The Coalition at 10: the wrong turning on public services

Ten years ago, when the Conservative and Liberal Democrats entered coalition, there was a certain energy about the way the new government wanted to approach public services. Gone would be the lumbering, heavy-handed nanny-state of “New” Labour. In would come something more focused, less costly and with a greater community involvement. The Economist enthused about the coalition’s apparent radicalism. In 2020, almost nobody remembers this energy. If the verdict is not entirely negative, the Coalition’s record on public services was more failure than success. It is as well we try to understand why that was.

The energy came from a meeting of minds between the Conservative modernisers led by the Prime Minister, David Cameron, and the “economic liberals” from the Lib Dems, led by his deputy, Nick Clegg (often referred to as “Yellow Bookers”). Neither faction had a secure grip on their own party, but there seemed to a meeting of minds across the coalition’s leaders. Alas neither leader had a strong grasp on how to manage public services, and most Conservative ministers had their own take on how things should be done. The left has made its principal line off attack on “austerity”, and blamed lack of funding for the coalition’s failures. But problems went much deeper than this.

At the start, though, it is clear that something needed to be done. After 13 years Labour’s public service policy was both bogged down and bloated. Labour’s strategy had been borne out of a tension between Tony Blair, who favoured business-friendly and market-oriented approaches, and Gordon Brown, who favoured top-down discipline and expanded budgets. Mr Brown won, mostly. The result was mountains of guidance coming down from on high, a highly complex system of numerical targets, and in the case of the NHS, a massively over-engineered commissioning system (“world-class commissioning”) supported by the biggest and most complex transfer-charging system in the world (“payment by results”). It was a job-creation scheme for management consultants, whose output was blather designed to incorporate as many as possible of the favoured buzz-words, and a slow atrophy of decision-making. Labour had achieved a lot in their 13 years, raising health spending and driving up standards in schools, but by 2010 the whole system was looking more than tired.

Unfortunately the Coalition found that sweeping out the nonsense was easier than replacing it with something better. The first thing to fall by the wayside was any idea of community engagement. Mr Cameron had promoted this through his idea of a “Big Society” which overlapped to a degree with the Lib Dem idea of community politics developed in local government. But Whitehall, both politicians and civil servants, jealously guard their power and nobody wanted to make concessions to interests not represented in Westminster’s lobbying industry. I had a sharp experience of this when local parents in Wandsworth tried to set up one of the government’s new “Free Schools”. This fitted the template of bottom up initiative promoted by Conservatives before the election, but the local, cross-party activists were quickly bundled out of the way, and the contract for the new school given to one of the well-connected academy-school groups. The Big Society was very quickly forgotten.

The next mistake was an obsession with structure over substance. The most costly mistake was a massive reorganisation of the NHS, which destroyed morale, but, to my knowledge, had very little benefit to show for itself. The minister in charge, Andrew Lansley, was given a free hand, and then sacked. Much of the new structure has shown itself to be useless or worse in the face of the pandemic, though that may have been as much to do with policies implemented after 2015 (such as cutting resources for public health), and hospitals have shown themselves to be in good shape organisationally. Another clear mistake was the energy put into the “acadamisation” of schools to take them out of local authority control. This proved to be a succession of costly errors. First managers of the new academies started overpaying themselves, then ministers found that academy chains were making the same mistakes that local authorities did. A huge amount of energy was wasted, and yet the country still suffers from the phenomenon of “coasting schools”. In both health and education the government would have been better off trying to make Labour’s structures work better.

A further mistake arose from a wrong-headed approach to outsourcing. There were two big problems. The first was a policy of divide-and-de-skill borrowed from the private sector. The idea was to divide services into separate functions, define their objectives, and then seek to meet these using as many untrained and inexperienced staff as possible. This may look fine on paper, but it is a complete misunderstanding of what public services are. Public services should be about solving problems, and especially the more complex ones, which will otherwise keep coming back at you. The private sector is not interested in solving people’s problems: it just wants people to keep coming back for more. Solvi8ng problems requires different services to be integrated, not carved up, and it requires highly skilled professionals to craft solutions around services users’ needs. The disaster that deskilling entailed is especially evident in social services and criminal justice.

