Wednesday, February 23, 2011

How to stop David Cameron's Corporate Welfare plans

David Cameron has announced that the latest version of the Big Society is that just about all public services will be opened up to be run by the private sector. He says that these "are more significant aspects of our Big Society agenda than the work we're doing to boost social action".

The Big Society started off with the idea that people would run services for themselves, but it became clear that this wasn't going to work, so Big Society 2.0 was that it was all about promoting charities. Then it became clear that many of these "Big Society" charities were being wiped out by the cuts, and anyway, they were very ungratefully complaining about the government.

So having given up on the people and the voluntary sector, the Big Society is now all about getting the private sector to run services. Unlike the users of public services or the voluntary sector, the private companies can be relied upon not to complain about the government, and will be suitably grateful for large sums of government money coming their way.

There are any number of reasons why this is a bad idea, but I just wanted to focus on a very revealing quote by the architect of this Corporate Welfare programme, who is reported as claiming that "responsibility for fixing the deficit can be transferred from the central state to the customer by transferring responsibility for the cost of services via a market to purchasers of public services."

Get that? If you use public services, the responsibility for fixing our budget deficit now falls on you, not the government.

I firmly believe that this is an even less popular idea than the original Big Society one, and one which more people should know about. It also highlights a key feature of the Corporate Welfare programme, which is that it is bound to lead to service users and taxpayers getting ripped off.

I've run some consultation meetings over the last few weeks about the government's NHS reforms. Out of all the different proposals, the two which worried people most of all were firstly that services which people rely on might be got rid of as a result of the changes (for example local hospitals closing), and secondly, that these private providers will run rings round the doctors who are commissioning services and exploit loopholes in contracts to increase charges for services which are currently free, or demand more money to keep a service going. This is, after all, the business model for the many of the American companies which will be bidding to win healthcare contracts (along with denying sick people the chance to claim on their health insurance to pay for their medical care).

The government proposals which protect users of public services and taxpayers if a service gets taken over by the private sector and closed down or loopholes get exploited can be summarised as:


Crucially, we don't have to wait until the next election in order to stop and reverse some of the most malign aspects of these plans. The Tory Corporate Welfare plans will attract all sorts of people looking to make money from government contracts. Some will have a genuine belief that they can run a service at a higher quality and lower cost, while others will believe that they can make money by cutting costs, and deliver the bare minimum required of them (as with cleaning in hospitals or safety on the railways).

What Labour should do is announce that they are very concerned about the lack of protection for service users and taxpayers, and announce that a future Labour government would put in place legislation which allows every corporate welfare contract to be reviewed. In cases where it is clear that the taxpayer is being ripped off or service users are getting a worse deal, the contracts will be declared null and void, and the contractor will be liable to fines equal to a proportion of the profits they made from the contract. (The mechanism could be something like 5% of service users have to request that the contract be reviewed, in which case the service is reviewed by a citizen's jury).

The advantage of this is that the threat of it will be enough to protect people from the worst of the corporate welfare parasites. Companies won't bid to take on contracts and provide the bare minimum, or exploit loopholes to charge patients for services if they know that there is a risk that they could end up losing the contract and getting fined if the Tories lose the next election.

This would highlight the way that the Tories are putting the producer interest of a small number of private companies ahead of the needs of taxpayers and service users, whether in the NHS or now across almost every single other public service. Those who are confident that they can provide better services have nothing to fear, while those that want to get rich on government handouts should look elsewhere.


At 5:51 am , Anonymous Liam Murray said...

Not meant to be as provocative a comment as it sounds but would you support similar protection mechanisms even where provision remains in public hands?

So say '5% of NHS users demanded action on waiting times' or '5% of local residents demanded dismissal for a particular school head' etc. you'd support legal sanction to enforce that?

At 8:36 am , Blogger donpaskini said...

Hi Liam,

I think that in cases where services are in public hands, then the principles of the community right to challenge (with modifications) is the mechanism to use.

So if anyone thinks they can run a public service better, then they should be able to submit an expression of interest, as the government suggests. But to protect service users and taxpayers, there should be legal sanctions to step in if this is abused.

In the future, if these mechanisms work well, then, yes, you might want to extend them to public sector provided services.

At 9:44 am , Anonymous Liam Murray said...

Cheers. I guess my point is if you're going to open up provision then the checks & balances you put in place (& I agree they're needed) need to apply to all providers. You can put a mechanism in place for private provider A that their competitor - public provider B - isn't also subject to.

So I'd reject the idea that you 'might extend them in the future' - why not at the same time?

At 9:56 am , Blogger donpaskini said...

Open to persuasion on this, but (a) I think it is worth experimenting with different models of consumer protection and seeing which is most effective before imposing one model on everything, and

(b) I think the reasons why private sector and public sector delivery go wrong are different and therefore you might want a one set of processes to protect against profiteering or service providers going out of business (which is a problem with private provision but not so much with the public sector), and a different approach which allows high cost/low productivity/low quality services to be challenged and run by other providers.

At 11:27 am , Anonymous Liam Murray said...

Mmmm... I think we need to guard against the assumption that there's more risk to service users from private profiteers than their is from state-ran producer interests; that's the inherent assumption behind your phased introduction in such controls.

In the interest of transparency I work for Capita albeit not the local or central government division. And yes, bottom line tends to drive everything in our world for very obvious reasons. But my experience is our smarter clients align their preferred outcomes with our commerical desires so everyone wins. If commissioned properly there's nothing wrong with having a private company chasing every dime while delivering public services - those dimes only exist when they do what the state asks them to.


At 11:54 am , Blogger donpaskini said...

Not "more risk", but different risk. And these changes would be in the context of the government's localism reforms, which mean that public sector providers will be under additional duties which private providers are exempt from (such as the community right to challenge).

Agree with "If commissioned properly there's nothing wrong with having a private company chasing every dime while delivering public services - those dimes only exist when they do what the state asks them to," this is intended to assist proper commissioning and intervene in cases where something goes wrong.

At 12:36 pm , Anonymous Cindy said...

Such a great article which
The advantage of this is that the threat of it will be enough to protect people from the worst of the corporate welfare parasites. Companies won't bid to take on contracts and provide the bare minimum, or exploit loopholes to charge patients for services if they know that there is a risk that they could end up losing the contract and getting fined if the Tories lose the next election. Thanks for sharing this article.

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