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The private governance of public services

Chris Painter, Emeritus Professor of Public Policy and Management at Birmingham City University, argues that the Coalition’s public service reforms threaten an existential crisis in public accountability that should be of concern to us all.

AUTHOR Chris Painter2 V

A groundbreaking book was published back in the 1970s entitled ‘The Private Government of Public Money’ by American academics Hugh Heclo and Aaron Wildavsky. Its basic thesis was that UK decisions about public spending were largely determined through negotiations behind closed doors in the ‘Whitehall village’. Despite the fact that these decisions had profound implications for the society in which we live, wider public involvement through the democratic process was minimal. It took two US academics to unveil the DNA of UK central government decision making!

The confidentiality cloak

This article adapts Heclo and Wildavsky’s argument to the changing realities of public service delivery. More non-state providers are becoming involved as a consequence of the Coalition’s ‘open public services’ policy set out in its July 2011 white paper. There is an irony in that title, since taking another connotation of ‘open’ we find that so-called ‘public services’ are increasingly shrouded in confidentiality. Yet the principle that public money – wherever it goes – should be subject to corresponding public scrutiny was widely subscribed to not so long ago by parliamentarians.

This is not an argument about involvement of the private business sector per se, despite a paradox highlighted by Ian Greener in the second edition of his book on Public Management – further extension of market reforms to public services follows a financial crisis triggered by the biggest market failure in living memory! There are indeed many examples of successful value-adding collaborative ventures. Instead the focus is the basis on which alternative service providers are being engaged. To understand what is at stake we need to take ourselves back to summer 2012.

The transparency problem

There was considerable adverse media publicity – both on BBC’s Panorama and Channel 4’s Dispatches programme – for the multinational French company Atos. It is contracted by the Department of Work and Pensions to conduct medical work capability assessments for those on long-term sickness benefit, the outcomes of which feed into decisions about claimant eligibility for employment and support allowance. This in a context of welfare cuts and stringent sanctions for those declared fit for work yet not actively pursuing such opportunities.

With contracts to manage tests for assessing claims for the more restrictive personal independence payment replacing the disability living allowance now also parcelled out between Atos and Capita, both sickness and disability benefits have become part of this stricter regime.

The critical publicity centred on the reliability of Atos’s assessment procedures, not only because of jobcentre staff who expressed shock at some of the clients being referred to them as ‘fit for work’, but also given the high proportion of successful appeals against assessment outcomes. The defence mounted by the company was revealing, namely that they were merely conforming to ministerial and contractual specifications.

There was strong suspicion that the primary objective was to achieve target reductions in benefit eligibility. Yet it proved virtually impossible to verify the existence of this target culture because contract terms were bound by ‘commercial confidentiality’.* Such lack of transparency is hardly the natural bedfellow of public accountability.

Round about the same time the South Gloucestershire Safeguarding Adults Board unveiled its serious case review into abuse of vulnerable patients with learning difficulties at the private residential care home Winterbourne View. This too had been exposed by a BBC investigation in a sector now dominated by private and charitable providers. There were scathing criticisms of the owners, Castlebeck, accused of seizing financial rewards without commensurate accountability for the standards of care provided – a company now placed in administration.**

Other examples abound. The Commons Public Accounts Committee has drawn attention to how successive welfare-to-work schemes created scope for malpractice and defrauding of the public purse. The transparency of arrangements for overseeing contractors left much to be desired. A4e especially has been subject to repeated criticism in this regard.*** Some contractors providing out-of-hours GP cover have been accused of falsifying data to bolster key performance indicators.

Fragmenting delivery and market dominance

My academic training cautions me to be wary of anecdotal evidence. Yet recent experience makes it irresistible on this occasion to highlight another dimension of the problem. I had call to require the assistance of my water company with a domestic sewage problem. It became evident that they contracted much of their work to another company, who in turn further sub-contracted as they saw fit.**** As one of the employees on site remarked: ‘It’s a long chain’!

Associated miscommunication, fragmentation and operational inflexibility became a source of endless frustration, as economy and (more ambiguously) efficiency seemed to take precedence over effectiveness of outcome and customer satisfaction. In particular, it was difficult to establish who was responsible and answerable for what. A fate that has befallen former public utilities now awaits mainstream public services given the Coalition’s accelerated pace of outsourcing, making joining-up of public services much more problematic. We’ve even had examples of complete circularity with outsourced companies sub-contracting back to public organisations!

This is to say nothing about the ability of large (often multinational) outsourcing corporations to break into and dominate public service markets, particularly at the expense of smaller social enterprises and voluntary organisations, through submitting cross-subsidised tenders. They do this in the knowledge that once established in that market more lucrative business will almost certainly follow. It seems unlikely that the Social Value Act recently coming into force will go very far in redressing the balance in current budgetary circumstances.

The often intricate company structures of the larger corporations also facilitate complex financial engineering, itself acting to the detriment of transparency. Moreover, conflicts of interest may increasingly cloud judgements, not least those of clinical commissioning groups when they are potential recipients of direct financial benefit from their own outsourcing decisions in the revamped healthcare structure.