There was one case where the government wanted to solve complex problems, using a people-centred approach implemented by skilled professionals. This was the troubled-families programme, which was to focus on 100 families that generated a totally disproportionate amount of impact on public services. Alas this fell foul of the second big problem: the idea of “payment by results” – the same words as Labour’s NHS transfer-charging system but with an entirely different use. The idea was to pay organisations more if they achieved measured results. Unfortunately, in the case of troubled-families, there was no good numerical basis of measuring success on the sort of timescale needed, so it simply led to the usual perverse incentives. Furthermore this type of remuneration ruled out smaller social enterprises that were unable to manage this type of financial risk, but which were more likely to embody the kind of public service ethos needed.

The coalition’s record was not all bad. The reform of university funding stood outside other reforms and was based on the recommendations of a commission appointed by the previous government, not to mention being led by two of the government’s more intelligent ministers – Vince Cable and David Willets. It secured additional resources for universities, allowing them to expand their intakes, including to more disadvantaged students. It compares favourably with the zero-fees approach used by the Scottish government, which forced universities to restrict access to the disadvantaged. Gradually people understand that the loan finance system works like a graduate tax, though the more recent imposition of high interest charges undermines this. That leaves plenty of problems with universities their financing, but it was a major step forwards.

Other bright spots on public services included improving school provision for disadvantaged pupils, through the pupil premium and better accountability, and a much stronger focus on mental health. But many big problems, like social care, were left unsolved.

After the coalition ended in 2015, the Conservatives doubled down on all the worst aspects of the coalition’s policies, with an almost vindictive cutting of public money. This came just as the longer-term problems stored up by earlier policies started to come back, with an increased crime rate, for example. In 2016 the new prime minister, Theresa May, tried to reverse this, but was quickly overwhelmed by the Brexit nightmare.

Labour’s top-down approach had got stuck, but the Coalition and the then the Conservatives on their own, looked for the answers in the wrong places. Readers of this blog will know what I think. Public services must become people-centred, allowing complex problems to be solved by crafting solutions across the boundaries of existing agencies. That cannot be achieved using a structure answerable to Westminster, or even at regional level (Scotland and Wales have just as many problems), but by devolution of power and accountability to a much more local level. This should be standard Lib Dem policy, though was not pushed in coalition; a few more Labour people talk about it nowadays, though it looks far from the way current Tories approach things. I would like to think it could be the basis of a Lib Dem-Labour-Green coalition, but I’m dreaming.

The Coalition’s failure shows just how hard our political system makes the effective management of public services.

Why Dominic Cummings is doomed to fail to reform state inefficiency

I was rather shocked by a story on the radio news last weekend. It was announced that the NHS was about to spend £40m to sort out the login to its IT systems, as staff are wasting lots of time with separate logins to a dozen or more systems. My first reaction was: “Why on earth has it taken them this long to get round to fixing this, if it costs just £40m?”. It was followed by a more depressing thought: they will spend their £40m and still fail to achieve it. And then: “What on earth possessed them to press-release such an embarassing story?”.

It is no wonder that the Prime Minister’s chief of staff, Dominic Cummings, has such a low opinion of civil servants and public sector management. The quality of management is appalling. It always has been. One of my earliest memories was just how awful the nationalised gas, electricity and telephone industries were in the 1960s and 1970s. It was worse than even I knew, as the government had lost control of their finances, so that these industries simultaneously drained the public purse and were starved of investment. And the vast scale of wasted resource on nuclear energy development only emerged long after it happened, with nobody accountable as usual. I do remember Harold Wilson (the PM of the time) having to cancel an absurdly ambitious development of a new bomber for the RAF. Things have only got better since then because the state has shrunk. One of many current fiascos is the Universal Credit system: a fatal combination of a visionary minister with a weak grip on reality (Ian Duncan Smith), and civil service project management skills.

