How much public money is being stolen and wasted because of the privatisation of public services ?


by Robert Henderson
http://livinginamadhouse.wordpress.com/2013/06/29/how-much-public-money-is-being-stolen-and-wasted-because-of-the-privatisation-of-public-services/

Note: In 1989, I attended a meeting addressed by Teresa Gorman. To an audience of rapturous Tory boys she explained how the contracting out of local government services would bring on some kind of libertarian nirvana. All I saw was opportunities for fraud and corruption. The question I asked was slapped down and followed by funny looks. There are two ways of providing goods and services to the public. One is by leaving the whole demand and supply to the people. The other is by turning supply into a duty of the State. The first is generally better. However, given strict cash management, and some degree of public spirit, the second can be both cheap and efficient. The mixed provision we have had since the 1980s inevitably leads to corruption and low standards. I’ve been asking for years where the money goes. Robert may be on to something in his last paragraphs. SIG

Futher Note: Robert has asked me to replace the original version of this article with a corrected and updated version.

How much public money is being stolen
and wasted because of the privatisation

In June this year I attended a talk given by Michael Heseltine. It was embarrassingly limp re-hashed Heseltinian fare from the 1980s,with Heseltine airily advocating localism in place of centralised government with precious little idea of how  to engineer his envisaged  utopia of local politicians free from the Westminster party embrace mixing with banks,  Chambers of Commerce and other trade bodies to bring about a Nirvana of self-help and self-determination.  (http://englandcalling.wordpress.com/2013/06/18/michael-heseltine-rebalancing-the-british-economy/).  Thankfully,  the Coalition thought so little of Heseltine’s proposals in his Government commissioned report No Stone Unturned that only the derisory sum of £2 billion (Heseletine had asked for £49 billion) was allocated to his recommendations for devolved power and expenditure  to promote growth (http://www.telegraph.co.uk/news/politics/spending-review/10144584/Spending-Review-2bn-to-boost-regional-growth.html). It would have been less insulting if the Coalition had allocated nothing.
When the opportunity came for questions I raised  the matter of  increasing corruption in the spending of public money.  This is a consequence of taxpayers’ money going to private contractors at an ever more alarming rate as the mania for putting out public services to private companies and not-for-profit organisations such as charities  continues  unabated,  despite the ample evidence that contracting-out is generally very poor value for the taxpayer.  My argument was simple: the greater the number of public contracts being put out to tender by commercial businesses and not-for-profit organisations, the greater the opportunities for corruption by either public employees and contractors colluding or contractors fixing things amongst themselves.  Human nature being what it is, greater opportunities for fraud inevitably means greater instances of  fraud.
Heseltine reacted with considerable vehemence to my suggestion that serious corruption might exist in public service saying that he “took great exception” to the idea.  His denial rang hollow because sadly there is a constant flow  of publicly reported frauds by those receiving public money.   Here are a few recent examples of  alleged frauds:
1. Pharmacists and drug companies colluding to overcharge the NHS for drugs http://www.telegraph.co.uk/health/healthnews/10133557/Pharmaceutical-scandal-The-NHS-the-drug-firms-and-the-price-racket.html.    The amounts in this case are potentially very large: “The Daily Telegraph’s investigation has found that companies are privately offering discounts of up to 70 per cent on drug tariff items to high-street chemists, with the pharmacist keeping the difference. For example, the NHS would agree to pay £100 for a drug that would be supplied to a chemist for only £30.” (http://www.telegraph.co.uk/health/healthnews/10135897/Pharmaceutical-scandal-firms-boast-of-profits-on-drugs-that-cost-pennies.html).
2. Former government education adviser Tim Royle  arrested on suspicion of fraud when he was a headmaster ( http://www.telegraph.co.uk/education/10130632/Former-government-education-adviser-arrested-on-suspicion-of-fraud.html).
