Liberal Hero of the Week #71: The Financial Times

by Stephen Tall on June 30, 2014

Liberal Hero of the Week (and occasional Villains) is chosen by Stephen Tall, Co-Editor of Liberal Democrat Voice, and Research Associate at CentreForum

cf hero ft

Financial Times

Pink ‘un read by the people who own the country
Reason: For urging government adopt a more thoughtful approach to outsourcing.

Don’t tell me about the press. I know exactly who reads the papers: the Daily Mirror is read by people who think they run the country; The Guardian is read by people who think they ought to run the country; The Times is read by people who actually do run the country; the Daily Mail is read by the wives of the people who run the country; the Financial Times is read by people who own the country; the The Morning Star is read by people who think the country ought to be run by another country; and The Daily Telegraph is read by people who think it is.
(Jim Hacker, Yes Prime Minister)

One of the Thatcher / Major / Blair / Coalition governments’ great mistakes has been to assume that competition is the same as what the private sector does. Under the Conservatives nationalised monopolies were converted into private monopolies. Under Labour, and now the Coalition, outsourcing public services has become a way of life.

There are, of course, times when this makes sense. The Coalition’s privatisation of the Royal Mail and its sell-off of parts of the student loan book are two cases in point, controversial though both are in some quarters. But it isn’t always the case that ‘public = bad, private = good’, as this week’s Financial Times shrewdly pointed out:

The government must control its temptation to outsource on all fronts. The rush to outsource the probation service is a case in point.

In those areas where outsourcing is appropriate, government needs to be much smarter about monitoring and challenging poor performance. The growth of outsourcing has outstripped the capability of the civil service to keep providers on their toes. The government should equip officials with the skills commensurate to negotiate on equal terms with large providers and to hold them to account throughout the lifetime of the contracts. Elaborate monitoring systems dreamt up by consultants must be simplified.

Finally, trust needs to be restored to the entire outsourcing project. It must be shown as more than a ruse to push down wages and cut costs. Quality should be the clear aim – which will sometimes mean big is not best. Trust also requires more transparency, especially about performance against targets. Government needs to show there is sufficient competition during the tendering process and an ability to manage a change in provider, should the company be found to fall consistently short. Outsourcing has an important role to play, if implemented properly. A more thoughtful approach is needed.

The three conditions are simple enough (if complex to implement): 1) Competition during tendering, 2) Transparency and accountability of performance expectations, and 3) An available contract exit route. If all three conditions can be met, then outsourcing can and should be considered. If they can’t then approach with caution.

I believe in competition as a great driver-upper of standards. But we cannot simply assume competition and improved delivery will automatically result from awarding a public service contract to the private sector. Hopefully the people who do run the country will listen to the paper read by the people who own the country.

* The ‘Liberal Heroes of the Week’ (and occasional ‘Liberal Villains’) series showcases those who promote any of the four liberal tenets identified in The Orange Book — economic, personal, political and social liberalism — regardless of party affiliation and from beyond Westminster. If they stick up for liberalism in some way then they’re in contention. If they confound liberalism they may be named Villains. You can view our complete list of heroes and villains here. Nominations are welcome via email or Twitter.