It is not all bad. The London primary schools where I have served as governor are as well-managed as any organisation that I have seen, though some of the regulations they have to navigate, and the “guidance” from national and local civil servants can be mind-numbing. There are other pockets. These might give us some clues as why such poor management happens – it is nothing to do with being part of the state as such – and indeed many large monopoly private businesses can be just as bad. Partly it is about accountability and incentives, and partly about complexity. Alas it is impossible to get these right in many areas. Health services are mostly too big and complex (our NHS isn’t particularly inefficient in global comparisons, though I imagine few others have the nonsense over IT logins); the secrecy required for national security institutions is the enemy of accountability; and so on.

Mr Cummings wants to address this by a massive shakeup of the civil service, as advertised by his blog, which I don’t read, as it sounds too much like an ego-trip, but this article in the Economist gives more detail. The general idea is to change the culture, to allow in more mavericks as well as engineers and scientists, ensure proper accountability for failure, and to prize competence and the ability to get stuff done, as opposed to just being “a safe pair of hands” (i.e. staying out of trouble before handing the job to somebody else). As somebody who has had a career in management, and experienced the public sector at first hand through my two decades as school governor, I really get this. The serial incompetence of the public sector really annoys me. But with all my experience in management I can see at least three sorts of problem with Mr Cummings’s approach.

Firstly management isn’t just about getting stuff done. There are two types of skill required to be an effective manager. 90% of the attention goes on the first type of skill: task-orientation. Success is generally achieved by picking a small number of priorities and concentrating on them. This seems to be Mr Cummings’s obsession, and he is in line with most people who pontificate about effective management. But there is a second type of skill: risk-management. This is about looking for trouble and heading it off. What most people don’t seem to appreciate is that it requires opposite skills to task-orientation. Task orientation requires focus; risk-management requires the opposite – the ability to step back, gather data from all directions and think about the things that are not priorities. You also require strong judgement as to which potential risks to take seriously and which just to keep a wary eye on – but without that broad horizon it doesn’t work. Some of the worst management disasters (including in the British public sector, notably in the NHS) have occurred from areas outside management’s top three priorities. In theory the incorporation of good risk-management skills is perfectly compatible with Mr Cummings’s idea of maverick managers constantly challenging each other. In practice this is unlikely. In his recent blog he has said “I’ll bin you within weeks if you don’t fit”; this does not sound like the sort of culture that welcomes effective risk management.

Secondly there is a clear implication that decision-making is centralised. If you don’t trust public servants in generality, then you are unlikely to delegate much of importance to them. Mr Cummings is as likely to have as low an opinion of government ministers as civil servants. This would certainly be justified in most cases: good management skills are not a requirement for political advancement, and most politicians have had little aptitude for running things. That’s a recipe for everything coming back to Downing Street. And given that the name of the game in Downing Street will be prioritisation, that means that most of the stuff that is referred to it won’t get looked at properly, because it won’t be in No 10’s top three. This will result in either gridlock or things being waved through when they should be challenged.

And the third type of problem is lack of consultation. One of the most tiresome things for people who want to get stuff done is listening to a wide variety of interested parties who might be affected by what you are trying to do. Managers of Mr Cummings’s sort like to short-circuit such time-wasting and have a good chuckle when people complain. Consultation is hard work, and most of the concerns people raise are about making sure their lives don’t get changed too much, sod the bigger picture. But not only is it good for risk management, but it is also good politics. People get less angry if they have been consulted about things, and it is useful to know who the big trouble-makers are likely to be, and whether there are easy ways to head off some of the trouble.

In my recent post on Boris Johnson’s government I suggested that his and Mr Cummings’s approach would lead to cronyism. This is what happened to the academy programme driven forward by Mr Cummings at the Department of Education. Doubtless Mr Cummings views this as a success because he pushed it through further and faster than anybody thought possible. But it achieved little in advancing the quality of education. It was not in fact over-centralised – but the rather extreme model of delegation he adopted meant that the unscrupulous made hay. And his impatience for consultation meant that academies were run by a small number of politically well-connected organisations, and not the sort “bottom-up” local groups that the policy was supposed to empower. And it created a huge stink, which meant that he and his minister were moved on earlier than people though they would be. Now this failure may be because of the lack of competence of education department civil servants (I have certainly seen that claimed by an initial enthusiast disillusioned by the results) – but that was a factor that had to be managed rather than bulldozed through. In the end Mr Cummings and his boss Michael Gove were responsible for a classic public sector failure themselves.

