Monday, 21 February 2011

In defence of the public sector

David Cameron's assault on public services-  his declaration that he wants to open them up to the private sector - is something that should bring us all out onto the streets. We have saved our forests - but this is a far greater and more critical battle. He is attempting to sell us the idea that the cuts in public services that the coalition government is forcing upon us gives us the 'opportunity' to revolutionise the provision of those services by bringing in the private sector. It does nothing of the sort. 

While the private sector is best at creating wealth – from which we all benefit in terms of innovation and increased spending from tax revenue among many other things – it is not necessarily the best model for providing public services.

When it comes to the provision of public services, the private sector is unable to look both ways at once – at its customers and at its shareholders. Providing the best possible service to customers is not wholly compatible – or perhaps at all compatible - with providing the ‘greatest benefit’ – the best value – to its shareholders. Could it be argued therefore that to protect their own interests, it is shareholders that will hold boards of private companies to account for the way it deals with customers? All the studies I have read – mainly from the United States, but also from the UK and Europe – suggest that this is not the case. With no effective representation on the board to influence the day-to-day running of companies, shareholders have limited powers to hold boards to account at AGMs. And when it comes to public services, many of the shareholders are institutions with little incentive to look out for the interests of customers. They will have their own shareholder constituency to satisfy: why behave when acting as a shareholder in a way they would not wish their own shareholders to behave? As shareholders, they hold boards to account to the same degree that they would wish to be held to account (ie not very much….). So, can we instead rely on competition between companies running the services to protect the customer. Again, the evidence suggests not. The barriers to entry in these markets are prohibitive and customer ‘choice’ is a very blunt weapon indeed for driving down cost and/or driving up standards when there is effectively a privatised monopoly. And so it is left to governments to regulate. Unfortunately, successive governments have concluded that so long as the ‘shackles’ are removed then the private sector will create so much wealth that it will trickle down to the neediest in society – and that therefore in fact we need less rather than more regulation. (When the Tories tell us how this recession was caused by Labour's recklessness, remember that in opposition they were urging the government to regulate less - to allow the banks to be even more carefree with our money.)  But human nature being what it is (the bonuses row being perhaps the most obvious example), the trickle-down effect cannot be relied upon to provide sufficiently for all.   

Where is the accountability in all this? And how does this allow for the sort of long-term planning that public services require if they are to deliver what this country needs for future generations. We have seen that when it came to privatise the railways, to get round the problems of short-termism that satisfying shareholders necessarily engenders, private companies were awarded long-term contracts - thereby replacing public monopolies with a degree of accountability with privatised monopolies with none.

Do we want public services to be subject to the marketplace? Do we want the provision of our public services to depend on cost or on need? Should the success of public services be measured in terms of its profitability or its quality? Do we want our services to be provided by trained professionals motivated by the desire to serve the public, or by the private sector motivated by profit or the voluntary sector with its lack of resources and accountability. 

In the final analysis, you get what you pay for. This country can afford decent public services. The cuts that are being inflicted on that sector are being driven by ideology and not by cost. The furore over bankers bonuses has demonstrated that the money is there, if only the government had the will to tap into it. Those of you who still support the coalition should ask themselves whether they are prepared to stand by while the state is dismantled all around them, just so that the bankers can continue to pay themselves their bonuses, and so that in the budget that Osborne delivers before the next general election he will be able to deliver tax cut bribes to the electorate. Tax cuts only benefit those in work. Tax cuts are of no help to the elderly, the sick, the unemployed, to the youth - those who depend most on the public services that are now under attack. It is how we treat the neediest in society that is a measure of its worth. 

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