Firstly, and perhaps most importantly, before you can contract something out effectively you have to know what you want. That is a rare phenomena right now amongst government Minsters. They don’t even know what kind of Brexit they want but even when it comes to simpler questions like energy policy they are in a complete muddle. Their expert opinion was that they wanted private contractors to bid to build a large nuclear reactor that would produce energy at twice the price available on the commercial market. As a consequence of their muddled thinking the UK is now using Chinese money to pay a French company to undertake a gigantic construction project that needs to be delivered on time and on budget if the lights are going to stay on reliably. What could possibly go wrong?
Once you’ve decided what you need it is then usually wise to figure out how much it is reasonable to pay. But that has also stumped this government. It wants the railways to be operated by private companies but hasn’t realised that it is actually quite hard to predict the fair price to pay for driving railway coaches down tracks for the best part of a decade. So much changes and so much depends on the number of customers. There are also only a very small number of companies who are capable of bidding to do the job. So the government found itself faced with a very small number of bids and was then legally required to accept the lowest bidder who met the criteria in the contract.
For some of the operators that turned out to produce a very nice bonanza indeed. Profits have been rolling in because the price was too high. But if you issue a contract and the company that holds the successful franchise makes billions you can’t legally ask for the public’s money back. The winner of the bidding process will point to their contract and to an open bidding process and insist that you carry on paying. Billions of rail users’ money leaches away in excess payments to the contractor and the government is utterly powerless to stop the waste. Or to be more accurate is directly to blame for it and for the high prices rail users pay for very poor services.
When the price was miscalculated in the other direction the situation was very different. The contractor’s shareholders won’t just sit there and put up with regular losses for the best part of a decade. All they have to do is to declare the company that was set up to bid for the contract bankrupt and there is not a damn thing any government can do about it. So the franchise holder on the East Coast line turned round to the government and handed back their contract to save themselves two billion. At the same time as the contract holder on the West Coast line was happily pocketing a very large amount of money. Heads government loses. Tails government loses. Or rather heads customers lose. Tails customers lose.
If all that wasn’t bad enough we come finally to the horrible farce of Carillion. We have been asked for decades to believe that public servants aren’t very good at running things like schools, hospitals, care service, prisons and the like and we need to contract out large chunks of those services to better more efficient management teams. We were constantly told that what we needed was new and better private sector management. It now turns out that what the new private sector managers were good at was paying themselves very large salaries and bonuses. They were also quite talented at raiding their employees pension funds at exactly the same moment in time that they were informing their shareholders the company was in rude health and they could collect yet another excellent dividend. Then suddenly reality hit. They discovered that running public services on the cheap is actually very hard to do and went bankrupt.
So a government that offered us stability has thousands of people working on its behalf who don’t know whether their pay cheque will arrive at the end of this month. Or how much of their pension fund has been run down to pay for directors’ bonuses. A government that prides itself on its reputation for economic competence doesn’t know who will be running large parts of its prison service next week and has no idea how it is going to get a whole series of major construction projects finished. And a government that prides itself on championing private enterprise culture is watching hard working self-employed construction workers going to the wall because they haven’t been paid.
This is not cock up. This is system error. Each part of the process of contracting out is going wrong because ideological obsession has replaced good judgement. The government for decades has been operating on the assumption that the best way to improve efficiency in the public sector is to contract out more and more of it. Thatcher started the process. Labour did it under Blair and created the horrific Private Finance Initiative and the start of the academies programme. Now the May government has reaped the rewards of employing one giant contractor to deliver its services by farming them out to a forest of sub-contractors that it wasn’t paying properly.
There is nothing wrong with the private sector delivering some services for the government. It has been happening since at last the start of the nineteenth century when contractors like Telford built a network of roads and bridges on their behalf. What is wrong is an obsessive conviction that the private sector must always be more efficient and the neglect and destruction of morale within the public sector which must inevitably result.
It is time for a radical re-think about public service. Time to restore pride in the concept that it is a good and a worthwhile thing to spend a career running services well on behalf of the public and that it is not admirable enterprise when you rip off taxpayers, customers, sub-contractors and employees and walk away with large bonuses. Time to focus on understanding what needs to be done to deliver public services well over a long period of time and to implement simple good management practices and good professional practice at every level instead of looking for an instant quick fix by farming the service out.
Don’t hold your breath on the ability of this government to make the necessary intellectual changes. It is quite simply ideologically incapable of understanding what is going wrong and why or of formulating a sustainable plan of action to get us out of the mess. I leave you to dwell on the implications for the future of this country of being under such leadership. I recommend a strong drink.