Public services, private profit

2 August 2011: The government’s white paper heralds an unashamed corporate takeover warns Bob Colenutt

While the whole country was gripped by the Murdoch scandal, a far reaching white paper aimed at dismantling the welfare state was announced by David Cameron in a speech at Canary Wharf. Surrounded by top executives of the corporations queuing up to take over public services, he said the paper aims to ‘Loosen the grip of state control’ by opening up most local and central government public services to competition. Only the military, state security, the police and the judiciary will be exempt.

Much is made of the opportunity for the voluntary and community sectors to be service providers, but this is plainly a mere sop. The reality is that with the exception of a few very large charities, most third sector organisations, particularly those working at the local level, do not have the infrastructure or capital to take over huge swathes of public service provision.  The government knows this, and inevitably corporations such as Serco, Capital, General Healthcare, and G4S that are already active in this field will step in.

The predatory nature of private companies is hidden behind a government rhetoric of consumer choice but without any guarantee of public accountability or ability of the consumer to hold companies to account.  The contract and commissioning role of local authorities will be hugely important. Very few local authorities, or government departments, have the skills to be commissioners or have the legal and political nous to draw up contracts for the hundreds of services involved.  There is a very high probability of incompetent contract arrangements, poor quality services, over priced contracts, and corrupt relationships between officials and businesses.

The response of the trade unions to the white paper is that it will ‘break up the welfare state’.  They are rightly concerned about the loss of jobs, erosion of wages and conditions and the loss of universal provision of essential services ranging from care for the elderly to social housing to parks and environmental health.

The third sector has been much more ambiguous in its response. The influential Joseph Rowntree Foundation  welcomed the overall direction and applauded ‘the human element that people should be in the driving seat not politicians or bureaucrats’. Other charities and trusts, though some have misgivings about support for a Tory-led government, are excited by the prospect of winning public service contracts.

There is a real danger of a divide being created (and exploited by the government)  between public service workers losing their jobs and conditions, and the voluntary and community sector that is being promoted by the government as an enlightened alternative.

The white paper is also an important part of the government’s austerity programme. For example, the CBI was quick to say that the  public service reforms are ‘crucial for tackling the deficit’.  By this they mean that the reforms enable public services to be provided on the cheap by reducing the level of provision (restricting entitlements), and crucially by offering lower wages and conditions, and by using more volunteers. Costs will be lower but profits greater because payment to companies by public commissioners will assume existing wages and conditions.

But amid this bad news, there may be political opportunities and openings.  Firstly, the white paper contains contradictions, weaknesses and inefficiencies which will attract vigorous political opposition, not only from the trade unions. Local Commissioning will turn most public services into post code lotteries. Some areas and some groups will do OK, others will lose out. Inequality and unfairness will increase, and some have suggested the reforms will create chaos and mayhem.

It is not just the poor who are dependent on the public sector, but the middle class too, especially in health and social care. This will create political problems for the Coalition. It is also quite possible that when the third sector realises that it is not going to win many of the contrasts, it turn into an opponent of reforms.

All in all it is highly unlikely that the Public Services White Paper will get an easy ride. The left has a huge responsibility to draw together a broad alliance to fight it and restate the need for universal public services.