Sometimes  misbehaviour  is judged to have fallen short of the criminal, but it still costs the taxpayer money.  A good example is that of  one-time award-winning  head teacher Jo Shuter  who  left herself open to suspicion and criticism by  inappropriate spending  and the employment of  relatives. She resigned but not before   being given a final warning  for “financial and human resource mismanagement”  (http://www.standard.co.uk/lifestyle/london-life/jo-shuter-there-was-a-blurring-of-my-personal-and-professional-worlds-it-was-incredibly-stupid-8664781.html)
I can give two examples of questionable public contracts involving a great deal of money  which I personally tried unsuccessfully to bring to public notice. Both involved Camden Council, the London borough in which I live. The first occurred in 2003 when the Council announced that they were to replace 14,000 kitchens and bathrooms in their council housing stock.  In response to a question I put to him at a public meeting  Neil Litherland, the then director  of Housing in Camden , quoted me £6,000 for each room (£12,000 for a kitchen and bathroom combined).  The bathroom and kitchen units Camden  proposed to fit were pretty basic. The total cost at that price was £168 million (at 2003 prices).  This struck me as outlandishly expensive, so   I went to a local high street fitted furniture retailer to get a  quote.
At the retailer  I  selected units of the same quality as those proposed by the Council and  was quoted £1,500 for each room, including the installation of the kitchen and bathroom units.   That was for a single retail sale. A contract for 14,000 properties should  result in a very substantial discount below a retail sale, but even at the retail price quoted the contract would have been a quarter of the Camden quoted figure.
When I made my complaint to Camden,  I doubled the £1,500 quoted by the retailer because Camden were doing other renovation work such as re-wiring and laying new vinyl on the floors in the kitchens and bathrooms as well as fitting the new kitchen units and bathroom suites.  The extra  £1,500 per room for this  renovation work was almost certainly far too much,  but even  at £3,000 per room  Camden  would have been halved their actual bill saving £84 million.
A  disinterested person reading that account might think the local politicians and the MP for area would have been biting my hand off to take up the case and stop the grossly overpriced contract going through. I could not find a single politician to take up the matter. Nor could I get even the local papers to investigate the matter.
The second case involved what is now known as the Francis Crick Institute. (http://ukcmri.wordpress.com/2012/11/11/links-to-all-ukcrmi-blog-posts/).  This is a gigantic medical  research laboratory currently being constructed on land behind the British Library. The site is  a road’s width from the Eurostar terminus.  There are excellent grounds for opposing the building of such a laboratory because it will be dealing with level 4 (the highest biohazard level) toxins.  This poses a risk of dangerous materials being released  (through a terrorist attack or carelessness)  into an area which is both heavily residential and arguably the busiest transport hub in London.  However, that is not the important thing in the context of corruption.
In an attempt to stop the building of the laboratory I used the Freedom of Information Act (FOIA) to gain details of the sale of the land on which the laboratory is being built. The land belonged to the taxpayer and was under the stewardship of the Department of Culture, Media and Sport (DCMS). Thesite   was put out to competitive tender and a good deal of interest was shown (27 bids, including the likes of Barratt Homes and   Oracle Group  – http://ukcmri.wordpress.com/2011/02/11/the-full-list-of-bidders/).  The decision was solely in the hands of the Secretary of State for the DCMS who was exercising a quasi-judicial role in the matter.  Despite this, documents I obtained using the FOIA unambiguously show Gordon Brown when PM illegally interfering with the bidding process  from before the closing date for bids and carrying on interfering until the sale was complete (http://ukcmri.wordpress.com/2011/02/21/gordon-browns-involvement-in-the-sale-of-the-land-to-ukcrmi/).   Here is an example extract from a Treasury document  dated 1 August 2007:
The PM is also most recently stated that he is very keen to make sure that Government departments are properly coordinated on this project [the laboratory] and that if there is a consensus that this is indeed an exciting project then we do what we can to make it happen. This is extremely helpful from a DIUS and MRC perspective, but, formally a NIMR relocation project in London has yet to receive Lyons approval from Treasury (for either the first planned NTH site or the possible BL site).