So what should the government do about poor public sector management? Most approaches have drawbacks, which is why the problem is so persistent. Delegated management and accountability – part of the formula with schools – can work very well, but won’t for large, complex monopolies. Holding managers to measurable targets, the big idea of former Labour reformer Gordon Brown, often has perverse results and leads to poor risk management. Outsourcing, favoured by many Tories, has often disappointed: because the process itself needs to be well-managed and not treated as an exercise in buck-passing, and because it often means carving up processes in ways that make the whole harder to manage. Labour claim to have new ideas to improve accountability to service users; these should not be dismissed, but scepticism is warranted. I think regional and district devolution of political responsibility is an important part of the solution, but it could take a long time before this shows results. Politicians are likely to misuse their new-found powers at first, and the centre is also likely to implement it in such a half-hearted way that the benefits will be hard to obtain.

In some ways I wish Mr Cummings luck – especially with the country’s appalling defence procurement processes. But his ideas are both strategically and tactically misconceived and he may well end up making things worse rather than better.

Child Maintenance: an epic failure that should be a lesson to government

Last week The Economist published a short article about the failure of Britain’s reform of child maintenance collection. The article highlights the human consequences but does to point to any wider lessons. And yet our political class needs to see what was wrong-headed about the idea, or else we are destined to keep repeating the mistake.

The original reform was in 1993, when the Child Support Agency (CSA) was set up. The problem it was designed to solve was that of absent parents (usually fathers of course) not contributing to the maintenance of their children. The idea was to replace a haphazard and costly system enforced by family courts with a centrally enforced system run by the new agency. Single parents lost the right to chase ex-partners through the courts for arrears; the agency would do that. But the CSA soon became overwhelmed, and it was closed in 2012 with arrears then amounting to £3.7bn. A new agency, the Child Maintenance Service, then took over. They are now close to writing off nearly £2bn. In many cases no serious effort has been made to collect the arrears at all. Apparently the new agency doesn’t even try unless it is provided with information by the partner to whom the money is owed – a tall order for often very stretched people. The government’s legal obligation to collect has been tossed into the bin, to the benefit of shirking parents, who may only have had to shrug off a standard letter or two, if that.

This is often what happens to attempts to reform public services. Reformers see a messy system involving a lot wasted or duplicated effort, and dream of something much simpler and more rational. They hope to achieve greater effectiveness at a lower cost. But the reform involves sweeping away the human efforts of, and information possessed by, many thousands of people and replacing them with a void. Failure is nearly inevitable.

This is just one example. Right now we are witnessing the slowly unfolding calamity of Britain’s Universal Credit (UC) system. Even now, many people assume that is simply a good idea delayed by cack-handed implementation. They can’t see that the whole idea is deeply flawed. The Conservative/Liberal Democrat coalition government of 2010 to 2015 seemed particularly vulnerable to this sort of mistake, with not just UC, but a misguided set of reforms to the National Health Service, the trashing of the probation services, and a deeply flawed idea of “payment by results” for outsourcing public services. The Prime Minister of the time, David Cameron, seems to have been particularly susceptible to such half-baked schemes (most notoriously “the Big Society”), and, to be honest, his coalition partner Nick Clegg, wasn’t really any better. They were both products of a political system that did not value true administrative experience.

The previous Labour governments of Tony Blair and Gordon Brown do not have such a dire record, though Mr Blair was as susceptible to the same sort lightweight thinking – for example launching the ill-directed Academies reforms of schools. Instead Labour liked to smother its reforms in layers of bureaucracy and masses of meaningless verbiage that had the effect of reserving things to an elite class of bureaucratic waffle-merchants. (You will sense some bitter memories coming through here: I bumped into this as a school governor, as well as my interest in the NHS in the vain hope of getting a job there). The Labour government’s flagship identity card system was heading the same way as UC before the Coalition sensibly killed it. The problem was similar: excessive centralisation of decision-making in Whitehall, with political leaders too easily seduced by lightweight ideas from political think tanks, made flesh by armies of overpaid consultants. Implementation was always somebody else’s problem. Ministers and consultants alike would move on to their next job before the consequences became apparent.

