Private or public

I have been told in a briefing note from the LGIU that a recent edition of the Financial Times newspaper carried a report from Children England, a coalition of leading charities, warning that “price-driven competition” in children’s services is having a damaging effect on the resources available for vulnerable young people. The umbrella group suggests that the involvement of “major shareholder companies”, and the cut taken by their investors, is shifting the focus away from the public being served. The charities, backed by the TUC, said an independent inquiry should look at “the benefits and shortcomings” of outsourcing.

This set me thinking about the issue of direct services from government, and the alternative of out-sourcing; especially after I read in the city press about two UK companies active in the sector possibly merging. Although one is apparently stronger than the other, it did set me wondering about whether any of the benefits from a merger might be passed on to the public sector through lower contract prices or will there just be a benefit to investors and the staff? Much, I guess, will depend upon whether it will increase or reduce competition.

At a meeting I chaired in London recently the issue came up in another way. The largest cost we face in education is for staff; whether professional, support or contractors. Material and running costs are relatively low compared with staffing costs, as they are in many other government services. When staffing costs are relatively fixed through the use of agreed wage rates there seems little point in not employing staff directly, as why pay the profit element for a fixed cost? However, when variable wage rates are introduced, the possibility of savings being made arises. If that is controversial, as it always will be, passing the burden of making the savings to the private sector, with profit being the reward, absolves government of the burden of pushing down wage rates. This is what I suspect is happening in the care sector at present, as workers employed by private contractors are faced with absorbing more unpaid work, such as travel between clients and payment is being restricted to actual client contact. Much the same thing happened in the education sector with some supply teacher pay rates in the past.

Now where schools are purchasers of services, there is another reason for local government to abandon direct service provision, as there is always the risk that schools will go elsewhere, and a service will have to be supported from other council income for the remaining users. Wise councils have no doubt cushioned the risk by signing long-term contracts with schools that would allow time to wind down a service if too many schools opted to go elsewhere.

In a time of cutbacks on government expenditure, as we have witnessed during the past six years, it is inevitable that staffing costs will come under pressure, and the debate between cutting wages or cutting services will rage. Sometimes there is a third way, and new technology or a different approach, can achieve the same service level for lower costs. Is that what we ought to be striving for in education? The only other alternative to preserve service levels is higher taxes.

 

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