Grahame Morris MP

Member of Parliament for Easington

Red Book: The commercialisation of public services

August 28, 2012 Blog 0

A foreword by Shibley – This, I believe, is a beautiful piece of writing by @GrahameMorris, MP for Easington. I not only believe that the economic arguments are cogent, accurate and compelling, but I also feel that it sets out the case accurately for this major flaw in policy which the Conservatives and Labour have been pursuing now for decades. I reproduce it below entirely in keeping with the original source ‘The Red Book’.

Foreword to the Red Book:

This book has been produced by Labour Left -a Labour Party campaign grouping within the UK Labour Party. For any queries please email the chief editor The book is free of charge and can be reproduced without permission. Each author retains sole responsibility for their work, and full intellectual property rights accordingly. You can find out more about Labour Left by visiting

Link: here.

Grahame Morris MP is the Chairperson of Labour Left as well as the Labour MP for Easington, an area blighted by the Tory misgovernment of the 1980s. Having spent his early career in the NHS, Grahame began working with John Cummings, MP, in 1987 and has served as a Labour Member of Easington District Council for fifteen years. Grahame is a member of the Health Select Committee, and he writes for the Morning Star on matters related to the NHS. Grahame’s passion lies in narrowing the health inequality gaps brought about by the unequal society in which we live.

The Left should Champion Dynamic Responsive Public Services

We need a dynamic, responsive, publicly funded and publicly provided model for the UK‟s public services. We must be bold and reclaim our public services for the sake of our people, our economy and our country.

The recent trend in delivering public services in the UK has seen a move away from the large centrally driven publicly provided service model which characterised the welfare state in the immediate post-war period. Across the public sector we have seen the introduction of competition as well as large sections of services passed over to the private sector. The drive behind this commercialisation has been from right wing critics of the old-style monolithic services who believed that it would be impossible to achieve improved outcomes, greater efficiencies and a consumer focus without such significant reform.

The desire of governments to reform key public services and extend the commercialisation agenda as they seek further efficiencies has entered a new phase under this Coalition. While New Labour brought competition into the NHS, the Coalition is seeking to break it up and remove any distinction between public and private providers of health services. The Health and Social Care Bill will turn the NHS into little more than an insurance fund. There were those in the Labour Party who warned that the split between commissioners and providers, the introduction of competition, commercial practices and the incorporation of the private sector into public service delivery would risk opening the floodgates to further ideological change in the future. While Margaret Thatcher would have struggled to pass current Tory-led reforms to the NHS back in the 1980s, once the private sector had a foot in the door and the public service ideology was broken down under a Labour government, these policies became a Trojan horse for privatisation.

At the last election, all three main political parties seem to have lost faith in the ability of public service workers to improve public services from within. “Reform” itself had become almost entirely associated with further marketisation, the extension of competition or a greater role for the private sector at the heart of our public services. The ideological drive behind reform of this nature has also deepened. The extension of commercial practices into public services is now pursued regardless of the impact o  assessment of how its implementation will affect the costs, accessibility or quality of service delivery. The government‟s own impact assessment of the Health and Social Care Bill suggested that “the majority of quantifiable [financial] distortions work in favour of NHS organisations‟, i.e. NHS providers have a lower cost base than the private sector even before taking into account the latter‟s need to make a profit.

The evidence suggests that the contracting out of public services to the private sector has a poor record. There is often a negative impact for employees with the prevalence of short-term contacts and the increasing use of employment agencies. UNISON commissioned a report on the rise of the multi billion pound Private Public Services Industry raising significant concerns about the increased dependency on private firms. Public services have become a huge industry from which the private sector receives more than £80 billion of taxpayers’ money every year. Yet private sector delivery of services has become characterised by increased cost, deteriorating quality, the loss of accountability and greater risk of service failure. The Southern Cross Care Homes debacle has brought just these sorts of issues to the fore once again.

More and more services are being transferred to the private sector, leading to a situation where there is a danger that we lose control over our public services altogether. In 2007 the Local Government Association warned that because of the amount of local authority spending on external private sector contracts, the ability to make efficiency savings without damaging services was not realistic. It should be even more evident at a time of financial restraint how important it is that we retain control over our public services. The central argument in favour of the increased commercialisation and privatisation of public services rests on the importance of consumer choice as a driver of increased efficiency, accountability and value for money. Yet there are serious limitations to the idea of the “well-informed consumer‟ as examples show.

While there were many faults with the nationalised rail services provided by British Rail, privatisation has not resulted in increased efficiency or competitive ticket pricing. On the contrary, disruptions to rail services remain, commuters suffer from chronic overcrowding on rush hour trains and prices have increased dramatically year-on-year. In fact, privatisation has not resulted in increased choice for consumers at all: in the case of the railways it is not possible to make a choice about which rail company to use. High fares and poor conditions have to be accepted. This is not a “free market‟. It is the result of the State granting a licence to specific companies to make money through market domination. We must be very wary indeed of allowing this situation to develop in the provision of healthcare and other welfare services.

One area which it is argued does feature genuine consumer choice is the provision of utilities. In most parts of the United Kingdom, it is possible to choose a provider of gas and electricity from a handful of companies. Yet here too prices have increased above inflation and the profits of the energy companies have soared, to the extent that during the autumn of 2011, Labour Leader Ed Miliband looked to hold the „big six‟ energy companies to account for their excessive price increases. Of course, energy companies claim that they are only reflecting the vagaries of the international markets in coal, oil and gas. However, their increased profits and continued price increases suggest that not only have they made no attempt to insulate people from any increased costs but that they are making money rather than working in the best interests of their customers. The reason is that the energy companies are well aware that the idea of the well informed consumer is largely a myth. People are often confused by the proliferation of similar sounding deals or are reluctant to get involved in changing supplier.