And it’s not just in Westminster where such disasters occur. The Scottish Government under the SNP has been trying to centralise local services and wipe out the human interfaces by which such services work. The reforms to the Scots police services were the most notorious. Northern Ireland has its own example of astonishing incompetence with renewable energy schemes, and doubtless there are examples in Wales too. The problem infects the entire British political class. I can’t see much sign of this changing. Instead I see hopes (as usual) being placed in new technology. But Artificial intelligence and machine learning will not solve the core problem that centralised institutions do not understand the problems they are trying to solve because too much of it is outside their remit.

So what direction should we be taking? Services should be drawn around the needs of individual people, allowing solutions to be tailored that will actually solve problems rather than perpetuate them. That means drawing together services related to physical health, mental health, education, social services, policing, justice, housing, benefits and so on. And that means two things in particular: empowered intermediation, and decentralised authority. In turn these almost certainly mean devolved political accountability.

By empowered intermediation I mean capable professionals meeting with services users (physically and not through IT interfaces), establishing their needs and making arrangements with the necessary service agencies to take things forward. There are plenty of examples of such intermediaries: social workers, teachers, and general practitioners. But the tendency is to disempower them, and to replace them with less skilled people with narrower briefs. The hollowing out of probation services is a particularly dire example of this. The Department of Work and Pensions (DWP), responsible for both UC and the child maintenance fiasco, is no so far down this culture of de-skilling that it probably needs to be abolished.

The need for decentralised authority is easier to see perhaps. In order for service providers to respond to the generalist intermediaries, they need the power to adapt flexibly. That is impossible in highly centralised administrative silos, which pin managers down to tight procedures and inflexible budgets.

That this leads to the need for greater devolved political accountability is also an obvious step. Attempts to make decentralised agencies accountable through the use of Key Performance Indicators, and the like are clearly a mistake. It is much easier to game the indicator that solve the underlying problem, which often makes things worse in the short term. This is where political accountability for the overall results should come in. But there is a trap here. It is tempting for politicians to think that political reform is the key step, and not the much harder job of re-engineering of public services into models that interact positively with users and collaborate productively. In fact devolved political administrations can get trapped in their own conservativism and become captured by local vested interests. British devolution to Scotland, Wales and Northern Ireland cannot be seen as an outstanding success.

And yet the failure of our public services is becoming more apparent. For now “austerity” gets the blame. I live in hope that people will start to understand that the issue is much deeper.

 

 

Have big organisations had their day? Alas not in the public sector

In a recent bog post David Boyle, whom I regard as a fellow campaigner for a new economic paradigm, describes the phenomenon of the “empty corporation”. He mentioned this after trying to deal with two large British companies: Barclays Bank and TalkTalk, the telecoms company. These companies offer their customers no human contact, and are unable to solve more than very simple problems without causing their customers a lot of work. And yet these businesses conform to our idea of high productivity, which is the holy grail of economic development. Examining how these companies work gives us clues about how economic development needs to change direction.

The key to this is the insight, offered in recent book by information scientist César Hidalgo, that the human brain can only handle so much complexity. And the human brain is at the apex of any system for managing complexity. Whatever power Artificial Intelligence (AI) and computing may have to transform life, they remain a long way from handling complex situations reliably. Groups of people can manage more complexity that individuals, but this is a process of diminishing returns; it ceases to be true of large groups. That is fundamentally why large organisations do not handle complexity well. So how do they succeed?

They do so by simplifying things. Manufacturers build standard products in large numbers. Service providers try to pull off a similar feat, by offering a standard service, handled by a relatively simple set of rules, with the minimum variation due to context. Further, they produce these products and services by fragmenting the more complex parts into simpler steps. By doing so they are able to develop “economies of scale”, first admiringly highlighted by the founder of modern economics, Adam Smith, in a pin factory. That makes them highly productive and competitive, within a tightly defined remit.

