Scrutinising an ever-fragmenting public sector

Summary

How can we improve our systems of scrutiny following the G4S shambles?

This was something that Margaret Hodge, Chair of the Public Accounts Committee raised in a recent evidence session with the House of Lords’ Constitution Committee. It’s something she has also mentioned in other forums too.

The move towards outsourcing and privatisation.

This is something I’ve touched upon in previous public administration posts. Governments with ministers of all the major three parties have transformed public services through much greater use of non-state organisations. This has raised issues of accountability – which I discussed earlier this year. Interestingly, in the last paragraph of that blogpost I noted that the first time I came across this type of outsourcing was when “Group 4″ took over the transfer of prisoners from the prison service back in 1993 – with a high profile break out not long after.

One of the basic concepts of economics I learnt was that of diseconomies of scale. The principle normally is that as tiny firms grow, they are able to specialise and thus become more efficient. But when they become too big, inefficiencies creep in. Think about getting IT permissions to use certain programmes or get changes done, or approval for this that and the other and you get what I mean. The Guardian’s business blog asked the question whether G4S is too big to manage – just as the banks being too big to fail.

It’s not like buying cabbages and peas

The financial relationship between buyer, service provider and recipient is far more convoluted than buying food from the shop. It’s much more indirect – the council ‘buying’ (more often than providing the service ‘in house’ in days of old) from separate providers, citizens being the recipients but ultimately paying for it through taxes. Yet this method is far more efficient than having a ‘pure’ free market where each household ‘buys’ their own refuse collection services. For a start there’s no guarantee that everyone would do so – even if compelled. (Think all of those drivers that drive without insurance). Then you have the problem of traffic congestion with potentially lots of firms clogging up the roads with their vans. This is why for me things like privatisation of mail services and ‘choice’ for schools is not cost free. An indirect consequence of it is increased traffic which itself has a knock on impact.

How do you scrutinise the service delivery?

In house provision, in principle is straight forward. You have elected councillors who scrutinise the directors of service deliver over the services they are responsible for. An extra layer is added where there is an external provider. One good example local to me is with buses – Stagecoach has a director responsible for bus services. But then I’ve never been entirely sure of what the relationship of accountability is for a member of the public when moaning about public transport issues. Do I go to my councillor? Do I go to the executive post-holder on the council? Do I go to the bus company concerned? It’s all very well someone responding to me on this blog on how to go about this, but then my blog and Twitter accounts are followed by a number of very informed and knowledgeable people that I can tap into. Most other people are not in this situation, so for them, where would you start? If the effort involved and barriers to overcome, to progress the complaint is greater than the likelihood of getting it resolved, then people understandably will give up.

What do you do if you really don’t like the person who runs or owns the firm that has a monopoly of service provision?

For example I strongly disagree with the beliefs of the owner of the local bus firm. In free market land, I’d boycott the service – but I can’t because his firm has a monopoly on the local bus service that I and many others depend on. At least having services ‘in house’ means that the politically partisan issues are taken out of things.

There is then the issue of how high profile the heads of large companies that secure big public contracts should be. G4S for example was relatively obscure to the general public until very recently. How many people are familiar with the people at the top of firms such as Capita, Serco, Honeywell and Mitie? Should the chief executives of these firms be subject to regular and continued scrutiny by Parliament due to the virtue of being responsible for delivering such huge public services?

Should such large firms be compelled to have public sector and/or trade union representatives on their boards?

It sounds strange at first – shouldn’t the board only be accountable to its shareholders? Well…no. A firm’s decision-making can only be as good as both the people who are its decision makers and the quality of information that it has with which to make those decisions. Wouldn’t having representatives from both their customers and their workforces improve the information available to decision-makers within those firms delivering those services? What would the impact have been on G4S if it had representatives from both its customers and workforce? Would problems have been raised far earlier and all of this been nipped in the bud?

Should such firms be subject to the Freedom of Information Act? 

Yes. In fact during my early civil service days I was told that some firms were already subject to some access to information legislation such as the Environmental Information Regulations. You can imagine my dismay to find out that this has since been overturned – in particular with water companies. Hence my take for both the FOI Act and the EIR regulations to be updated to include private firms delivering public services.

How can we get the scrutiny talents of the likes of Robert Jay QC and avoid the shambles of the Treasury Select Committee’s failure to pin down Barclays?

…Other than paying huge amounts of money to lawyers and barristers for extended public inquiries? One of the jokes flying around is that we risk becoming an inquiry-based economy because it’s the first call when something goes wrong. My take is that the bar rightly should be high when considering cases for public inquiries. But at the same time we should recognise that our existing systems of scrutiny leave room for significant improvement because they have not kept pace with the evolution of how public services are delivered. If these systems are not improved, we risk having future cases of G4S-style failures.

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2 Responses to Scrutinising an ever-fragmenting public sector

  1. Ed Hammond says:

    Ultimately it’s all about the contract.

    Robust scrutiny needs to be built in to contracts, backed up by a significant expansion in the scope of the FOI regime.

    Providers – whichever sector they’re from – need to understand that with public money comes an obligation to transparently account for how that money is spent, and for the performance of the service being provided.

    For natural service monopolies – bus services, water, electricity etc – where there is no effective market and/or “vertical integration” of provision (electricity is an example – generation and supply used to be separated to provide a transparent wholesale market but this is no longer the case) we have to look at more robust mechanisms, including the internal governance of the organisation in question. This, though, is rather more difficult.

    In local government, overview and scrutiny has made something of a success of scrutinising outside contractors without technically having the legal powers to do so. Usually this has been about the exertion of soft power, and building relationships with the contractor that allow scrutiny to act as a constructive, critical friend.

  2. I don’t see why private companies who provide public services paid for with taxpayers money can’t be added to the FOIA (and FOISA where money comes from the Scottish Government). A BBC-style derogation could be added in to ensure that it is only public sector contracts covered by FOI.

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