Don’t be misled by the rhetoric

The arguments over the use of the private sector to deliver public services were rehearsed again in the wake of GS 4 very public failure to provide adequate security staff for the Olympics. The fact is this coalition government has,   from the outset, sent out contradictory messages about the private sector and the profit motive . Ministers appear more comfortable  waxing eloquent about the merits of the third sector, social enterprises and community based organisations than the private sector. Their ideal model for the private sector appears to be some form of John Lewis styled partnership.

A couple of weeks ago, Sir Merrick Cockell, the head of the Local Government Association, made some interesting comments about how the government provides public services. In an interview with the FT, he warned ministers not to assume that the private sector was necessarily best. He said there had been a period when “public bad, private good” had “almost been a mantra”, accompanied by a belief that “the right way for local authorities to do things was to outsource everything”. He added: I hope we’ve moved beyond that, because there are very good cases for outsourcing. There are even stronger cases for testing a service properly to see whether it’s the right service to outsource, to see whether there’s a mature market out there that may be suitable to tender against it and then properly to reach a conclusion that there is, or there isn’t. It seems a similar strain of thinking is going on at the top of government too. Philip Hammond, the defence secretary, gave a very frank interview to the Independent recently in which he said: ‘I came into the MoD with a prejudice that we have to look at the way the private sector does things to know how we should do things in Government. But the story of G4S and the military rescue is quite informative. I’m learning that the application of the lean commercial model does have relevance in areas of the MoD but, equally, you can’t look at a warship and say, ‘How can I bring a lean management model to this?’ – because it’s doing different things with different levels of resilience that are not generally required in the private sector. It is somewhat ironic, given these comments, that Hammond heads a department of state widely regarded as the most inefficient and dysfunctional ,in an area where competition is keen.

Three weeks ago, Bernard Gray, the senior civil servant in charge of defence procurement, wrote a plea for change entitled “The MoD badly needs some private expertise”. He warned that the department simply does not have the specialist and commercial skills common in the private sector. Do these ministers really mean that they can do without the private sector and might stop buying from the private sector? Almost certainly not. Indeed investors don’t believe it either. The share prices of three of the government’s largest suppliers (G4S, Serco and Capita) remain in rude health (though Mouchels recent  demise reminds us that  success in   public service contracting  is by no means guaranteed). Ministers, nonetheless, never knowingly let a bandwagon pass by  without jumping on it,   and clearly  believe that there is some political mileage to be had in knocking the private sector, while relying heavily on the private sector to continue to  deliver a range of public services. This is likely to continue.


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