Selling public services – why think tanks promote the ‘Whitehall consensus’ for outsourcing

In posts over the past few weeks, we’ve looked at the issues of accountability, transparency and reliability raised by the Government’s ‘open public services’ agenda, in particular its plans to outsource more public services. We’ve focused especially on how outsourcing threatens to undermine another recently announced Government initiative, that for ‘open policy making.’ In the absence of reliable and rigorous evidence for the benefits of outsourcing, why have so many think tanks continued to push outsourcing?

Some of the loudest cheerleaders for outsourcing have been in think tanks. In addition to conservative parts of the media, many think tanks have played an important role in promoting the ‘Whitehall consensus’ in favour of outsourcing – whatever the reality of outsourcing at the frontline for the people who use public services and the people who provide them.

The explanation for some think tanks ignoring the public and public service workers is that often think tanks consider them to be part of the problem. Starting in the 1970s, a group of commentators began to characterise organised frontline workers and service users as the underlying cause of the country’s problems. These commentators were often found in, or heavily informed, by right-wing think tanks such as the Institute of Economic Affairs and the Centre for Policy Studies.

Their argument was that public sector workers and ‘interest groups’ (including people who benefit from services) in effect hold politicians to ransom until governments pay them off by spending more on services. This only serves to make these interests stronger and so turns the “collectivist ratchet” inexorably away from a free society and towards the big state. As a result, not listening to frontline workers (and ‘self-interested’ service users) became a matter of political principle – the only route to genuine reform in the public interest.

Another implication of this argument was that if the state couldn’t be slashed overnight (because interests in favour of the state were too strong), then private companies should at least be given a much greater role in delivering public services. This would produce more efficient and effective services. It would also reduce the power of public sector unions – and possibly pave the way for privatisation.

A related argument often made by some think tanks has been that public services are over-regulated – over-inspected, over-measured, and over-directed. Combined with outsourcing, in practice this means that private companies taking over the running of public services should expect less close inspection than used to be the case with the public bodies that previously ran services (although the same commentators are largely quiet when it comes to addressing failures of ‘light-touch inspection’ such as Winterbourne View).

It’s not surprising that right-wing think tanks pushed this argument – it’s their job to promote their particular ideology and they do it unashamedly. What’s more surprising is that supposedly progressive left-of-centre organisations have also promoted the Whitehall consensus in favour of outsourcing and less regulation – or as they prefer to put it, for more ‘diversified provision’ and greater ‘innovation’. The question is why – and why they have often seemed so uninterested in asking the more fundamental question as to whether outsourcing improves the quality or efficiency of public services, especially from the point of view of the people who use and pay for these services.

Think tanks often present themselves as fiercely independent – as ‘intellectual outriders’ that are prepared to ‘think the unthinkable’. In reality, think tanks also need to pay the bills, and outsourcing interests often have deep pockets. This is the time of year when think tanks promote their party conference events. Sponsors of think tank events at last year’s party conferences with a direct interest in outsourcing included PwC, VertexPearsonCareers Development Group, the Association of Employment and Learning ProvidersSodexoAvantaManpowerWorking LinksDeloitteKPMG, and G4S.

Most of the time, government feigns ignorance regarding the potential influence of these interests. Last week however, the Department of Health dismissed a paper written by Conservative MP John Redwood for the Centre for Policy Studies as “misleading and inaccurate” in part because of “influence” (unspecified) by Partnership Assurance – “an insurance provider known to be critical of a cap on care costs” (in his paper, Redwood had called on the Government to abandon proposals by the economist Andrew Dilnot to cap the costs of elderly social care).

It’s ironic of course that the Government dismissed the Centre for Policy Studies’ argument for the same reason that the CPS has consistently used for dismissing the views of public sector workers and service users – that of narrow ‘self-interest’ at the expense of genuine public interest. Applying the same logic would mean that government should ignore the arguments made by many think tanks when it comes to outsourcing public services. Should it – and will it?

Selling public services – where’s the evidence for outsourcing?

In posts over the past few weeks, we’ve looked at the issues of accountability, transparency and reliability raised by the Government’s ‘open public services’ agenda, in particular its plans to outsource more public services. We’ve focused especially on how outsourcing threatens to undermine another recently announced Government initiative, that for ‘open policy making.’ If the Government wants policy to be based on real expertise and evidence, it’s important to ask where the evidence is that outsourcing produces better public services – and who continues to push outsourcing in the absence of this evidence. The answers suggest that we are a long way from genuinely open policy and the independent research that we need to inform better policy.

The outsourcing of public services has never been popular with the public. According to a recent YouGov survey for the Fabian Society, nearly two-thirds of people think that ‘services like health and education should not be run as businesses. They depend on the values and ethos of the public good.’ Two-thirds of people also believe that public services should be provided wholly or mainly by national or local government. A third of the public believes that when politicians talk about ‘choice’ in public services, they really mean privatisation. Most of the public like the idea of public services, publicly delivered – and publicly accountable as well.

Given this, why have governments of all stripes over the past 30 years continually sought to extend outsourcing to more public services ? Where is the evidence that outsourcing works? If outsourcing isn’t popular with the public or the people who provide public services, who is it popular with? The next few posts will examine the arguments and evidence in favour of outsourcing – and who’s being paid to promote outsourcing in more and more public services.

