The Public Service Industry: A constitutional blasphemy and a democratic perversion

One third of current public spending on services, £80 billion, is channelled through private sector companies. Although they deliver services demanded and paid for by taxpayers, their employees are not ‘public servants’. They are not subject to the disciplines, procedures and expectations attached to government employees. Instead they are part of an industry growing in size, ambition and confidence – the Public Services Industry (PSI). Stephen Wilks argues that we need to rein in the massive, international and often foreign-owned public service companies.

London City Airport DLR station, one of many in the capital operated by Serco (Credit: wikimedia commons, cc by 2.0)

London City Airport DLR station, one of many in the capital operated by Serco (Credit: wikimedia commons, cc by 2.0)

In their repeated attacks on the ‘old’ civil service, the latest of which came on 10 July with Francis Maude’s unified management reforms, ministers have expressed a preference for private sector disciplines, skills, enthusiasm and efficiency. With a remorseless increase in partnership and outsourcing, the Public Services Industry (PSI) accounts for 6% of GDP with 1.2 million staff, almost three times the number employed by Whitehall. This is not the familiar world of direct purchase of services from privatised companies, instead it occupies a middle ground in which government commissions a huge range of services from outsourcing companies who run prisons, test blood, provide skills for the unemployed, train RAF pilots and, an absolute gem, store our nuclear warheads.

This alternative civil service is not just about delivery of specified services, it is part of a ‘shadow state’ which is also displacing the old civil service’s policy-making role. Individually and collectively the companies define policy options and aspire to address outcomes rather than simply delivering services. They offer ‘ends’ as well as ‘means’. They will get the unemployed back into work, cut reoffending rates, reduce waiting lists, or provide digital governance. How they do it need not be defined by ministers, or even civil servants, what’s good is what works and whole areas of government are transferred to private sector providers.

The PSI has developed as a formidable political machine. Since its success depends on securing government contracts, its ability to colonise government is a core strategic objective. It operates as part of an elite corporate network which includes management consultants, law firms and financial enterprises anxious to invest in reliable government revenue streams. Their prophets are easily visible. The Minister for Economic Delivery is (Lord) Paul Deighton, former Olympics CEO and Goldman Sachs COO; the Government Procurement Director is Bill Crothers, former Accenture Board Member; Frances Maud’s unified government reforms originate with – you guessed it – McKinsey. At the heart of the public services network is the Confederation of British Industry’s (CBI’s) Public Services Strategy Board chaired by Adrian Ringrose, CEO of Interserve, supported by the CEOs of Amey, Babcock, Balfour Beatty, Capita and, of course, G4S and Serco. The PSI paints a compelling picture of the desirability of outsourcing government that builds on 30 years of pro-market advocacy, catering to Conservative ideology, presenting exemplary success stories and, of course, contrasting with the alleged failings of traditional civil service delivery.

The Strategy Board’s successful moulding of the policy agenda can be seen in the 2011 ‘Open Public Services’ White Paper which aimed to open as many public services as possible to private provision. The same effect is incorporated into NHS GP commissioning and the many equivalent initiatives including the contracting out of probation services and the internationally unprecedented plans to outsource the entirety of Defense procurement which will involve the transfer of 16,000 people to a privately operated ‘Goco’. But the killer argument rests on austerity and spending cuts. The CBI argues that up to £280 billion of public services could be opened up to private provision and claims that efficiency savings of 11% would be possible which allows it to offer ministers the delectable prospect of £22.6 billion of savings. This would be a revolutionary abdication of the government’s ‘monopoly of provision’ but observers have already noted the transformative implications of the biggest cuts in public spending ever undertaken. Paul Johnson of the Institute For Fiscal Studies (IFS) observes that the cuts will ‘change dramatically the shape of the state that is delivering (public services)’ while the leader of Birmingham City Council, Sir Albert Bore, has talked of ‘the end of local government as we have known it’. If, as seems to be the intention of Osborne, Maude and the coalition government, this transformation will be based on privatisation, outsourcing and partnership, then the New Corporate State will be consolidated. The civil service of this state will be the PSI, its permanent secretaries the CEOs and the Cabinet will be reliant on the Public Services Strategy Board.

How will it be held accountable? The alternative civil service is a constitutional blasphemy and a democratic perversion. Civil servants operate within a constitutional framework which is intended to constrain their imposition of the powers of the state which, argued Weber, includes a monopoly of the legitimate use of violence. They are Crown appointments, energised by an ethic of public service which is enforced through a series of safeguards ranging from the civil service code to audit and inspection, freedom of information, the code of standards of public life and judicial review. The PSI also deploys the powers of the state including depriving citizens of their liberty through privatised prisons. Yet they are not subject to the range of safeguards. If an elaborate quasi-constitutional framework is necessary for the civil service why should the PSI be exempt? An even more profound concern applies to questions of political accountability. Although increasingly ineffectual, the Westminster system has a clear chain of accountability from civil servant to minister, to parliament and, ultimately, the electorate. For the PSI that chain is replaced by a contract; a commercial agreement. The PSI employees are not operating in the name of the minister and the minister has no responsibility for them to parliament. The National Audit Office (NAO), parliamentary committees and parliament itself have limited authority to call companies to account and the electorate’s democratic control is thereby neutered. Instead there is managerial control and accountability to the market, despite the inescapable reality that the ultimate responsibility continues to rest with elected representatives.

Bernard Jenkin, the chair of the Public Administration Select Committee has rightly called for a committee to examine the future of the civil service. This should be extended to examine the alternative civil service. On the agenda should be a series of questions about the accountability of the massive, international and often foreign-owned public service companies. Should their senior managers have specific public service duties? Should they appear before Select Committees (as happened with Nick Buckles, the hapless, if wealthy, former CEO of G4S)? Should there be a mandatory duty to establish programmes of corporate social responsibility or social value? Should ministers take some responsibility for the behaviour of government contractors? Should we tolerate the continuing revolving door which inserts corporate executives and management consultants into governmental positions (and takes civil servants into board rooms)? And, underlying all such debates, what are the implications for citizenship in a liberal democracy when citizens no longer have influence over the commercial organisations who owe duties only to contractual clauses?

This article was originally published on Elgar’s blog before being re-posted on the LSE British Politics and Policy blog. It can be viewed on BPP here.

Note: This article gives the views of the author, and not the position of  Democratic Audit, the British Politics and Policy blog, nor of the London School of Economics. 

About the Author

dscf2568Stephen Wilks is Professor of Politics at the University of Exeter where he was Deputy Vice Chancellor from 1999 to 2003. He qualified as a Chartered Accountant before taking a PhD at Manchester. He went on to teach at the University of Liverpool and was visiting Professor at Kyoto University before moving to Exeter. He researches on comparative political economy with a special focus on relations between government and industry. He was a Member of the Economic and Social Research Council from 2001 to 2005 where he chaired the Research Strategy Board. His other main area of expertise is competition policy where he has written extensively. He served as a Member of the Competition Commission from 2001 to 2009 and is currently a Member of the Competition Appeal Tribunal. Stephen has recently published ‘The Political Power of the Business Corporation’ with Edward Elgar.

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