This was before the initial bidding process was closed.  The process was a sham, the other bidders having bid with no prospect of success. Brown should not have interfered at all,  even to say whether he thought X or Y was or was not  a promising project, but here he is  issuing a direct instruction to favour the laboratory consortium by getting all the government departments with some future or immediate interest in the laboratory to put their weight behind it. (When a Prime Minister says he is “very keen” on something that is an order to move heaven and earth to achieve it).
As with the Camden contract for kitchens and bathrooms I was unable to get any politician, local or national, to take up the matter. Every Camden councillor and the local Labour MP Frank Dobson  had the information but refused to act. Camden granted planning permission in principle, but this had to be agreed by Boris Johnson in his role of Mayor of London because the Institute building  is over the height which can  be sanctioned by a London council. Johnson  granted permission despite having the details of the corrupted bidding process (http://ukcmri.wordpress.com/2011/01/14/notification-of-planning-irregularities-to-boris-johnson/) and refused to comment on Brown’s illegal involvement in the decision.  Equally telling in this case was the failure of the national media to take up the story despite Gordon  Brown’s involvement.  The nearest I came to getting the story up and running in the media was a single  short piece in the London Evening Standard (http://www.standard.co.uk/news/no-10-interfered-to-push-through-600m-plan-for-virus-superlab-6557759.html).
The nature of public  fraud
Much, probably the large majority,  of the fraud consists of inflating contracts. This can be done with or without the collusion of public servants and politicians. Collusion between  contractors, public servants and politicians  speaks for itself.  Fraud without public servants or politicians being involved is more complicated. It requires a conspiracy by a number of contractors to fix a bidding process.  The larger the contract  or the more specialised the  work to be done, the more likely a bidding process can be fixed, because often there are only a handful of bidders  capable of taking the contract on. This leads to corrupt agreements between the companies to share out public contracts between themselves at inflated prices. This is done by the bidders  putting in bids to a supposedly competitive bidding process structured so that the company who is to take the contract puts in the lowest priced bid. However, this lowest bid is much higher than it  should be if it was pitched simply at a level to  guarantee a level of quality and provide a reasonable profit for the successful bidder.
The practice is probably very widespread. The Office of Fair Trading concluded an investigation in 2009 which showed widespread fixing of prices: “The OFT has imposed fines totalling £129.2 million on 103 construction firms in England which it has found had colluded with competitors on building contracts.” (see   http://www.oft.gov.uk/shared_oft/reports/Evaluating-OFTs-work/oft1240.pdf and http://www.oft.gov.uk/shared_oft/business_leaflets/general/table-of-infringements.pdf).
Where public servants and/or politicians agree to accept an overpriced contract they may be  bribed either directly or indirectly. A favourite indirect method  is not to pay the politician or public servant at  the time of the fraud but later with lucrative sinecures after they have left office .
The current rules regarding ministers and public servants taking posts in private industry are so lax as to be next to meaningless – they can take up posts after a year or two, regardless of how closely the private sector job is linked to their previous post.  A recent eye-catching example was that of Dave Hartnett who has just taken up a post with the accountants Deloittes. . The Telegraph Daily telegraph  recently reported “Until last year, Mr Hartnett headed operations at HM Revenue and Customs. His new role will involve him working one day a week at Deloitte, which acts as auditor for companies – including Starbucks – which have been accused of using legal loopholes to avoid paying tax.” (http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10083254/Former-Revenue-boss-lands-tax-advice-job-at-Deloitte.html). I am not  suggesting there is corruption  in this case,  but is it really acceptable to have such a senior and important public servant turning from  gamekeeper  to poacher so rapidly?  Like Caesar’s wife, politicians and public servants should be above suspicion.
Waste through incompetence and lack of alternatives