Typically there are three main benefits of outsourcing that are put forward as part of the ‘Whitehall consensus.’ As we’ve discussed in posts over the past few weeks, all of these benefits can be questioned – and need to be if we are going to avoid more public services turning into public policy disasters akin to rail privatisation.

The first claimed benefit is efficiency. The flag bearer for this is the 2008 review commissioned by the previous government and conducted by the DeAnne Julius. This found that the ‘public services industry‘ in the UK is the most developed in the world and is second in size only to that of the US (in 2007-08 it represented nearly 6 per cent of GDP with revenues of £79 billion and employing more than 1.2 million people). But although the Julius review is often cited as evidence in support of outsourcing, it was  never a study of its overall benefits (or disadvantages) – rather it was a review by a corporate insider on how government could support the growth of the public services industry.

The description ‘corporate insider’ is not hyperbole. Julius is a former senior economic advisor at the World Bank, founder member of the Bank of England’s Monetary Policy Committee, and non-executive director of BP. She is also on the board of partners of Deloitte UK, and since last year also an independent non-executive on Deloitte’s main board. Julius was, until December 2007 – that is, when she was appointed to conduct her review – a senior independent non-executive director, and member of the audit committee, remuneration committee, training and development committee, and nomination committee of Serco Group plc and Serco Solutions Ltd. In addition, the advisory panel for her review included representatives of the CBI, Partnerships UK, Cap Gemini, Working Links, Logica CMG, Spire Healthcare, Babcock, KPMG, and Serco itself – all of them with very significant interests in outsourcing.

Regarding the repeated claims for ‘greater efficiency’, of course it’s possible to reduce contract costs through open tendering – you pick the lowest bidder, despite the impact this might have on quality or effectiveness (which is the real measure of value for money). But for such a widely accepted policy (at least in certain circles) there’s little clear-cut or comprehensive evidence that outsourcing improves the real quality or efficiency of public services. As Nick Timmins of the Financial Times noted at the time of the review (in, of all places, Serco’s own journal): “What is still needed, …despite the release of the Julius Review, is a better analysis of where it works well and why. We also need to know why, when it fails, [if] it is due to structural and incentive problems rather than an individual company, or third sector provider, failure.”

The second benefit put forward for outsourcing is that it produces more responsive public services – services that engage more with users and respond to their needs. The Whitehall consensus says that outsourcing helps to break-up bureaucracies and creates far more responsive services – something both left and right can get behind (this is where even supposedly progressive think tanks fall for the notion of more ‘diversified provision’). But as we’ve noted in previous posts, outsourcing and the push for more marketised services generally have often undermined efforts to work with service users and the public – firstly because increasingly fragmented services makes sustained public engagement and real choice more difficult, and secondly because it has led to the growth of very large providers which are too big to care what individual service users – or even the public as a whole – might think.

The third supposed benefit of outsourcing is innovation. In particular the (often left-leaning) ‘innovation industry’ – of which I used to be a (small) part – that calls for ‘new solutions to old problems’ seems to hope that outsourcing will somehow magic innovation out of thin air. But as we’re now being reminded under austerity, innovation on the cheap leaves people without adequate services and support, as much-touted innovations from care in the community to personal budgets have shown. Some of these innovations – however positive the ideas on paper – have helped to prepare the ground for cuts and reduced access to services, for example the way that personal budgets have made it easier to reduce support than it would have been to decommission traditional services.

In reality, there can be little innovation or even improvement without both proper investment and sustained engagement with the people who use and provide services – but these are exactly the people who are marginalised by an outsourcing agenda that they didn’t vote for and don’t agree with (despite being exposed to more than 30 years’ worth of propaganda in its favour).

In many respects the current Government’s open public services agenda merely restates the recommendations from the Julius review, such as its call to open up public service markets and for ‘competitive neutrality’ between public, private and third sector bidders to deliver public services (there is, however, a notable lack of evidence in the open public services white paper – as if the benefits of outsourcing are now so obvious they hardly need to be mentioned). Looking back at the Julius review now, what’s most striking is its complete lack of any other perspectives. For example, there’s no evidence from service users about the quality of outsourced services, and no sense of how public services can be accountable to the public other than by being re-designed as individualised consumer-like services.

We’re still waiting for an independent, rigorous and reliable analysis of the effects of outsourcing – one that incorporates long-term value for money rather than short-term costs, but also evaluates the wider social, economic and political impact of the public services industry. What is especially absent is any analysis about what outsourced public services look like from the perspective of the people who use and provide public services – as opposed to the industry insiders who benefit directly from selling-off public services to the lowest bidder.

On the railways (II): What lessons does rail privatisation offer open public services?

Rail privatisation offers a warning from history for the Government’s ‘open public services’ agenda to outsource more public services. In our previous post we suggested that rail privatisation has never been wholly accepted because the Major Government overlooked the essential ‘publicness’ of the railways. In this post we identify five specific damaging consequences of rail privatisation that should cause the current Government to consider much more carefully how it approaches outsourcing or risk repeating the same mistakes in other public services.

