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Profits before people

Dexter Whitfield on the insidious destruction of public services

The Coalition's public sector transformation message is focused on a considerable selection of innovations: spin-outs and growth, new community rights to challenge, bid and buy; individual budgets and social impact bonds, commissioning councils, payment-by-results, outsourcing outcomes and free schools. These are all part of an attempt to divert attention from deepening public spending cuts and disinvestment, and of a more intense phase of neo-liberal transformation of public services and the welfare state.

Meanwhile G4S and Serco are developing the 'asylum market'; Education companies are waiting to get the go-ahead to turn free schools and academies into profiteering enterprises and Virgin and Serco are encircling community services currently provided by Primary Care Trusts with United Health, Circle and Capita are expectant of more NHS commissioning contracts. Moreover, McKinsey's, KPMG, and PriceWaterhouse, and other management consultants, are ready to declare schools and hospitals as non-viable unless privatised.

Campaigns needed

Locally there are powerful examples of trade union and community organisation campaigns, such as Stroud Against the Cuts and Barnet Alliance for Public Services. There are vibrant service-based campaigns in health, education and housing such as Keep Our NHS Public, the Anti-Academies Alliance and Defend Council Housing. Nationally, however, there is a vacuum. There is little evidence of a national strategy except for single-issue campaigns such as that for public sector pensions.

This is not a 'shock doctrine' strategy, but the culmination of three decades of propaganda, creeping legislative change and corporate welfare in which the private sector has played an ever-increasing role in determining public policy. Many of the Coalition Government policies are developed from New Labour's and they had a degree of continuity with the previous Conservative government.

The following example is insightful. Contracting out began in earnest in the early 1980s when the Thatcher government required competitive tendering of building and highways services. Several Local Authorities voluntarily tendered refuse services. After this came Compulsory Competitive Tendering (CCT) in 1988 for cleaning, catering and other support services. CCT was later extended to sports and leisure management in 1991 and to technical and professional services the following year. Market testing then followed in the NHS and civil service for support services.

CCT was abolished by the Labour government in 1998 and replaced by 'best value', which agin was based on a competition ethic. The Labour government established a Strategic Partnering Taskforce in 2000 to promote the 'outsourcing' of ICT and corporate services in long-term multi-services strategic partnership contracts.

Proposals for Creating a Patient-led NHS in 2005 extended 'commissioning' throughout the whole NHS system and were followed by the Department of Health's 'world class commissioning' programme from 2008.

So, 'contracting-out' began as an overt attack on the lowest paid, mainly female workers, and became 'outsourcing'. It has now become 'commissioning' and is applicable to all public services. Commissioning Councils that outsource most services are emerging and the Cabinet Secretary, Sir Jeremy Heywood, suggested in March 2012 that even policy-making could be outsourced! This is not so much a 'hollowing out' of the state, but a fundamental redirection to finance and manage markets and collusion in the deepening of corporate welfare.

A four-part strategy is urgently needed

First, we must understand the scale, scope and intensity of the new phase of neo-liberal transformation of public services and the welfare state. It has four dimensions financialisation, personalisation, marketisation and privatisation.

Financialisation: The drive to create new financial products and further tiers of financial ownership led to the capitalisation of income streams and securitisation of assets in both public and private sectors. The mainstreaming of direct payments and individual budgets (beyond high dependency users) to enable users to purchase services, such as health and education, will have far reaching consequences for the NHS and local government. Likewise the imposition of new and higher charges and tolls.

The Private Finance Initiative (PFI), and its 'replacement' expected this summer, and social impact bonds create new opportunities to profit from the provision of infrastructure and services. The sale of equity in PFI projects has increased the returns already built into contracts and accelerated the growth of offshore infrastructure funds.

