The recipe looks immensely complicated. Here is a huge pile of ingredients that do not necessarily blend well together. The challenge will be making the cake – and whether the will is really there to get it to rise. That might well be the verdict on the government’s long-awaited – and long-delayed – Open Public Services white paper, published in July.
Under five broad and admirable headings (Choice, Fair Access, Decentralisation, Diversity and Accountability) the coalition government attempted to streamline great swathes of its current policy (for schools, the NHS, local government, value-for-money procuring, welfare to work, payment by results, neighbourhood services, social enterprise and a lot more) in one coherent strategy.
The sheer complexity of all this was evident in the reactions to it. Nick Clegg painted the white paper in the foreword as being all about equality of opportunity, while David Cameron put more emphasis on its elements of choice and competition. The Labour benches were suitably divided. Tessa Jowell, the Opposition Spokesman and former Cabinet Minister, dismissed it as containing nothing new. In many ways, she said, it “lagged behind … action taken by the last Labour government,” although by that she may well have meant the Blairite government rather than Brownite version. By contrast, Glenda Jackson of the Labour backbenches shared the analysis of many public sector unions that it was essentially “a prelude to privatisation” of huge chunks of public services.
The reaction from the employer’s organisation, the Confederation of British Industry (CBI) was almost the opposite. With the white paper stressing, among other things, the government’s desire to get a million public sector workers to quit their jobs and sell their services back through mutuals, John Cridland, Director-General of the CBI, said: “Citizens should be able to choose from any willing and qualified provider, and, like the government, we believe that the best provider should deliver every time.”
It was right to recognise the benefits that mutual and smaller providers could bring, he said, but: “The principle of any willing provider also means that larger firms should be able to bring their expertise to bear, and when they achieve better outcomes, they should be able to make a reasonable profit. We think the government should have made this much clearer in the white paper.” The problem now, added Cridland, was getting the government to be even bolder “in turning these ideas into reality on the ground”.
And there’s the rub. There are inherent contradictions in some of what the government wants to do. Getting big value out of procurement often means centralising it. Decentralisation of power – in the coalition’s case, down to councils and beyond, and to much more independent NHS hospitals – cuts right across that. Choice should be a right. But too many patients choosing too suddenly to abandon a hospital for their routine operations could easily render it financially unviable. That would come with massive exit costs and – for other patients – not just the loss of choice, but potentially the loss of treatment. Social enterprises can bring renewed vigour to public services, but they can also fail. So how do politicians ensure continuity of service – something for which the electorate will undoubtedly hold them to account?
Payment by results
Some of these ideas are powerful. Social impact bonds can provide upfront investment to allow charities and others to be paid by results. But for the bond to work there needs to be a clear, reasonably short-term and measurable outcome so that payment can be made. These bonds may work well for cutting reoffending, where it is easy to measure whether someone has ended up back in court within a year. But how would you use measurable outcomes – as the government intends – for sorting out chaotic families, where the results of intervention won’t be known for certain until some years down the road? Where the measures may be less clear cut? And where it may be harder to prove that intervention – not something else that was changing at the same time – caused the outcome?
The longer the period between investment and payback, the bigger the risk and the more money that will be needed upfront. And that applies whether using social impact bonds or the more straightforward payment by results contracts now being used for welfare to work.
Dan Corry is a former head of Labour’s Number 10 Strategy Unit who tried to produce similarly government-wide public service white papers; he says that this approach has a fundamental flaw: “The problem we faced, and the problem the coalition has faced, is that you try to retrofit a bunch of existing policies into one coherent strategy. The truth, however, is that once you get below the headlines, you do different things in different sectors for different reasons, and usually for good reasons; either because not all the ideas work in a given sector, or because they are at different stages of development. None of the ideas – outcome-based contracting, diversity of providers, big extensions of choice – work equally well everywhere. It really is a case of horses for courses, but politicians do not like to admit that.”