1. Expectations of greater efficiency from privatisation have not been realized

One of the principal expectations from privatisation was that the railways could be delivered more efficiently in the private sector because of the motive to generate profits. British Rail was already pretty lean following a cost cutting exercise in the 1980s, and in fact the opposite has occurred. The unit cost of the privatised rail industry is significantly higher than that of British Rail because economies of scale have been lost and the complexity of the industry has thrown up new costs. The public subsidy to the industry is considerably higher than it ever was for British Rail.

Chris Grayling when he was Shadow Transport Minister admitted that the way privatisation was organised “…helped push up the cost of running the railways – and hence fares – and is now slowing decisions about capacity improvements. Too many people and organisations are now involved in getting things done – so nothing happens. As a result, the industry lacks clarity about who is in charge and accountable for decisions.”

2. The rail industry has coalesced around a small group of large private sector providers who are (almost) too big to fail

The rail industry after privatisation was highly fragmented. This fragmentation has now been reduced but has resulted in a small group of private sector companies who now dominate the market. The complexity and scale of these contracts has skewed the market in favour of these large private providers who have the scale and deep coffers to absorb the risks associated with running a franchise.

Nonetheless, the narrowing of the market around this small group of providers is a risk. On three occasions, the state has had to step in and pick up the pieces because a company has pulled out of a franchise. The exit of Virgin Trains from the rail industry has further reduced the options available to government. Two of the recent new entrants to the rail market have been the national train operators of the Netherlands and Germany who have been accused of profiteering to subsidize their domestic operations. Where will the new train operators come from if another company fails or is judged to offer a poor quality service?

3. The private sector has profiteered from parts of the rail industry

To many people, private profit shouldn’t have a place in an industry that receives a £4 billion subsidy from the public every year and where consumer choice is highly limited. But there’s profit and then there’s profiteering. One of the publicly neglected aspects of rail privatisation is that running a Rolling Stock Leasing Company (or ROSCO) is a very lucrative business. Three were created as part of the break-up of British Rail and all are now owned by a combination of banks and private equity. ROSCOs have found older rolling stock to be especially commercially attractive as they can continue to generate revenue for stock even after the construction costs would have been written off by British Rail. This has also helped to inflate the fares paid by customers.

The privatization of ROSCOs is another example of the public sector selling assets at below their fair market value. The National Audit Office in a 1998 report stated that the UK Government had not realised fair market value for the sale of these assets. Eversholts Leasing later HSBC Rail was sold for £518 million in February 1996 but a year later the business was sold on for £726 million, a gain of some 40 per cent over the sale price by the Department for Transport.

More generally, train operating companies own virtually nothing, hiring most of the assets required from Railtrack and ROSCOs whilst also contracting out areas such as onboard catering and cleaning services. For this reason, Baroness Vadera, when she was a special adviser to Gordon Brown as Chancellor of the Exchequer, described the privatized passenger train operating companies as ‘thinly-capitalised equity profiteers of the worst kind’.

4. Privatisation led to a loss of skills and flexibility

The Hatfield disaster in October 2000 – caused by a broken rail as a result of faulty maintenance procedures – illustrated the loss of skills and flexibility from the rail industry as a result of privatisation. Railtrack, which had responsibility for rail infrastructure, had outsourced almost all of the maintenance and renewal of track. Outsourcing maintenance and renewal both removed flexibility (unless it was already included in a contract) and led to a drain of skills and knowhow from Railtrack. In the aftermath of the disaster, thousands of speed restrictions were imposed unnecessarily across the network because Railtrack did not have the expertise to know whether other parts of the track were also at risk of an immediate tragic failure. Railtrack was a disaster waiting to happen according to Christian Wolmar in his book On the Wrong Line: how ideology and incompetence wrecked Britain’s railways; the system it operated in was brittle and not designed to cope with sudden challenges. Hatfield sealed its demise and replacement by Network Rail, which has taken a different approach to maintenance by bringing some of this in-house again.

5. The views of users and frontline staff were sidelined

British Rail argued that if it was to be privatised then the rail network should be privatised as one entity. Instead the Treasury, under the influence of the Adam Smith Institute, advocated for the creation of 25 passenger railways franchises as a way of maximizing revenue. The effect of this was to create a complicated system with over 100 different companies delivering bits of the rail system, which made it difficult for the views of users and practitioners to be heard. Passengers were unclear on who was responsible for what or who to direct their questions or complaints to. Public accountability suffered as a result.

The views of passengers have also been neglected in franchise decisions. Passenger satisfaction targets in franchise agreements don’t carry sufficient clout. According to Passenger Focus, only 42 per cent of rail passengers are satisfied with value for money, yet increases in rail fares have continued this year despite the concerns raised by passengers. Given the amount of public money invested in the rail industry last year, as well as the cost of fares, surely the views of passengers should be at the forefront of rail policy?

The nationally-owned British Rail was far from perfect, but most people think that rail privatisation has been a relative disaster for the reasons discussed here. Rail privatisation represents a warning from history for a Government that seems intent on outsourcing more of our public services – will it learn the lessons?

On the railways: What lessons does rail privatisation offer open public services?

