U-turn on Public Services Sell Off

In February David Cameron wrote a bold article for the Daily Telegraph entitled "How we will release the grip of state control". In this article Cameron announces that the government will allow any private provider (the voluntary and community providers have been dropped) to take over a public service.

We will create a new presumption ... that public services should be open to a range of providers competing to offer a better service. ... But everywhere else should be open to diversity; open to everyone who gets and values the importance of our public service ethos. This is a transformation: instead of having to justify why it makes sense to introduce competition in some public services ... the state will have to justify why it should ever operate a monopoly.

This is not competitive tendering, this is simply the case of a private company saying "we want to provide that service" and they will be handed the contract.

This is Letwin's big plan for the NHS, something that he first wrote about for the right wing Centre for Policy Studies in 1988 (together with John Redwood).

"establishing the NHS as an independent trust and of increasing co-operation between the NHS and the private sector. It should have an open agenda on health credits, insurance schemes and any other serious radical suggestions." 

Thankfully, we did not get that then, but there is still a chance that we could have that now. After all, Lansley's plans are to make sure that he is not in control of, nor responsible for, the NHS ("independent trust") and he wants the private sector providing much or all of the NHS health care ("increasing co-operation between the NHS and the private sector").

This is a huge political minefield, it is quite clear that most people are happy with the way that the NHS is funded, who controls it, and who provides the care. Changing all of that is difficult, and unpopular, which is why these ideas were not spelled out in last years election manifestos, nor openly discussed in public. Now that Cameron is able to get the plan moving, he is still in danger of losing the policy, particularly if the policy becomes deeply unpopular and there is a chance of a vote of no confidence over the policy. This is why it is so important for Cameron to get a full 5 year term, and why Cameron was so much in favour of fixed term parliaments (long parliaments) it lets him off the hook for five whole years.

Even so, it appears that the privatisation plan is going off the rails. It is just so unpopular that the government is losing bottle. Today the BBC report:

Leaked documents suggest ministers have decided the "wholesale outsourcing" of public services to the private sector would be politically "unpalatable". Ministers instead want to use more charities, social enterprises and employee-owned "mutual" organisations.

The question, of course, should be why is it any more palatable to outsource to charities, social enterprises or employee-owned "mutual" organisations? Further the BBC say:

The shift in policy will raise questions about whether the government can make the savings it has promised - or deliver the services it is committed to - just by using charities and mutuals.

Why is it assumed that public provision is always assumed to be more expensive and that only private provision (which by definition must include a profit to provide a shareholder dividend) is always cheaper? The government document indicates that privatisation is about ideology rather than efficiency:

The government was not prepared to run the political risk of fully transferring services to the private sector with the result that they could be accused of being naive or allowing excess profit making by private sector firms.

The private outsourcing industry are not pleased with the u-turn which effectively freezes them out:

"This is a bit surprising. Francis Maude gave the impression when we got called in last year that we would be very much needed. There was every expectation that the private sector would be needed to help get the deficit down. This goes the other way. It seems to be different to what the government was committed to a year ago."

Instead, the BBC report indicates that the

Government is very open to ideas for services currently provided within the public sector to be delivered under a private/government joint venture. Government is committed to new models of partnership, and private sector organisations need to offer joint ventures - joint ventures between a new mutualised public sector organisation and a 'for profit' organisation would be very attractive.

So the future is that the government will partner (pimping?) with private outsourcing companies. In the BBC's report the NHS is listed as one of the public services that will be affected by this new policy. Presumably the new Any Qualified Provider policy will be influenced.