueless how to stop it, no politician brave or informed enough to tackle our addiction to incarceration, two of the  three main operators still under investigation for massive fraud against the tax payer yet Government still handing out contracts to them, and MoJ pretty inept at shaping and managing the quasi-market Government has created, the choice between public or private operators looks a bit like a dispute of how best to arrange the deckchairs on the Titanic.

Yet the wider issue, of how to construct and run markets in public services well and for the public good, is still very much alive, and hardly ever properly considered. A rare example is this recent article on care homes:

https://www.theguardian.com/social-care-network/2017/aug/22/will-consumer-law-destroy-care-home-market

If one looks at railways, or social care, or the NHS (or prisons or probation), one is struck again and again by how badly Government constructs and runs markets for which it is the sole, or dominant customer.  The claim I make in my book is that with prisons, we didn't do it too badly, until the early years of this decade, and we showed that real benefits - to users and the public purse - could be achieved. But benefit is certainly not achieved automatically, by the mere fact of multiple providers. It's how you do it.

Part of the reason Government does this so badly is its failure to learn from experience - the very issue that I started this entire blog to look at. What is astonishing is how, despite the massive switch of vital public services into the private sectors, especially since 2010, Government is utterly uninterested in finding out how the markets they created and shape are working, or learning from it.   (The Institute of Government has done some sterling work on this (1), but there's little sign of Government itself paying much heed.) In prisons, and the NHS, the only areas I know about, there is no research or evaluation that I know of: I mean none at all. For a spend of maybe £50bn across all service sectors. It is not an accident: it is a willed, sustained ignorance, presumably for fear that the answer might be awkard.

And of course the answer is nowadays awkward: because in recent years marketisation has gone hand in hand with increasing underfunding, resulting either in dire service quality (social care), or ever higher prices to users (railways).  Marketisation is in this context not simply an ideology (private sector good, public sector bad - a daft mantra, which is disproved by news of private sector failures almost weekly), but a cynical political ploy to distance Tory politicans from the damage that cuts are doing. Nothing to do with us, they say: it's the market: it's the up to the user to choose well; if providers fail, the market will punish them. But so often the 'market' does not punish them: Government bails them out (2), and carries on awarding them new contracts (3). It's the public who are 'punished', by poor services over which, in reality, they often have little if any choice,

As a result , the public become more and more hostile to private provision of public services. Opinion polls show this very starkly: outsourcing is now very unpopular indeed (4).  When Labour next get in, they will bring everything back into the public sector as fast as they can.

And that is sad. Because, as I have recounted with prisons, a State monopoly of service provision isn't in the public interest. Britsh Rail wasn't wonderful, though no-one under 40 knows this,  Monopoly always tends to  higher costs, to services run at the convenience of the staff, indifference to users' wishes and needs, and the incompetent or self interested meddling of politicians.  The re-birth of the all-providing State under Corbyn will prove just as unsatisfactory as - and much more  expensive than - the often botched privatiation we have now..

If only Government were willing to think about how to structure and run markets in a way that produced the best service for the money - with solutions that would, necessarily,  be quite different in different sectors.

But that seems to be the Catch 22 of public services: that Government contracts them out because it believes it isnt very good at running them, but then shows itself not very good at managing contracting out, either.  What do you do then?


(1) https://www.instituteforgovernment.org.uk/publications/making-public-service-markets-work

(2) http://www.julianlevay.com/articles/ministry-of-justice-in-the-dock-again

(3) http://www.julianlevay.com/articles/an-unhealthy-relationship

(4)  https://yougov.co.uk/news/2017/05/19/nationalisation-vs-privatisation-public-view/     also  https://yougov.co.uk/news/2013/11/04/nationalise-energy-and-rail-companies-say-public/