It’s been almost twenty years since John Major’s Government privatised British Rail, but unlike some other sell-offs the issue of who owns and runs our railways continues to attract widespread public controversy. In recent posts we’ve been looking at the tensions between the Government’s ‘open public services’ agenda for outsourcing and its ‘open policy’ agenda for greater transparency. In this post we suggest that rail privatisation has never been wholly accepted because the Major Government overlooked the essential publicness of the railways – a warning from history for the current Government’s attempts to outsource much of our public services.

Rail privatization is back in the news again with the announcement that Virgin Trains lost out to FirstGroup in its bid to continue to manage the West Coast mainline, a contract that Virgin has held since 1997. Richard Branson quickly offered up a withering criticism of the way the Department for Transport conducts its franchising arrangements for new passenger train operating companies (or TOCs). Branson has threatened that Virgin will walk away from the railway market for good, having spent £60 million on four thwarted bids, because (it says) it won’t play the game of offering up unrealistic performance targets to win business. Of course, this could just be regarded as sour grapes – but Branson is usually too savvy to let a knock-back make him seem like a bad loser. Rather, it’s best to assume he means it, and that his criticisms of the franchising process are heartfelt and somewhat accurate. If this is the case, how did we reach this point where Britain’s best-known businessman expresses so little confidence in what was supposed to be such a flagship privatization policy?

The 1993 Railways Act privatized the rail network. British Rail was broken up into over 100 different companies, with the complete separation of infrastructure (track, rolling stock, stations and signaling) from passenger train services. The latter were broken up into 25 different franchises (or contracts) leased to private sector passenger train operating companies. The number of franchises has subsequently been reduced, with a small group of private companies now dominating the market, including the likes of FirstGroup and the national rail companies of Germany (Deutsche Bahn) and the Netherlands.

Rolling stock, meanwhile, was transferred to three Rolling Stock Leasing Companies (ROSCOs), who were privatized and sold to private equity investors and banks including Abbey and the Royal Bank of Scotland. Rail infrastructure was transferred to Railtrack, which outsourced all maintenance and renewal to private contractors. Railtrack was quickly privatized in 1996 to prevent the unwinding of railway privatization by the incoming Labour administration. After the Hatfield rail disaster, Railtrack was sold to Network Rail and, remarkably, its current legal status is unclear with disagreement as to whether it is a public or private body. Franchising was also outsourced but was eventually brought back into the Department for Transport given the political sensitivities over the railways.

Proponents of rail privatization claimed it would improve quality and efficiency. While there are more trains on the network and there have been some improvements in safety, there have also been many downsides to privatization. There has been a significant rise in unregulated fares – particularly walk on tickets bought in stations or on trains. Costs have risen, since rolling stock is now leased from ROSCOs and construction costs would have previously been written off by British Rail. The unit costs of the privatized industry have risen significantly as the various train operating companies are not able to realize the economies of scale available to the previously national network. The complex nature of the industry has also watered down accountability and confused the general public (and no doubt often policymakers as well).

The numbers of passengers on the railways has also increased significantly but the start of this can be traced back prior to privatization. Factors such as the cost of petrol and increased road congestion could also help to explain this rise. Nonetheless, the public subsidy to the rail network has increased to about £4 billion in 2010/11 – down from a high of £6.5 billion in 2006/07 but far higher than what was given to the sector under public ownership. The effect of this has been to place an even greater burden on profitable routes such as the East and West Coast mainlines to return a significant dividend for the taxpayer – hence the reason perhaps that the Department of Transport has put so much faith in the highest bidders for these routes.

This faith hasn’t always been realized. Two operating companies, GNER and National Express, have handed back the East Coast franchise because they were not able to service the expected payment targets. Both providers over promised in order to win the franchise and ran into financial difficulties trying to deliver their plans. The result has been a legacy of under investment and cost cutting – which of course has ultimately cost passengers.

Richard Branson argues that the selection of the new franchisee for the West Coast mainline shows that the Department for Transport has not learnt the lessons from previous failures. The short-term political desire for a good headline has over-ridden the long-term interests of the network – and the concerns and opinions of rail users, despite active representation from passenger groups. But the broader lesson from this ill-conceived and rushed policy might be that some services need to be properly publicly accountable, even if not every aspect of them is delivered by the state. Does the current government understand the essential publicness of our public services?

Winterbourne View shows that some policies are ‘out of sight, out of mind’

In a previous post we suggested that outsourcing can be a way to protect unpopular policies. In the case of vulnerable adults with learning disabilities, outsourcing has become a way to abandon them in poorly run institutions far away from their families – until scandals like Winterbourne View force us to confront the abuse that this isolation enables. Blaming poor providers is only part of the picture – we also need to look at the bad policy that enables such abuse to happen.

Winterbourne View Hospital was an admission and treatment unit for people with learning disabilities in Bristol, managed by social care provider Castlebeck. A Panorama programme, Undercover Care: The Abuse Exposed, first shown on BBC One in 2011, uncovered the endemic abuse and neglect taking place at the centre. The programme showed footage of one member of staff who trapped a female patient under a chair whilst he watched television; another female patient was dragged from her bed by two male members of staff. The appalling abuse that took place at Winterbourne was only uncovered because a whistleblower, Terry Bryan, was prepared to raise the alarm.