Light regulation and ‘private’ contracts

Of course, abuses of the kind identified above can lead in due course to recalibration of relationships between public bodies and contractors. So much is already being proposed to prevent a repeat of what happened at the Winterbourne View care home.

‘Light touch’ regulation is nonetheless still being touted for the more ‘open’ healthcare market. Yet, in a succession of institutional crises in recent years a common factor has been regulatory failure in some shape or form. Such failure was germane to the Francis inquiry’s diagnosis of underlying causes in the Mid Staffordshire NHS trust scandal. The fragmented regulatory structure emanating from the Coalition’s health reforms turns out to be the very opposite of the Francis report’s prescription for a single super-regulator.

‘Private’ governance of public services is, moreover, becoming endemic. Academy schools, whose rate of growth has taken many by surprise, are a case in point. Despite being nominally self-governing, in reality they allow growing centralisation of power in the hands of the secretary of state for education. Each academy is bound by a ‘private’ bilateral contract with the secretary of state, the contents of which can be varied and changed at his discretion without any open public deliberation. Yet, simultaneously the Home Office presided in November 2012 over the creation of 41 elected police and crime commissioners, justified by the need to strengthen local public accountability of police forces!

An accountability deficit

The irony becomes even greater when the motivations for the Coalition’s initial endeavours to shrink the quango state are borne in mind. Matthew Flinders and Chris Skelcher point out in the September 2012 edition of the Public Money and Management journal that ministerial rhetoric increasingly highlighted the accountability deficit long associated with arm’s length public bodies. Yet, at the same time, newly-created agencies of this kind are becoming responsible for resource allocation decisions with a vital bearing on service reconfiguration, such as the NHS National Commissioning Board (now re-named NHS England).

The strains placed on public accountability by changing modes of public service delivery are compounded when political executives seek to weaken constraints on the exercise of their own powers. Portrayed as ‘forces of conservatism’, parliamentary financial watchdogs, statutory public consultations, equality impact assessments, judicial review and – of course –Whitehall mandarins have all recently been on the receiving end of irate ministerial comment.

In the case of the latter, a desire to give secretaries of state ultimate say on appointments raises the spectre of further politicisation of a historically meritorious civil service. This is in a context where evasion of the (admittedly long tarnished) constitutional convention of ministerial responsibility is becoming the norm, even when problems occur in ministers’ own backyard or are in breach of the ministerial code.

A reform implementation challenge

Contrary to a principle intrinsic to my academic discipline, black holes of non-accountability emerging as a consequence of the Coalition strategy for public service reform constitute only one of a number of issues arising as we move onto the implementation stage. But with it being fashionable to talk about ‘existential’ crises, that description surely particularly applies to the risks we are taking with public accountability, given a growing tendency to tolerate ‘private’ governance of public services, along with the labyrinthine delivery structures that increasingly entails.

If so, it is of critical importance to us all – whether in our capacity as citizens, taxpayers, elected representatives or indeed public service managers.

Right of reply

* An Atos Healthcare spokesperson said: “It is untrue to suggest that we are not transparent or accountable. Our contract with the DWP for medical services is published online by the Government and is freely available. We have absolutely no targets for benefit outcomes and as we do not make this decision will likely never know what the outcome is. We do, however, have other targets and around 300 service level agreements to meet which cover everything from quality of work, professional approach and timeliness. We are financially accountable where these are not met. Although appeals are widely reported to be the fault of Atos Healthcare, the NAO warned there were dangers in this assumption and recent information directly from tribunal judges show they account for a tiny proportion (0.3%) of successful appeals against benefit entitlement decisions.”

** Castlebeck went into administration in early March. Daniel Smith, one of the company’s partners, noted that Winterbourne View was closed as soon as the abuse was revealed, and that the company promptly undertook a “root and branch internal review”. He said: “Whilst the board has focused on quality care provision and restoring confidence in the Castlebeck operations, the impact of two further unit closures in 2011 and reducing occupancy has significantly diluted Castlebeck's subsequent trading capabilities.” Six out of 11 care workers were jailed after acts of abuse at the home and five others were given suspended sentences.

*** Responding to the Committee’s report, A4e said it had not been given a chance to give evidence so it could challenge the allegations or correct misunderstandings. Group CEO Andrew Dutton said: “I understand why people want greater transparency. The issues raised under historic contracts were not acceptable and this is why we have gone back and strengthened our controls and why we are now openly calling on MPs, business leaders and employers to come and see for themselves the work that we are doing. I am completely confident that A4e is a fit and proper company.”

**** Severn Trent Water (STW) spokesman Andrew Fairburn told us that it remains ultimately responsible for all its work. “We don’t hide from this responsibility. Bringing in outside experts in certain areas helps us get a better deal for our customers and to drive innovation. It also helps us contribute more to the local economy as we’re involving a broader range of businesses. We have a code of conduct for our supply chain that helps us and those companies in the supply chain to work in a collaborative and transparent way. Our supply chain also helps us drive up standards. In those very rare cases where our supply chain does not perform, we divert the work elsewhere.”

(Image courtesy Benjamin Nolan / Syniq, used here under a Creative Commons licence.)


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