Some of the fraud will be accomplished because the public servant or politicians involved in making contract decisions are simply not up to the job of judging what is a reasonable price for the work being put out to contract.  This is a common enough state of affairs because public servants often find themselves asked to negotiate contracts  even though they  have no experience of  doing so because work which has always been done by direct public labour is suddenly subcontracted to the private sector.   To cover their ignorance the public servant  will often judge bids not on their objective merits, but on who is the cheapest within the criteria set for a contract.  Whether the bid is a reasonable price  for the work done is ignored. This has a knock on effect, not least because  of the widespread lack of honest competition in bidding.  Those accepting bids will justify their acceptance by referring to other contracts for similar work.  Because of this inflated prices become the norm. The politicians who have to make the final decisions on the contracts are as ignorant as the  public servants who negotiate the contracts and simply take what is put before them in the vast majority of cases.
But even where politicians or public servants do realise a price is too high, they can be in a very difficult position which makes them  accept the price quoted.  The problem is that if they refuse all the bidders for a contract on the grounds of cost , then how is the work to be done?  They cannot go elsewhere often enough because there is no public organisation which could do the job rather than a private company or not-for-profit  institution. This is a particular danger with really large or specialised contracts which can only be undertaken by a few companies.  An inflated price may have to be paid by the taxpayer because there is no longer a  public sector alternative.
How much money is being lost?
Total UK Government expenditure for 2014 is £715.3 billion (http://www.ukpublicspending.co.uk/total_spending_2014UKbn). However, that does not include all of the Public Private Initiative (PFI)  liabilities because  Governments want to keep the full  PFI/PPP indebtedness off  the official national debt.  A report by the Office for Budget Responsibility in August 2011 notes that many PFI deals are not recognised in the National Accounts.:
“ As well as lacking transparency, this has fuelled a perception that PFI has been used as a way to hold down official estimates of public sector indebtedness for a given amount of overall capital spending, rather than to achieve value for money.[27]
The report details the scale of the problem noting that “at March 2010, PSND [Public Sector Net Debt] included about £5.1 billion (0.4 percent of GDP) in respect of PFI deals that were recorded as on balance sheet in the National Accounts.” However the OBR considered that “the total capital liability of on and off balance sheet PFI contracts was closer to £40 billion (2.9 per cent of GDP).”[28] They estimate therefore that if PFI contracts were all recognised as debt in the National Accounts this would increase the level of debt by around 2.5% of GDP.[29]” (http://www.publications.parliament.uk/pa/cm201012/cmselect/cmtreasy/1146/114605.htm)
 In 2012 The Guardian using ONS figures put total PFI liabilities at £301,343,154,097 (http://www.guardian.co.uk/news/datablog/2012/jul/05/pfi-contracts-list).
It is clear that  a substantial figure should be added to  the headline £715.3 billion to account for the full PFI liability for 2014.
In the nature of things it is impossible to say exactly how much of taxpayers’ money will have been spent on overpriced contracts. However, the examples which are public knowledge suggest that it must be very considerable, because so much of what used to be done in-house by the British state, at both national and local level, is now put out to contract.
Take the NHS as an example.  If you spend time as an in-patient in the present day NHS you are likely to find that the cleaning, laundry, catering and provision of multimedia installations are  contracted out. The NHS will also spend immense amounts on equipment which will be supplied by a private contractor. Staff will often be recruited by a private agency for a hospital.  If they need temporary doctors and nurses they will pay a private agency.   The hospital may well have a Starbucks or a Costa Coffee instead of an in-house café for visitors. There is fair chance  that  hospital car park will  be run by a private company. Most expensively, if the hospital is recently built it will almost certainly be the  subject  of a PFI contract which stretches way into the future (twenty years or more). This,  and apart from costing the hospital a good deal of money  to pay for the building,   will almost certainly entail a costly management contract to run and maintain the building. This means in practice no one will be in definite overall charge,  because if something goes wrong with the building the contractor has to be left to undertake the maintenance as they see fit