This is not just about one bad provider, however. Following the scandal, the Government asked the regulator, the Care Quality Commission (CQC), to make unannounced inspections of 150 similar learning disability services. CQC found that nearly half of hospitals and care homes are still failing to meet acceptable standards. The degree of abuse at Winterbourne View is sadly not unique either – it follows other recent scandals in NHS care homes for people with learning difficulties in Cornwall and in Merton and Sutton.

Multi-agency working clearly also failed in the case of Winterbourne View, and the Department of Health has called for more joined up working – the usual mantra after such scandals. Avon and Somerset police were called 29 times but failed to observe any pattern or draw any conclusions about the level of incidents at the home. The local Adult Safeguarding Board received 40 alerts over three years but took no action, whilst CQC decided not to follow up the notifications of abuse it received because it assumed that the local Safeguarding Board was doing so. CQC had also inspected Winterbourne View prior to the Panorama programme and concluded that the service met its standards. Vulnerable individuals have been at a centre of a web of public bodies who are all pointing the finger of blame at each other, from the CQC, the local Safeguarding Board, NHS commissioners, to the police and the local hospital.

But this is not (just) a failure of regulation either. Various reports relating to successive scandals have pointed not only to gaps in multi-agency working, but also to poor training, the pay and conditions of staff employed in adult social care, commissioning focused only on procurement rather than managing contracts, and poor representation of the views and aspirations of disabled people and their families. In other words, it’s time we focused on what’s wrong with the policy as well.

Many people assume that the NHS or local authorities provide services for people with a learning disability, but scandals like Winterbourne View highlight that much of the social care system is outsourced to providers who run these services to make a profit. Despite the perception of over-regulation of these services, something is not working if cases like Winterbourne View, Cornwall and in Sutton and Merton continue to emerge – and these are just the ones we know about.

Despite the rhetoric of ‘localism’,  ‘choice’ and ‘personalisation’ that underpins the Government’s open public services agenda, too many adults with a learning disability are still being placed in poorly-run institutions far away from their families and friends. This is the argument of 86 individuals and organisations that wrote a joint letter to Paul Burstow MP, the Minister for Care Services.

Admission to an assessment and treatment unit such as Winterbourne View is supposed to be time limited to complete a new assessment and treatment plan or change medication. However evidence points to the fact that people go in and stay in. The CQC Count Me in 2010 census looked at providers of in-patient learning disability services. It found that 67% of all patients in England and Wales had been in hospital for one year or more, 53% for two years or more and 31% for more than five years. This policy could be characterized as ‘out of sight, out of mind’, which was the theme of a recent report from Mencap in how to stop the neglect and abuse of people with a learning disability.

Many people with a learning disability want to live in the community that they come from, near their family and friends, with support available locally. Mencap and other providers have called for policy changes, in particular the closure of these residential assessment centres, to be replaced by a system of local care and support. One of the problems of Winterbourne View was that in some cases families were actually refused contact or had contact their family member restricted in some way. Abandoning people in long-term residential centres far from their families leaves people feeling very isolated, especially for older people with a learning disability where their parents may be frail or have passed on with family contact left to siblings or distance relatives.

To place one person in one of these assessment and treatment units can often cost in excess of £150,000 per year. Supporting people in their local community would cost significantly less. Large sums of public money are being spent on inappropriate treatment that many people with a learning disability and their families don’t want to access. A wider debate about the policy is urgently needed. If charities, families and people with a learning disability are telling us they would like a different approach to delivering care and support, why is this being ignored? The Government’s recently announced open policy agenda is all about ensuring that more expertise and evidence informs policy, wherever this input comes from. What price genuinely open policy if it might threaten the current lucrative market for outsourced delivery in which services users have little voice?

The Games Makers versus G4S – what the Olympics means for outsourcing

Olympics over (at least until the Paralympics start), we can get back to where we were – wondering how G4S cocked up so badly providing security for the Games, and what it might mean for outsourcing and social policy. The Olympics have provided a stark contrast between the performance of companies like G4S and the thousands of volunteers and public sector workers who made the Games happen – something to remember when it comes to who we trust to deliver public services.

The biggest cheer at the closing ceremony was undoubtedly for the volunteers. An astonishing four million people applied to be volunteer ‘Games Makers‘, and 70,000 were chosen. Spectators’ and tourists’ experience of their help and hospitality seems to have been almost universally positive (volunteers’ own stories seem to have been equally good).

Then there’s the behind-the-scenes public sector workers – the planners, highways staff, events and civil emergency teams, social workers and others who supported the Games, often on top of their regular responsibilities. Comments on the Daily Telegraph’s site might regularly refer to public sector workers as “parasites” and “scum”, but when it comes to delivering for the nation it seems that the public sector still has its uses and some forms of ‘public investment’ are okay.

This is not private sector-bashing; many businesses and sponsors also made the Games happen. The National Lottery also played a crucial role in the Games’ success, through its investment into hosting the Games themselves, as well as into the success of Team GB’s athletes. But the G4S experience shouldn’t be forgotten. It points to at least three important issues in outsourcing.