In fact, in his response to the debate in Parliament, Oliver Letwin, the government Minister in charge, conceded as much – while insisting that the white paper still provides a “comprehensive, consistent, coherent” approach to ensuring that public services “provide access to excellence for us all”. But that still leaves the problem of implementation. The Local Government Association (LGA) was more welcoming of the white paper than the CBI, saying that services could be more accountable and efficient, and more in tune with needs, when delivered locally.
But LGA Chairman Merrick Cockell added: “Ministers [now] need to deliver on their commitment to let go.” The power shift, he added, “must not get tied up in red tape”.
The Institute for Government has been thinking hard about the implementation problem. Tom Gash, the Institute’s Programme Director in this area, said: “Ministers often seem to find it difficult to relinquish power, particularly over decisions which their residents care passionately about, such as school closure. So how will ministerial accountability function in a more decentralised system?” Gash notes that Clegg has recognised the challenge. The Lib Dem leader told the Institute that “ministers standing at the despatch box will continue to be held responsible for local decisions over which they no longer have any control. They will find this uncomfortable, to say the least: responsibility without power, the curse of the decentralising minister.” Avoiding this conundrum, said Gash, “requires nothing short of revisiting the convention of ministerial accountability”.
This is no small order. And at the same time, it will require new and robust accountability mechanisms locally – not all of which have yet been developed.
A role for the third sector?
There are plenty of implementation problems elsewhere. Simon Parker, Director of the New Local Government Network, says the government clearly wants to get social enterprises off the ground, create new mutuals, and give the third sector a bigger role in delivering public services. “But there is the small question of EU procurement rules,” he says. “These rules set out how you must approach the market, and the requirement to choose the provider that offers the best value for money. So it is not straightforward, providing new enterprises and spin-offs with favourable contracts initially, in order to get them started.”
He believes there are ways around that. “But there are questions over whether councils and departments have the skills to contract in this different world, particularly as council leaders are looking for more agile services than the traditionally tendered four- or five-year contract. They want to avoid long-term lock-ins. We need a big debate about how that might happen, and there seems to be a suggestion in the white paper of a centrally imposed means of tendering,” he says.
“Well we’ve been there before with compulsory competitive tendering in the 1980s and 1990s, and that sort of standard contract approach is likely to be counter-productive. If you want more diverse providers, at least at the beginning, they may not offer the lowest prices. But they may bring other advantages. A project that provides a service that employs homeless people may save money elsewhere, but it is not clear how you can price that properly. You may have to commission at not necessarily the lowest price, in the belief that a greater diversity of providers will produce bigger savings in the long run. But in the current climate of cuts, this is not an easy message. So in practice, a lot of these contracts may go to the big for-profit providers. That’s not a problem, because many of them do a good job, but it is not what the white paper says it wants to see happen.”
Letwin, whose grand design for the long-term reform of public services is embodied in the white paper, is clearly committed to it. So is Frances Maude, the Cabinet Office Minister who leads on public sector efficiency. Unusually for a politician, he is genuinely interested in seeing through implementation, and not just in making announcements. Eric Pickles, in his uniquely rumbustious way, clearly wants to take local government by the throat and shake it, while Andrew Lansley would claim his huge shift of power and accountability in the NHS meets the white paper’s goals.
But Corry says that there remains a problem. “You can set up a central unit, or take other steps to try to push this through. But the fact is that each department will have its own take on all this and will pursue the bits that suit them, but not others – and with varying degrees of enthusiasm. And as soon as the next big crisis unrelated to all this hits – in probation, say, or in the NHS – that department will put these measures on the back burner.” And there remain unresolved issues. Corry adds: “What happens in terms of continuity of service when not-for-profit providers fail? If you really want to do this seriously, you need completely different skills, in market-making, and in service continuity, and in failure regimes in departments; and that is a long way off.”
Nonetheless, the coalition has a lot riding on this agenda. Gash notes: “Other governments have tried and failed to remodel public services. The difference this time is that the stakes are higher. With significant cuts in public spending, if these measures don’t work, the state will not necessarily be in a position to shore services up”. The only certainty, it seems, it that we are all likely to discover the outcome of the white paper before very long.