The NHS is one of the most comprehensive examples of contracting out. But most government departments and much of local government displays the same tendency.  Schools and universities are within the contracting out net.  Defence procurement is  depends  very largely on  private contractors, foreign and British.  Police forces around the country  have either privatised much of their administration or are thinking of doing so.  Even the translation service used by the courts has been put out to a private contractor (with disastrous consequences).  Local government services such as waste  collection and disposal and street cleaning are frequently in the hands of contractors. The most disturbing and absurd example I have come across is the privatising of the quasi-judicial  District Auditor post which oversees local government and deals with complaints about their financial probity(“ Following the outsourcing of the Commission’s in-house Audit Practice, all auditor appointments are of private firms “ http://www.audit-commission.gov.uk/audit-regime/appointing-auditors/).
If only ten per cent  official Government expenditure is creamed off by fraud, that would mean £71 billion  of taxpayers’ money will be lost this financial year.  That is more than half the current government deficit.  But the figure  could well be much more because of the omitted PFI costs and the incentive of contractors to be as greedy as they can get away with.  Putting on twenty or thirty per cent to charges for supplying goods and services to central and local government might seem reasonable if you are the supplier and have good reason to believe  prices are likely to be accepted even if they are high. If the Telegraph reports of the grossly inflated prices charged  through collusion by pharmacists and drug companies are to be believed, the sky is the limit in the right circumstances for ramping up prices.
 Why do politicians do nothing?
It is little wonder that politicians in Britain are so willing to tolerate corruption because so many of them are happy to have their snouts in the public trough themselves in illegitimate ways. The information published by the Daily Telegraph on MPs expenses in 2009 was sufficient to show that the majority of MPs were engaging in expense claims which should never have been counted as legitimate expenses by Her Majesty’s Revenue and Customs (HMRC) in normal circumstances . This was because they did not meet the HMRC test of being  expenses “ wholly, exclusively and necessarily “ incurred in the performance of a job.   Very few MPs faced criminal charges even though quite a few repaid money they had claimed. Nor does the public know how many of the MPs faced fresh assessments  by HMRC or the penalties if any HMRC imposed.
Two criminal offences are committed by those who evade tax by illegitimately describing expenditure they have incurred as tax deductible expenses. That  counts as a false declaration. They are effectively claiming money by false pretences. A second criminal offence arises if the bogus expense claim is made without an employer knowing that it is bogus (effectively theft from the employer) or a business which  is paying a sub-contractor expenses as part of the contractual arrangement  and the business does not know the claim is bogus (effectively theft from the employing business).
Depressingly, MPs appear to have learned little if anything from the Telegraph’s 2009 exposure of their shameful behaviour  because they are still thrashing their expenses (15 May 2013  http://www.telegraph.co.uk/news/newstopics/mps-expenses/10059243/Have-MPs-learnt-a-thing-since-2009-Their-greed-suggests-not.html).
There is also the widespread  practice of politicians, especially those who have held office,  being employed on lucrative contracts by organisations whose interests they have either surreptitiously  promoted as a backbencher or , in the case of ministers,  had an area of responsibility which coincided with that of the organisation involved (http://www.dailymail.co.uk/news/article-1387791/Corruption-risk-ex-ministers-walking-straight-private-sector-jobs.html)
Finally there is  the scandal of still active politicians openly acting as paid lobbyists,   including providing ready access to Parliament  (http://www.guardian.co.uk/politics/2013/apr/10/lobbying-professionals-parliamentary-passes).
 