The first is about trust. On our behalf, the Government trusted G4S to deliver and the company failed. Thankfully there were no major security incidents, thanks to the thousands of public sector workers in the form of the police and army who stepped into the breach at the last minute. What we need to know now is whether this failure relates specifically to G4S or not. If G4S is a particularly poorly managed company that can’t be trusted, its performance in delivering so many other contracts also needs to be reviewed. Alternatively, if as G4S and others have seemed to suggest, the Government made major mistakes in how it commissioned and oversaw its contract, then the issue is much broader – it’s about whether outsourcing at this scale can ever be trusted.

The second is about openness. G4S’s clumsy and surely counter-productive ‘donation’ of £2.5 million to the armed forces shouldn’t succeed in obscuring these issues, rather it raises more questions. We will only find out the answers if we can see the contract that G4S was given, and in particular how the company will ever be held accountable. How many security staff did G4S (2011 revenues of £7.52 billion) actually deliver? What penalty clauses are there for its non-delivery? How much will it paid for what it did manage to do – and how much will it (properly) recompense the public sector for the additional costs that it (we) had to cover?

The third is about what we value and what motivates us. Some commentators (and ministers) have claimed that the Games reflected the Big Society. The Games Makers in particular demonstrated that people are prepared to volunteer in huge numbers. This doesn’t mean we can deliver public services on the backs of volunteers, but it does suggest there is a vast and often neglected commitment that could be harnessed to improve society. Even The Economist magazine (a consistent advocate of outsourcing) noted last week that volunteering has gone up during the recession – not because of the Big Society but because people care about their local services and communities and so are more motivated to ‘save’ them when their budgets are being cut. Danny Boyle’s opening ceremony (also largely a volunteer army) might have been “multicultural crap” to reactionary misanthropes, but the reason it moved the rest of us is that it reminded us of social achievements driven by a commitment to collective good rather than private benefit.

How many of the Games Makers would have turned up if their job was to save G4S’s neck? The latter might not have offered much pay, but the former weren’t offered anything – beyond the opportunity to be part of something that matters, to make a contribution to a national moment. The Big Society (by whatever name you want to call it) won’t happen if people feel they are being asked to take the place of public services that they’ve already paid for, especially if large outsourcing companies are getting paid at the same time. Perhaps it wasn’t coincidence that while we were distracted by the Olympics, it was ‘leaked’ that the Government is set to give the contract to manage the National Citizen Service to Serco (2011 revenues of £4.64 billion). Put to one side the question of why volunteering – something that charities do all the time – requires a for-profit outsourcing company to manage it. The G4S fiasco suggests we should make sure the penalty clause is so strong – and so transparent – that we won’t have to rely on Serco’s sense of ‘charity’ if and when it fails to deliver.

How outsourcing can reduce real choices for people using services

In recent posts we’ve been exploring the tensions between two competing Government agendas – for so-called ‘open public services’ and ‘open policy-making’. Choice is supposed to be a central part of the Government’s agenda to open up public services to greater competition in order to improve outcomes, quality and efficiency. In this post we explore three ways in which outsourcing can actually reduce real choices for people using public services.

You might have missed it, but in June the Cabinet Office announced an independent review led by David Boyle into the barriers to choice in public services. The review is looking to address the factors that prevent people from understanding and exercising the choices available to them in a range of public services. But the review does not address another pertinent question: how ‘open public services’, especially outsourcing, can reduce real choices for the public.

Firstly, there is no getting away from the impact of the cuts, which are creating poor choices for users of public services. For example, local councils are due to make cuts of about £2 billion to adult social care budgets between 2011-13, with £890 million coming out this year alone as part of the Government’s deficit reduction programme. Outsourcing services to non-public sector providers is seen as the main way to reduce costs.

Take this example: domiciliary care services (care in the home), much of which is outsourced, is one area that has borne the brunt of cuts. Hourly rates for dom care have dropped in some parts of the country to as low as £10-12 per hour. From a provider point of view, the only way to make these contracts work financially is to increase the volume of customers and reduce costs. Given that the majority of cost is staff time, this means becoming a minimum wage employer and reducing staff terms and conditions – a move that many charities and private sector providers are (being forced into) making. It also means cutting the time allocated for care visits to under 30 minutes and sometimes to less than 15 minutes.

Rationing of social care has also meant the things that people want to choose – for example social contact or help with domestic duties such as housework, shopping and gardening – are not available unless they can afford to pay from their savings. According to Age UK 33% of older people report feeling lonely, with this figure increasing to half for those aged over 80. It’s obvious that a 15 minute visit doesn’t leave time for a conversation.

Outsourcing based on price is bound to affect quality. A review into choice and competition in public services by the OFT found that competition based on price alone is likely to lead to a deterioration of quality. This is backed up by the results from a survey conducted by the National Care Forum of 40 social care providers this week, which showed that the social care workforce is rapidly ageing, and that there has been a hike in staff turnover rates. Given the unsociable hours and low pay, social care does not tend to be an attractive career option for young people. 46% of care staff are aged 46 or over, whilst turnover rates for domiciliary care for older people has climbed to almost 28%.