Anybody who has worked in a large organisation (as I have within in financial services) will recognise this drive to simplicity. Failures are usually attributed to excessive complexity. Every so often there is a reorganisation to re-simplify things. Hierarchies and bureaucracy is put in place with the aim of preventing complexity from growing – though this sometimes backfires by doing the opposite. Even so large organisations often become unstuck because vital processes are neglected (a recent example being TalkTalk’s inadequate defence against hacking) or parts of the organisation interpret their an over-narrow remit without comprehending the full context (VW’s problems with emissions standards being a case in point here).  It seems impossible to get the balance between inadequate and excessive control.

And yet officialdom often favours large corporations. That is mainly because they have a similar problem with complexity. They find it much easier to handle a smaller number of large organisations. They are many examples, but one that sticks in my mind is the almost vindictive campaign by officialdom against smaller abattoirs after a scandal of lax standards. This still afflicts British agriculture; we may question whether it really has produced much in the way of safety benefits. But it has made the blame game easier to manage. There is a further, and sinister twist. Large corporations, especially in the USA, have discovered how easy it is to manipulate new regulations by lobbying officials and politicians. The payback on investment is apparently enormous.

The problems of excessive scale are even more apparent in the public sector than in the private one. A recent case described by Guardian journalist Deborah Orr is particularly poignant. She told of a woman falsely accused by a neighbour of antisocial behaviour. It was quite clear that this neighbour had mental health problems. Officialdom, in the shape of the housing association that managed the property and the police, where utterly unable to cope. They could not see beyond an isolated series of incidents, which each had to be dealt with according to a set process, regardless of human impacts. In the end her neighbour was evicted – but only because his rent was behind; at no point did anybody think of getting down to the root of the problem – the neighbour’s mental health problems, which are presumably being inflicted on somebody new. The theme of Ms Orr’s article is the lack of compassion in the modern world. To me it is simply the inability of large organisations, like the housing association and the police, to manage context and complexity. There is no place for compassion is such places. Compassion means allowing the impact of context, and that means losing control.

These problems are made worse by organisations attempting to be more “productive” by reducing levels of staff, and “de-skilling” – using less qualified, and cheaper, staff, working within tightly defined rules. Unfortunately this is one area where the wrong lessons from the private sector are being imposed on the public sector.

There is a sort of defining paradox about the problem. On the one hand we have workers working very hard, and very productively, and on the other we have the organisations they work for failing. This almost always arises because the sum of all the things that the workers are doing fails to add up to what they are collectively trying to do. There is even a name for the discipline of trying to resolve this type of problem: “process management” – which I personally have found an essential set of ideas as a manager. Unfortunately people charged with process management are usually given too narrow a remit to get to grips with the real problems their organisation faces. And all too often these problems are insoluble for large organisations – because solving them means depending too much on the exercise of judgement at a junior level (including the “compassion” of which Ms Orr speaks), the full consequences of which the wider organisation will be unable to handle.

Economists should ponder this paradox when they tut-tut about poor growth in productivity, as they are prone to do. Most still believe that productivity comes about with simplification and scale. But each of our lives is complex, from the billionaire to the welfare claimant. Offering us a bewildering menu of simple, standardised products and services is often not what we need, even if each of these services is very cheap, because it is produced to high standards of productivity. At least the billionaire can employ a small staff of professionals to try and make sense of it all. Alas the welfare claimant often needs interaction with just the sort of trained and empowered professional whose jobs are being de-skilled. Productivity, as it is usually understood, may be self-defeating. We need a new way of looking at it.

In the private sector the processes of technological advance and competition will eventually drive positive change. Big corporations will try to slow it down by creating monopolies, by making life difficult for their competitors, or by misusing such concepts as intellectual property rights. But the life expectancy of larger organisations is already shortening. A long last technology may be taking forward individual empowerment at the expense of centralisation. It is always dangerous to predict where technology will take us, but the smartphone, blockchain technology (pioneered by BitCoin), and additive manufacturing (3D-printing) are surely pointing towards a more distributed model of capitalism. Meanwhile the struggles of large companies to secure customer databases and fight disruption from cyber attack are pointing the same way too. With inevitable exceptions, the big commercial corporation may have had its day.