How things used to be
Until fairly recently the British Civil Service was remarkably free from corruption (local government is a different matter), a fact made all the more surprising because of the truly colossal amount of money Government  disposes of each year . There were two reasons for this. The first was the hard-won tradition of public service which in which the Civil Service is an apolitical institution and as such serves no political ideology or party but provides politicians of all stamps with disinterested advice and executes their policies. This tradition has been underpinned by the lifelong working careers which public servants, especially senior ones, have commonly had. Of course, that was merely the ideal and, as with any human institution, the reality fell some way short of the ideal. Nonetheless, such sentiments and conventions have in the past affected the behaviour of public servants for the better, especially in the area of honesty. Sadly, the public service ethos has been largely lost because of the constant upheaval in terms of employment, the loss of  career security  and thirty years of politicians and much of the mainstream media reciting the false mantra that private is good, public is bad.
The second reason for a lack of corruption was  the direct provision of most the services provided by central government. This meant that the number of large central government contracts offered to private business  was  small in relation to the money spent on the direct provision of public service in all its aspects. In such circumstances serious fraud becomes difficult going on impossible for most civil servants because they do not have access to large amounts of taxpayers’ money. (Where they do have access, for example in the Inland Revenue, in most instances there are strict accounting procedures which make the embezzlement of large amounts of cash extremely difficult). Moreover, where there are few government  contracts, most civil servants are not in a position where someone  would find it fruitful to bribe them because they have nothing to sell.  Unsurprisingly, where serious corruption amongst public servants employed by central government has occurred in the past, it has been overwhelmingly in those areas where large government contracts exist, most notably in Defence Procurement and building contracts. It is a reasonable assumption that the more public contracts offered to private companies, the greater the corruption will be simply because the opportunity for corruption increases.
It would be impossible to reinstate the public service ethos quickly, but taking work back into the  public  service fold  would have an effect on fraud and waste through incompetence.  It would  definitely reduce fraud and should allow costs to be controlled because it would be the public sector setting the prices for the work.
Here is a question for the supporters of privatisation in it various forms to puzzle over. Ever since Thatcher began the privatisation of public services governments have insisted that this was saving the public money.  Yet  government expenditure since 1980 has risen substantially  in real  terms.  In 1980 total public spending was £104 billion (http://www.ukpublicspending.co.uk/total_spending_1980UKbn). Using the Bank of England inflation calculator, £104 billion at 2012 values would be only £377 billion. (http://www.bankofengland.co.uk/education/Pages/inflation/calculator/flash/default.aspx).
The cruel truth is that the £715 billion of  government expenditure  in the present financial year is almost double what it would be if the UK had maintained public expenditure at 1980 levels in terms of the real value of the Pound.  If the true PFI/PPP figure for 2014 was included it might be double. The huge increase since 1980  is very interesting because in 1980 the UK  not only had a serious unemployment problem,  but owned vast swathes of British industry, everything from British Leyland and coal mining to the public utilities and , believe it or not younger readers, a national bus network which meant that to live in the country did not mean you had to run a car.  1980s  UK also had armed forces which were considerably larger  than they are now and the putting out to private contractors of public sector work in  national government and council services was rare except in areas such as road building and defence procurement.  For example, local councils only routinely  employed direct labour on items such as road maintenance and cleaning.    In addition much of  private business then was, we were constantly told,  supposedly hideously uncompetitive . Yet despite  these alleged  crippling disadvantages, the British government in 1980  was able to maintain a level of public services  better and more comprehensive than that we have today whilst spending, in real terms,  little more than half of what government spends today.
Why has British government spending rocketed?  It is reasonable to put forward as the primary culprit the mania for privatising everything .  These things have not been understood by the privatisers:
1. The public service ethos did exist and was most valuable in maintaining standards, continuity and honesty within public provision.
2. Multiplying the opportunities for fraud results inevitably results in more fraud.
3.  That public services cannot be run on commercial lines  because public provision is normally universal provision.  Unlike a private company losing business, a public service provider such as the NHS cannot turn round and say we will not treat these patients because we need to cut costs.
4. For public services to run properly  those in charge of them need to be focused not on the bottom line but on the provision of the service.
5. Once a public service has been contracted out to a private provider,  the private provider has the government over a barrel because there is no alternative to a private provider once the public service option has been done away with.
6. That public employment gave those so employed secure lives and indirectly increased the sense of  security in those employed by outside of  public service  because  having a substantial proportion in secure jobs in itself made society more stable and certain.
7. That public money is a recycling of money and however it is recycled it has a value because its spending supports local economies, many of which are depressed and heavily reliant on public sector workers’ spending.
8.   That public expenditure has increased steadily during the privatising of public service activities.

