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May


How the government does business in the public sector

Wed, 18th Feb 2015

If the government was responsible for the UK’s whelkstalls, here’s what it would do. It would commission McKinsey or PWC to do an expensive study. Next, it would outsource national whelkstall management to Capita or similar, which would then subcontract whelkstall operation to regional providers, either new organisations or consortia of existing local operators cobbled together to bid.

The first result of whelkstall reform would be a cut in the revenues of local operators, which would now be supporting two extra layers of management overhead. Some localities would find themselves whelkless, since their local operator had gone bust, not been selected for one of the consortia, or refused to prepare whelks to the recipe of the hated regional rival up the road. The government would declare the reform ‘a success’, although not releasing any figures to support the claim; the outsourcer likewise, as well it might since it was making 20 per cent on its contract revenues. A whelkstall regulator would be set up to ensure targets for hygiene and quality were met and whelkstall whistleblowers protected.

An exaggeration? Only a little. It encapsulates the second reason to throw the government’s insufferable boasting about its business friendliness back in its face: without exception, every reform or ‘solution’ it has brought to an already hard-pressed public sector has not just failed to improve it: it has systematically made things worse. This holds at macro- as well as micro-organisational level, and is the opposite of surprising, since it has single-mindedly applied (already wrong) private-sector thinking to the public sector, where it comes out even wronger.

Take the NHS. Faithful to the failed, false (see last week’s article) and reductive neo-liberal conceit that the market and transactional relationships are the only efficient form of organisation, the coalition’s reforms have, as the King’s Fund confirmed in a critical recent report, substantially marketised healthcare. In so doing they have carried out a ‘distracting and damaging’ top-down reorganisation, brought in ‘complex and confusing’ mechanisms for accountability and governance, and failed to plug a lack of system leadership which is increasingly problematic when there is a need for more bottom-up adjustment to deal with the consequences of the reforms. The report could have added that relying on competition (the essence of markets) to bring about cooperation and integration is a contradiction in terms.

As this suggests, many of the NHS’s ills are iatrogenic – caused by the treatment. Thus, as always, measures designed to reduce costs (rationing of all kinds, NHS 1111…) drive up costs, while targets create unattended, unwatched spaces where scandals bubble up malignantly until they burst. Yet more intrusive and counterproductive regulation and inspection ensue, resulting in a reign of terror that blankets hospitals, schools and whole swathes of the public sector like a pall.

Fear is a mockery of intelligent management – it blocks movement and makes people institutionally stupid, looking after their own skins rather than those of others, as in the old Soviet Union. ‘Sadly,’ confirms Polly Toynbee, ‘[Robert] Francis’s 2013 report into appalling treatment at the Mid Staffordshire trust has increased the “climate of fear” he criticises’ – ‘Freedom to Speak Up’, the name of his review, thus joining a growing number of ‘reversifications’ of practical meaning that this kind of management always translates into. Recent choice examples of reversification include ‘freedom to plan old age’ (translation: no pension), ‘personal budgets’ (choice over who gives you a package that is no use to you), ‘flexible labour market’ (permatemping, zero hours), the ‘sharing economy’ (winner takes all), and Help to Work (punishment for being poor).

As for local services delivered by the public sector, whether care, training, play centres and even consultancy, welcome to the whelkstall. For a comprehensive primer on this wonderland of management nonsense, read John Seddon’s incisive The Whitehall Effect: How Whitehall Became the Enemy of Great Public Services and What We Can Do About It, reviewed here, and get angry. Meanwhile, meet Henry Stewart, founder of a successful IT training and consultancy company, Happy, that has won more training and ‘great place to work awards’ than you can count. Earlier this month Stewart posted a blog on the madness of government procurement, describing what happened when the government decided that (yes) all training for Whitehall departments would be delivered through a single central contract provided by (yes again) Capita.

Having won the tender, Happy had previously been sole provider of IT training for DWP, where it was highly rated. But under the new system, previous record, quality, price or even what the department wanted, counted for nothing – DWP could have any colour it liked so long it was Capita. At a stroke, not being a Capita partner, Happy lost 25 per cent of its revenues.

It lost again when the government instituted new ‘minimum value contracts’ for apprenticeship delivery, which disqualified small businesses from direct contracts and forced them to work through others. ‘This increased the cost and complexity, as well as resulting in major delays in payment.’

‘Government regularly trundles down the path of big centralised contracts in the belief that they will provide economies of scale, but they rarely do’, comments Stewart  – in this case claims of 60 per cent savings are undercut by the Cabinet Office’s refusal to release the report on which the claim is based, despite repeated Freedom of Information requests.

Let's leave it to Stewart to draw the conclusion.

'I find it hard to see a government that has had such a devastating effect on my business as any friend of enterprise', he says.

'And I also note that while they have been keen to cut corporation tax for large companies, there has been no change at all for small business. So, Mr Cameron, please do not pretend to be on the side of small business. You may be friends with the banks, the hedge funds and the tax dodgers. But you are no friend of hard-working small enterprises like mine.'

 

 

 




 

 


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