Alas there is no sign that policymakers understand that scale is a problem for public services, even though almost very day provides evidence that it is. Each failure is greeted with promises that some tweak in the system will sort the problem out. You would think that after so many years of such failed promises that people would start to twig. And yet, alas, no.

The Olympics and Hillsborough: two faces of the public sector

Brendan Barber, the outgoing General Secretary of Britian’s Trade Union Congress, called for “an Olympic approach to the economy“.  He was, of course, only one of many politicians and others trying to use the example of London’s success in putting on the 2012 Games to try and make a wider point.   He said that it showed that “the market does not always deliver”.  In this I think he was referring to both the fact that the games were a government sponsored grand project, and the spectacular failure of one of the private contractors, G4S, to deliver security staff.

Well I did not hear his speech, or even read it – relying on radio and press reports.  What comes over is a mixture of the coherent and nonsense.  The coherent part was the idea that an economy lacking in aggregate demand could do with some grand infrastructure projects to keep people employed and deliver future benefits.  Many people across the political spectrum agree with that, although personally I am on the sceptical side.  The nonsense bit was the idealisation of the public sector and suspicion of anything that smacks of private initiative and enterprise.  He precise words may well not have done this: “the market does not always deliver” is not the same as saying that “the public sector always delivers and market never does.”  But that is no doubt what his TUC audience heard, judging by what some people were saying.  The ideas of many trade unionists are not so much inspired by Maynard Keynes as Leonid Brezhnev.  Unlike in America, though, the public are more sympathetic to such notions than they ought to be.

To see why we have the terrible example of the Hillsborough football disaster in 1989.  Today a report has been released vindicating criticisms of the authorities long made by families of the victims; the Prime Minister was forced to make an apology.  The authorities, mainly the Police, not only made misjudgements that caused the disaster, but their handling of things made it worse by delaying medical help.  And to cap it all they systematically covered up the truth and put about mis-information to try and divert the blame.  It has take 23 years to get this far.

What is my point?  It isn’t that the public sector is any more likely than the private sector to perpetrate the sort of mistakes that led to and exacerbated this tragedy.  Far from it.  It is that it is so much harder to hold the public sector to account.  They are integrated into the system that is meant to secure justice; they can pull strings, call in political favours, and work the system so that the truth does not come out.  For every Hillsborough that eventually does come to light, think of the hundreds of lesser tragedies where the authorities manage to thwart the victims.

Compare that to the private sector.  At the Olympics retribution was swift and brutal for G4S, publicly humiliated in days (while their public commissioners who seemed asleep on the job just kept their heads down).  Or to take something a bit more comparable: BP’s Mexican Gulf disaster last year.  BP faced the full weight of the US political and judicial system, forcing a rapid response and compensation payments.

Hillsborough was a long time ago.  I would like to think that standards of public accountability have improved since then.  But we still get procurement disasters in the Ministry of Defence, bad hospitals getting away sub-standard services, state schools in many parts of the country not trying hard enough to raise standards among less well-off communities.  And even the Olympics – compare the cost to original budget!  Not to mention their reliance on armies of unpaid volunteers.

Scepticism of the private sector and open markets is understandable – but we need to get things into perspective.  We have too easily forgotten what happened to the Communist systems in Europe.  All those expressions of goodwill and the promotion of the public good soon get buried in a culture of passing the buck.

Let’s learn the right lessons from the Winterbourne View scandal

On Monday the government published its serious case review into the Winterbourne View abuse scandal.  Winterbourne View was a specialist private sector hospital for learning disabled and autistic people – people who were sectioned and could not fend for themselves – “vulnerable” in the jargon.  The BBC Panorama programme filmed some spectacular cases of staff abusing patients.  A closer look didn’t make things look any better – abuse had being going on for years, and the hospital was not remotely doing the job it was being paid to do.  This is laid bare in the report.  All sorts of people fell down on the job – the hospital’s owners, police and other services, and the Care Quality Commission.  This should not distract us from the central lesson which the report makes clear – the commissioning of these services was seriously deficient.