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15 responses to “How much public money is being stolen and wasted because of the privatisation of public services ?

  1. Richard Coeur de Lion

    A great article on a massive fraud and pigs in a trough.Does anyone have information on the London Borough of Lambeth 37 million pounds of housing contracts fraud with Chris Lee Director of Housing and shoddy housing repairs.Axis a private company was involved and the police initiated Operation Ruby.I seem to remember Chris Lee tried to double the Council Tax to cover the loss but he was unsuccessful.He walked into a new taxpayer paid job at neighbouring London Borough of Merton as Director of Environment and regeneration on 140000 ponds.

  2. Nick diPerna

    For those with the greatest security, i.e. the politically connected, money is an abstract concept. Who cares if another contractor is offering the same service for £15million less – it all goes back into the system as far as the economically naïve are concerned – they’re not the ones slaving away for £6.19 per hour!

    Long gone are the days when a person would exchange a potentially lucrative private-sector career for lower pay with job security, a guaranteed pension and a sense of serving their fellow man. Maybe this is partly due to the rise of the ‘public-sector professional’.

    I would argue that unrecognised natural human tendencies such as lack of empathy, inflation and the dominance hierarchy, contribute just as much to the injustices of our times as unsound policies do.

  3. I agree with the general sentiment, and have had arguments with other libertarians about this. In particular, that much of what has been touted as “privatisation” since the 80s has not been actual privatisation at all, but simply the transference of patronage from the State to the faux-private sector, with enormous increases in the capacity to trough-snout as discussed above. In general, from a free market perspective I would argue that the most desirable form of service provision is (in general) private sector, then public sector, with the worst being the current public/private system.

    Basically unless a thing is *entirely* independent of the State, it is not in the free market. Sometimes that may be unavoidable; as with manufacture of tanks and aircraft carriers, or some social provision. But I think one interesting factor is the question of who is the end user of the service.

    In *relative* terms, military procurement has historically worked reasonably well (although this appears to have lately broken down too) because the State was itself the user of the weapons, tanks, planes, ships etc being purchased, and thus were directly aware of failure. A government trying to win a war is likely to be pretty harsh on the manufacturer of bombs that don’t go off, or planes that fall from the sky.

    With social services though the user is the citizen, not the government itself, and this is where everything can go entirely out of control. The government is happy to measure its success by inputs- “we have increased NHS spending by X” and not suffering the actual results of it. Hence this is where things can *really* go out of control.

    Though as implied above, things are now so far out of control that even the military procurement has collapsed into the same mess.

    As I understand it, there is now such much “funding” occurring that there is nowhere a complete accounting of it all. Contracts, grants, etc are effectively beyond the knowledge of anyone.

  4. A valid argument I think.

    My complaint with most of the so-called privatisations that we have seen is that they are not really private at all, but crude state-run faux markets, whereby private companies can make money by meeting a load of odd arbitrary targets, many of which have nothing to do with serving the consumer at all.

    The so-called privatised rail industry is a case in point, whereby losses are socialised and profits privatised on the basis of an arcane collection of contracts that no one really understands, with no clear lines of responsiblity.

    The outcome is predictably the worst of all worlds, with high costs, poor service and private enterprise blamed for everything although it has never even been tried.

  5. Hugo Miller

    A few years ago my dentist referred me to a local hospital to have a wisdom tooth extracted. After hearing nothing for some weeks I phoned the hospital to see what was happening. Turned out that with typical NHS efficiency they had sent the correspondence to my previous address. I asked when they could fit me in. “Thirteen weeks” came the reply. “Why thirteen weeks?” quoth I. “Why can’t you just give me the next available appointment?
    “Everybody has to wait thirteen weeks” came the reply; “it’s an NHS protocol. Your dentist didn’t mark it as being urgent. Anyway, if it’s not cancer it’s not urgent”. I told her that while the pain was not intolerable, I was getting fed up with it as I had already been waiting six weeks I think it was. She told me I could pay £600 to have it done privately, in which case they could fit me in within a couple of days. I told them exactly what I thought of their service and their blasted NHS protocols.
    By happy co-incidence a friend had just had her wisdom tooth extracted at a private clinic locally, so I called them up, and 48 hours later and £200 lighter it was over and done with.
    In the meantime, and this is the crux of this little tale, the manageress of the NHS hospital had called me back and accused me of being rude to their receptionist. I told them that if I was being rude they would know what being rude was. “We provide a very good service” she said. I told her that if this was her idea of a good service we must be living on different planets.
    Then it struck me. Like a bolt from above. The hospital is providing a ‘service’ to the government, not to the patient. So if they make everyone wait precisely 13 weeks as per the NHS protocol, if they employ the requisite number of lesbians and Muslims; if they all go on regular equality and diversity courses; answer the phone within six rings; have a Health and Safety Policy; employ a Carbon Footprint Reduction Co-ordinator , etc etc etc; if they tick all of these boxes as per government diktat, then they pride themselves on ‘providing a good service’.
    Sod the poor patient.

    • Nick diPerna

      When I confronted the condescending nature of an advisor at the local job centre last week, I was also accused of being rude – ain’t that a coincidence? As further punishment for my ‘transgression’, I’ve been asked to provide written evidence that I’ve applied for jobs and also made to have extra appointments at the job centre for additional punishment – no reason given. These people are power mad!