Similarly, people are traditionally very reluctant to change the bank which provides their current account, even when there are tangible financial benefits from doing so. That is why banks create incentives to those who do switch their current accounts. It is also why there are so many attractive add-ons to opening a student account. Banks know full well that once a person has opened an account with a bank as a student, they will most likely use the same bank for the rest of their life.

There are very few people indeed, irrespective of income or education, who sit down every month, work out which energy company or bank account offers best value, and, crucially, act by changing their utility provider or switching their current account. And even if they want to do so, there are usually financial tie-ins and penalties for leaving their existing deal. It seems that the “big six‟ energy companies know these things, hence the steep increase in fuel bills and their reluctance (as evidenced by their increase in profits) to insulate their customers from the increase in the market prices of fuels. It is worth remembering that left politicians at the end of the nineteenth century argued for municipalisation on the grounds of efficiency, in that it enabled councils to run utilities at a lower cost to ratepayers and to avoid the wastefulness and high costs incurred through the use of private companies. There are certain services which it seems natural for the state to provide – no one would seriously suggest replacing police forces with private security firms – and the increasing consumerisation of public services not only undermines our welfare state, but also the health of our economy and society.

Milton Friedman and Friedrich Hayek did not advocate a “small state‟, as many commentators on both the right and the left have mistakenly argued. On the contrary, they saw the state as vital for securing private property, protecting the market and incentivising trade. They recognised that for a nation to succeed economically it was not simply a matter of low taxation and regulation. They did not believe the simplistic argument that capital and human resources simply move from an area of high taxation to one of low taxation, as though through osmosis – but rather that security and infrastructure needed to be provided and the only institution able to provide this was the state.

As a nation, we cannot expect to attract leading industries without leading excellent state education. We cannot expect to have a motivated, healthy and happy workforce without comprehensive welfare provision; and we cannot expect our innovators and entrepreneurs to take risks with borrowed capital if their main concern is whether they can afford treatment should they be ill. Given that the vast majority of start-up companies fail within the first twelve months, and given that many small businessmen and women build up large amounts of debts while starting up businesses, they are less likely to take these risks if they are liable for ruinous healthcare or welfare payments should they be ill, pregnant, or unable to work.

Essentially, if we are to have a vibrant and vital economy which can attract the most innovative industries and keep the brightest people in the United Kingdom, we need robust public services. There are certain areas which benefit from consumerisation – the welfare state is not one of them. For the health of our people, our economy and our society we need to keep it in the public sphere. The welfare state has a proud history and has embedded itself into the British psyche. The NHS has perhaps been one of the most robust drivers behind the welfare state with its guiding principles and values which are supported wholeheartedly by the public at large. We do not need to protect the welfare state merely for ideological reasons, nor do we need to resist the consumerisation of the NHS and other public services simply out of a suspicion of change and a desire to protect the status quo. Indeed, the last Labour Government sought to use the private sector in the NHS to increase capacity, for instance in reducing waiting times for cataract and hip operations. However, once the distinction between our public services and the private sector was blurred by the centre-left it was clear that this would be abused once those on the political right took power. While this government denies its motives are to privatise NHS services, there is growing evidence that NHS providers and social enterprises are continuing to lose out to commercial companies for major NHS contracts.

Private healthcare firms have on numerous occasions beaten social enterprise projects even where these projects reinvest profits into the local community. The direction of travel that of this government, forcing new commissioning groups and hospitals to operate in the private sector, is certain to lead to much more of this privatisation of our NHS services. Aneurin Bevan argued that abuse in the health service occurred when the incompatible principles of private acquisitiveness and public service were married together. This is true throughout the welfare state. The scale of the privatisation in public services receives little or no attention in the media and often goes unnoticed apart from by those that it directly affects – such as the cleaner or cook that loses their job. Yet around 20-30% of government spending on public services goes to the private sector – almost a third. It is not that we should simply oppose any money going to the private sector from the public purse. What should be opposed is the direction of travel and rapid growth of the private sector within public services. The benefits of good public services are clear for all to see. They should be characterised by:

  • Reliable employment practices;
  • Greater democratic control over service delivery; and
  • Greater accountability.

However the most basic benefit of public services should always be the ability to deliver an effective service for better value for money than private competitors. We must set out an agenda which puts confidence back into public services and the public sector workforce and which can fashion change and improvements from within. There have been clear failures in the state-owned public services model which must be addressed if those of us who support this model are to win the arguments over future reform. Slow moving monolithic bureaucracies at local and national level need to become more responsive and we must recognise that the move towards the private sector was in part inspired by the refusal of some services to adapt and change. Trade unions and staff associations must become part of the solution to improving services – indeed there are examples where unions have worked with local authorities to redesign services for the benefit of staff and services users, such as in my own area, in commercial vehicle maintenance and refuse collection. As we look to thefuture, we must consider today how we will respond to creeping privatisation and outline a clear plan to reclaim our public services. There are many powerful, pragmatic arguments for robust public services. Any attempt to undermine the social provision of these services is a grave mistake – for our economy, for our society and for our country. We on the left should be bold and we should not allow ourselves to be hoodwinked by the falseness of the „choice‟ argument. Nor should we be taken in by the neo-liberal consensus of recent years that reform of public services must inevitably lead to commercialisation. A dynamic, responsive, publically funded and provided model can deliver services more efficiently and with greater accountability than the private sector.