Magazine article Public Finance

A Very Private Party

Magazine article Public Finance

A Very Private Party

Article excerpt

The rise of the public services 'industry' - private and third sector businesses providing services to the public under government contract is one of the most dramatic transformations in the economic and social policy landscape of recent years. Since the 1990s, this industry has grown faster than the NHS, absorbing an ever-expanding share of total public expenditure. Last year it took almost £80bn of taxpayers' money, more than the government spent on education.

But this rapidly advancing privatisation is still not widely understood by the public and has been subjected to little independent scrutiny. So it is right to take stock and assess the consequences and implications of this quiet revolution.

Last week's Public Services Industry Review was thus a missed opportunity. Set up by Business Secretary John Hutton at the CBI's prompting, the review was conducted by DeAnne Julius, former director of contractor Serco, and drew most of its advisers and evidence from firms lobbying for more public contracts. Trade unions, representing hundreds of thousands of staff employed in this industry, were invited to submit evidence only at a later date, after protests from the TUC.

But guite apart from the narrowly drawn appointees and consultees, the review started from the assumption that new business opportunities for the private public services industry must be created, irrespective of the broader objectives and outcomes of public services.

As the call for evidence put it: 'What current government policies and practices have been most effective - and therefore should be continued or expanded - in increasing the role of the private and third sectors?' So it's not surprising that the final report is so one-sided.

For example, it argues that the private public services industry provides employment and 'adds value' to the economy. But of course this can only be at the expense of publicly provided services, which also create jobs and add value.

The report admits that not enough is known about the impact of privatisation on costs and service quality. But it makes bold claims and recommendations on the basis of a partial and selective reading of a limited evidence base.

Much is made of the assertion that outsourcing can lead to cost savings of 10%-30%. But the evidence to support this dates from the early days of Compulsory Competitive Tendering, when cost was the only consideration and transferred staff had no protection. It is well known that early savings were made in areas such as hospital cleaning and school catering by slashing pay and staff numbers. …

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