Secondly, information about services available is fragmented. It is well documented that advocacy, information and advice services are withering on the vine as a result of the cuts. Yet good quality information and advocacy support are integral to supporting choice. Information about providers is hard to find with services such as Find Me Good Care, Shop4Support and the Good Care Guide in their infancy. The Government has been reluctant to invest in services such as these – the Social Care Institute for Excellence has invested their reserves into Find Me Good Care instead. Providers have also been agnostic about these services as many of them find business through word of mouth or local authority referrals. Yet without adequate market information, real choice for service users will be undermined.

The views of service users are not always well understood or captured by services. Take another sector as an example: 11,000 pupils are placed in out of authority special schools at an annual cost of £572 million. A review of this market by the Audit Commission found that young people were rarely asked for their opinions or offered choices. Instead, choices are made by parents and professionals, not the young person themselves. Many young people want to be placed nearer to their family but the concerns of their parents tend to take precedence.

Thirdly, the ‘bigger is better’ approach to outsourcing is reducing real choices for people. The outsourced public services market is maturing around a group of large providers who are increasingly too big to fail. The Government is ever more reliant on providers such as Capita, Atos, A4e, Serco and G4S, who alone have the scale and funds to absorb the risks associated with this ‘bigger is better’ approach to outsourcing. A4e now delivers services across welfare to work, adult social care, information and advice and offender management. The dominance of these providers crowds out small charities and providers who cannot compete on a level playing field, which again reduces choice for service users but also commissioners of services.

Choice is nothing new of course; successive governments have embraced it as a way to improve performance across a range of public services, and in one sense the current Government under its open public services agenda is only continuing this trend. But after nearly 30 years of promises of increased choice – often to be achieved through increasing amounts of outsourcing – many of the actual choices available to the public seem less and less appealing. The one choice we don’t seem to be being offered is the political choice to challenge this agenda – for the users of services and the professionals who deliver these services not to be subject to imposed ‘choice’, but rather for them to be able to determine together how services can be improved and for policy wonks to get out of their way. Perhaps the Cabinet Office could add this type of choice to its review, if it is allowed to.

How open public services is a way to outsource unpopular policies

In this recent series of posts we’ve been exploring the tensions between two competing Government agendas – for so-called ‘open public services’ and ‘open policy-making’. The former is supposed to improve public services by widening the choice of providers, while the latter is meant to improve policy by widening the range of voices that influence policy. These ‘tensions’ aren’t necessarily undesirable for policymakers – outsourcing can be a useful way for Government to ignore the views of those on the frontline when these views conflict with its policy agenda.

Last week Atos was appointed to carry out assessments for the new Personal Independence Payment (PIP) securing two contracts worth over £400 million. PIP is the new benefit to replace Disability Living Allowance from April 2013 for new claimants (with existing claimants migrating onto this benefit by 2016). This decision has proved to be highly controversial because of Atos’ £100 million a year role in the Work Capability Assessment (WCA). The WCA is the main assessment for Employment Support Allowance (ESA) claims.

The WCA has been a public policy fiasco, which has caused real anxiety and fear for people who have been forced to go through this process, as highlighted in recent documentaries by Panorama and Channel 4’s Dispatches. The media has been littered with examples of people who clearly should not have been found fit for work. According to an Early Day Motion last year, 1,100 claimants died while under compulsory work-related activity for benefits and a number of those found ‘fit for work’ and left without income have committed or attempted suicide.

As a result, there is considerable fear, distrust and anger amongst disabled people towards Atos, and the company has faced serious criticism from campaigners, charities and the media for its role in the policy. However, the concerns of disabled people have clearly not featured in the decision to commission Atos to deliver PIP – indeed, they have been dismissed.

Perhaps this is because the problem is the policy, not necessarily the provider. Charities and commentators have argued that the process is flawed, the tests are too impersonal, take little or no account of the wider circumstances and motivation of a person, and that the fluctuating nature of some conditions is not sufficiently taken into account (charities have instead called for a ‘Real-Life’ Assessment rather than a one-sized fits all approach). GPs at their annual conference in May called for the WCA to be scrapped because the assessments are “inadequate” and “have little regard to the nature or complexity of the needs of long-term sick and disabled persons”. They called for the tests to be replaced with a more “rigorous and safe system”. Of the 390,000-plus appeals that have been lodged against decisions not to grant the benefit, just under 40% have been successful. By some estimates the appeals process has actually cost more than the value of the Atos contract to deliver WCA.

Helpfully from the Government’s point of view, criticism of the role of Atos has often obscured concerns about the policy itself, in spite of the fact that the design of the assessment itself is the problem. Professor Harrington was appointed to review the process and recently announced that he is quitting after his third review is completed. Paul Farmer of MIND also stepped down from the Harrington Scrutiny Panel, highlighting a variety of concerns about the WCA. The WCA contract was a poisoned chalice and any provider delivering this contract would have faced similar criticisms.

The policy has also had serious implications for another initiative, the Work Programme (discussed in previous posts), with the flow of customers in receipt of ESA significantly below the estimates provided by DWP to bidders when commissioning the Work Programme. The scale of appeals against WCA decisions has created this logjam in the system, which was not anticipated. The effect of this has been that many charities in the Work Programme who expected to work with ESA customers have seen little or no referrals, whilst the financial models of primes have been affected given that this customer group attracted the biggest financial payments.