      Like I said in a previous post, there is no genuine customer/client relationship in state services – this creates a power disparity. They already have your money courtesy of the taxman and if you don’t like what they have to offer then you can get stuffed. The same thing happens if you are foolish enough to pay a builder in advance.

  6. Hugo Miller

    The issue of a pedestrian crossing came up locally not long ago. I can’t remember the details of the discussion – the only thing that stuck in my mind was that these things cost £110,000 each. Just think about that – think about what it entails; paint a few lines on the road, dig a trench for the cabling & back-fill it; erect a couple of light poles & probably a computer in there somewhere. Maybe £10,000 the lot? I suggested to a friend who is a builder that we ought to go into partnership providing pedestrian crossings. We’d only need to do two a year to live comfortably.
    Nice work if you can get it.

  7. Peter – “The so-called privatised rail industry is a case in point, whereby losses are socialised and profits privatised on the basis of an arcane collection of contracts that no one really understands, with no clear lines of responsiblity.”

    RH The railways are the prime example of the big privatisations being a literal nonsense. Not only does the taxpayer pay the companies running the trains more than it cost under British rail, the infrastructure also has to be maintained and replaced at taxpayer expense. If a private contractor pulls out of a contract the state has to step in. To put the cherry on the cake, when something like HS2 is proposed it is the taxpayer who has to pay the bill. Exactly how this is meant to be privatisation I cannot see. RH

    “The outcome is predictably the worst of all worlds, with high costs, poor service and private enterprise blamed for everything although it has never even been tried.”

    RH This is an argument akin to the old Marxist one that Communism had never been tried when they were challenged about the horrors of the Soviet Union or Red China. In fact , the way the companies running the railways behave is precisely how private enterprise will always seek to behave if left unregulated, that is, gain a monopoly. RH

    • “RH This is an argument akin to the old Marxist one that Communism had never been tried…”

      I’m not interested in Marxists’ defence of communism.

      But what I do say is that an industry where all the important decisions are actually taken by state officials cannot be called “private” in any meaningful sense of the word.

      Corporatist, yes. Private no.

  8. Sean – that public spending is now virtually twice what it was in 1980 in real terms is the killer fact. These things have not been understood by the privatisers:

    1. The public service ethos did exist and was most valuable in maintaining standards, continuity and honesty within public provision.
    2. Multiplying the opportunities for fraud results inevitably results in more fraud.
    3. That public services cannot be run on commercial lines because public provision is normally universal provision. Unlike a private company losing business, a public service provider such as the NHS cannot turn round and say we will not treat these patients because we need to cut costs.
    4. For public services to run properly need to be focused not on the bottom line but the provision of the service.
    5. Once a public service has been contracted out to a private provider, the private provider has the government over a barrel because there is no alternative to a private provider once the public service option has been done away with.
    6. That public employment gave those so employed secure lives and indirectly increased the sense of security in those employed by outside of public service because having a substantial proportion in secure jobs in itself made society more stable and certain.
    7. That public money is a recycling of money and however it is recycled it has a value because its spending supports local economies.
    8. That public expenditure has increased steadily during the privatising of public service activities.

  9. I couldn’t wade through thousands of words of socialist text above – but privatisation is a good thing. The only problem comes when the state is still buying in those privatised services. Privatise them properly, but no longer providing those services through the state, and the private businesses can then no longer sponge off the public purse. Robert, you seem confused.

    • “Privatise them properly”

      That is really the crux of the matter.

      To me the word “privatise” means for the state to sell off an asset or service once and for all, taking no further interest in it whatsoever.

      Very few current so-called privatisations meet this definition.

      To take railways, for example, this would leave the new owner free to close lines down, scrap the track and equipment and sell the land to property developers.

      Clearly that is not the case – and never has been the case – with our so-called “privatised” railway. Indeed on this basis, it is debatable whether Network Rail even owns the assets it claims to own at all.

      A much better case could be made for saying that the UK’s rail infrastructure is still owned by the state no matter what politicians may say and no matter how enraged trades unions get about rail “privatisation”.

  10. DJ Webb – as by your own admission you have not read what I wrote I am afraid your comments by definition have no standing…