Payment-by-results (PbR) and outcomes are the new performance mantra. They are intended to incentivise contractors by making payment conditional on the completion of agreed outcomes. In practice PbR shifts the focus to the financial impact of the cause and effect of service delivery. It marginalises voluntary organisations and small and medium-sized enterprises because they do not have sufficient financial resources to withstand delayed payments.

Personalisation: Direct payments and individual budgets have a key role in promoting the choice agenda. This has little to do with empowering service users and community organisations. Instead, the objective is to individualise customers, each paying, being consulted, commenting or complaining separately. Choices in health and education are designed around market mechanisms for individuals. The objective is to atomise or fragment user relationships and to have them prescribed by market relations.

Marketisation: States create the conditions, regulations and financing and provide the legitimacy to create and sustain markets in public services, they do not evolve naturally. Public services are marketised in five overlapping ways. Firstly, services are commodified or commercialised so they can be readily specified in a contract. Secondly, labour is commodified by standardising tasks and working practices. Thirdly, client and contractor roles are separated with public bodies becoming 'commissioning' agents rather than providers. Market mechanisms are then introduced, such as money-follows-patients-and pupils, pricing of tasks, activities and payment-by-results. Fourthly, services and functions are transferred to quangos, arms length companies and trusts with separate governance structures that undermine traditional structures of democratic control. Finally, business interests are more deeply involved in the public policy-making process.

Privatisation has mutated into a variety of forms. The transfer of ownership and control of public assets was initially concentrated in state-owned corporations and real estate, for example, the sale of oil, gas, electricity, telecoms and water. Once the scale of privatisation reached a threshold where further sales were complex or politically untenable, the emphasis moved to different forms of ownership and control. New forms of privatisation emerged as the focus moved to the marketisation of services by outsourcing, joint ventures, public private partnerships.

Although the sale of assets took centre stage, privatisation was never intended to be solely about selling assets to increase government revenue in order to minimise taxation, or to improve economic efficiency. Private ownership was a means of marginalising democratic accountability, and reducing the cost of labour and the power of trade unions.

Although the Coalition's agenda includes the pending sale of Royal Mail, a raft of other proposals include public sector 'spin outs' to social enterprises, privatisation of the road network with wider use of tolling and the wider use of contractors in policing and the armed forces.

Alternative policies are essential

We must develop alternative policies that are subject to rigorous debate in: the trade unions, community organisations, civil society organisations, Labour Party and progressive political organisations.

Compass launched Plan B last autumn. While it is an important initiative, it has key limitations and omissions. It fails to recognise the extent to which marketisation and privatisation are embedded in public services, avoids dealing with commissioning and outsourcing, fails to distinguish between social enterprises originating in the public and private sectors, nor does it fundamentally address private finance projects (see link).

An alternative strategy should set out policies to reconstruct the economy, the state and public services. Economic and industrial policies should target investment for a clean-energy economy, job creation and reform of employment and labour market policies. A parallel financial and regulatory plan should include a financial transaction tax and a raft of tax reform measures.

Reconstructing the state would recognise intergenerational responsibilities and the core functions of the state and lead on to re-establishing the principles of universal provision, public ownership, democratic governance and the role of the public sector in the economy.

A new public service management, transformation methodology and a public infrastructure investment strategy should be the means for reconstructing public services. Rigorous assessment of the economic, social, employment, environmental and health impacts of policies and projects should be a core part of this reconstruction. The significant differences in tuition fees, community care, PFI and right to buy in Scotland, Wales and Northern Ireland need to be highlighted. These and other measures are detailed in chapters 4, 5 and 6 of In Place of Austerity.


We must also build national and regional coalitions and alliances that embrace different services or sectors. The failure to build a national alliance against PFI allowed New Labour and the infrastructure lobby to treat each project as separate and unique and to localise opposition.

Finally, it is essential to continue to build local trade union-community alliances and opposition to public spending cuts, disinvestment and neo-liberal transformation of the public sector and welfare state.

Link: www.redpepper.org.uk/plan-b-and-beyond/