Work Programme providers are also required to recommend customers for benefit sanctions – this is an integral part of the design of the programme and providers face consequences if they don’t carry out this aspect. As with WCA however, it is providers who have faced criticism (in this case for their role in sanctioning customers) when the design of this sits with the Department for Work and Pensions. Sanctions are a policy decision and they can only be implemented by DWP – they are not a provider decision.

The outsourcing of both PIP and WCA are examples of the Government’s open public services agenda in practice, whereby public services are opened up to greater competition from the private (and to a lesser extent voluntary) sector. Previously both the WCA and PIP could and would have been delivered ‘in-house’ by Jobcentre Plus. But with outsourced provision, badly designed policies such as WCA and the Work Programme can lumber on while the media and others focus on what’s ‘gone wrong’ with a particular provider. What price open policy then, when providers are effectively being paid to cover for poor policies – at least for a while?

What does the Work Programme mean for open policy?

In this recent series of posts we’ve been exploring the tensions between two competing Government agendas – open public services and open policy making. In this post we examine these tensions in more detail, using a flagship Government policy – the Work Programme to tackle long-term worklessness.

The Work Programme is regarded by Government and others as a model of outsourcing that should be replicated in other areas of public services. The Economist magazine has predicted that £58 billion of public services will be outsourced by 2015 as part of the Government’s agenda for ‘open public services’, on top of the £82 billion already outsourced (according to Oxford Economics). Much of the comment surrounding the Work Programme has focused on what it means for the future of outsourcing – but what does it also suggest about the potential for open policymaking?

The Work Programme is a £5 billion initiative that has been heralded as the most radical attempt by UK government to address long-term worklessness. It is based on the principle that government will get out-of-the-way and will financially reward providers who perform. The Government has argued that delivery of this programme should be outsourced rather than delivered in-house, because this will drive innovation and significantly improve performance compared to previous programmes such as Flexible New Deal. Responsibility for both delivery and risk has been transferred to large generally private prime contractors who are largely paid on results, that is the number of people entering into work and keeping their job for up to two years.

However, one of the striking things about the Work Programme, given its size and remit, is the lack of publicly available performance data. This seems to run counter to what the Government has said about the importance of open data, transparency and now open policy. For example, the Government’s Open Public Services White Paper states that ‘Provides of public services from all sectors will need to publish information on performance and user satisfaction’ – yet the same emphasis isn’t always apparent when it comes to this flagship Government programme.

Effective transparent scrutiny of the Work Programme is difficult because providers are not able to share data about what is working and what isn’t. They are required to sign comprehensive contracts, which prevent them from sharing performance data unless it is already in the public domain. Provides face serious consequences if they flout these rules especially if they generate ‘adverse publicity’ for the programme. Nonetheless, some data have trickled out, and the first analysis of performance was released by the Department for Work and Pensions earlier in the summer. This followed a data set released by trade body ERSA in May. ERSA and the Department estimate that one in four people are going into work after being attached to the programme for six months.

The Government has argued that there are complications in releasing timely data about the Work Programme, both because it is new and because there are customers coming onto the programme all of the time, which can distort the overall impression regarding its performance. The Minister responsible, Chris Graying, in evidence to the Work and Pensions Select Committee in March this year argued that his Department is publishing data about the Work Programme in accordance with Office of National Statistics guidelines covering both what, when and how statistics are published. However, a careful reading of his evidence  might suggest that the ONS rules don’t actually prevent DWP from releasing Work Programme performance data – in other words, that the Department has more room for maneuver than the Minister appears to suggest. We’d be happy to be corrected on this interpretation – if someone from DWP or indeed ONS wants or is allowed to get in touch.

What is certainly true is that it is still very difficult, a year into the Work Programme, to build an accurate picture of whether the policy is in any way on course to deliver against its original objectives. This vacuum of information is creating a lot of unease about the policy. It has been left to the likes of the National Audit Office and the Social Market Foundation to fill the gap – much to the chagrin of the Government. A report from the NAO earlier this year stated that the Government’s assumptions about the Work Programme were over-ambitious, and that only 26% of job seekers would secure work compared to the Department’s target of 40%.

Given the scale of investment in this programme, both political and financial, it is unsurprising that there is so much interest in this policy – and so many demands for more openness and transparency. There are legitimate questions to be answered as to whether the Work Programme is working in the way it was intended. A number of charities have pulled out of the programme whilst others have gone bust because of the financial constraints of the payment by results model used in the programme. St Mungo’s, a well-respected charity is the latest example to pull out after failing to receive any referrals. The NCVO has also raised a number of concerns from their members about how the programme is being implemented. Given this level of public interest and concern, lack of transparency becomes counter-productive – rather than reducing possibly inaccurate comment and analysis, it only serves to increase it.

The Work Programme points to a real tension between the Government’s open policy and open public services agendas. The Government wants to create a vibrant and efficient market of providers for outsourced public services. It also says it wants the performance of providers to be transparent and open to public scrutiny. But if other, equally important areas of provision such as reducing re-offending, public health, skills, and drug and alcohol recovery employ the Work Programme model, this suggests that open policy in public services will be severely limited, and that the public will know less than they should about what their money is funding and what the results are.