The report was published on a day when the news was dominated by the Olympics and by the Coalition spat over Lords reform.  Perhaps it is a pity that this meant it did not get the public attention it deserved.  But it may be just as well.  In the hands of the usual top news journalists and editors, the wrong lessons would have been drawn.  Instead the coverage has been a bit more balanced and considered – I have even been able to pick up mature and balanced coverage from BBC’s Radio 4.  Even so, I’m not sure if the right messages are getting through to the people that matter.    There are some big red herrings.

The first red herring is the use of private sector providers to deliver care.  The report and headlines made much of the hospital owner’s pursuit of profit as being the reason they failed to provide a proper service, in spite of being paid quite well.  But this is nothing new – and there are plenty of shining examaples of good practice in the private sector.  The problem was that they were not being held to account.  Terrible things happen in public sector organisations too, if nobody is asking what they are getting for their money.

Which leads to a second red herring.  An early “lesson” was that the Care Quality Commisssion’s inspection regime was too light touch, and that inspections by this national body should be more frequent and more thorough.  But we mustn’t rely on these big inspectorates, who often fail to understand local nuances and issues, and can end up being excessively confrontational.  At best they can guarantee a certain level of mediocrity.

And thirdly there is the role of family.  The patients at Winterbourne were often from a long way away, which meant that it was much more difficult for the family to stay in touch.  This was condemned as being part of the problem.  This is right up to a point.  Public service commissioners are far too casual about sending people a long way from where they have their roots.  I am uncomfortable with the NHS reformers’ constant refrain of creating fewer but bigger specialist facilties for everything – though they always point to statistical evidence.  But while family can and (usually) should be an important part of somebody’s care, the system should not depend on them.

No, the real issue is with the commissioners of public services, within the NHS and local authorities.  They should take more responsibility for the services they commission and devote more time to holding them to account.  At this point it is very easy to be swept away by a debate over structures, procedures and responsibilities, seeing this as simply an exercise in public procurement, as one might outsource street cleaning, for example.  But again, that is not the important point.

At the heart of the commissioning of social and health services should be the client or patient.  Their individual requirements should be assessed, treatment individually tailored and their progress followed with human interest.  The patients of Winterbourne were sent there by commissioners who thought their job was done by just placing them there.  What was supposed to assessment, treatment and rehabilitation, a process implying progress towards a goal, turned into warehousing.  That should be almost as outrageous to us as the abuse itself.  If the commissioners had been following their patients, they would have picked up their lack of progress, and either worked with the hospital to improve it, or simply taken their patients elsewhere.

This isn’t rocket science.  My wife is a care manager at a local authority, dealing with drug rehabs.  Her authority takes an interest in their clients as individuals, and this invovles meeting clients at the rehab facility from time to time to check on progress…and cutting out facilities that aren’t up to standard.  The problem is that some public sector managers take a more industrial view of things, trying to drive efficiencies by doing things in bulk and treating problems and performance indicators rather than people.  This can give rise to some short term cost savings, but it quickly becomes self-defeating, as processes that fail to take account of people as individuals fail to solve their problems, and you end up with warehousing on a minimum cost basis.  But it is not value for money you keep adding to the workload.

Unfortunately in this aspect of public services, not much much can be learnt from the private sector.  Private sector techniques (lean management, business process engineering) can lead to a more people-centred approach if applied properly – but ultimately the private sector answer to difficult clients is either to pass them on to somebody else, or turn them into dependents and warehouse them for a fee.  Warehousing problems rather than solving them can be a lucrative business, as the owners of Winterbourne, Castlebeck Ltd, clearly saw.

I hope that the government’s ideas for GP-led health commissioning, and integration between local authority and NHS care, will lead the commissioning process to the right place, as they should in theory.  But the bureaucratic obstacles are huge.  It would help to have a clearer vision from on high.

 

The G4S fiasco poisons attitudes to the private sector

The British contractor G4S has specacularly failed to find anything like enough staff to support its contract to provide security staff for the London Olympics…which start in less than two weeks.  The details aren’t clear yet, but this one has all the makings of a fiasco that will be examined in deph in MBA courses for a long time.  A bigger question is the effect it will have on public attitudes to the private sector here in Britain.

For now the politicians and journalists are having some fun.  “Is this a humiliating shambles for G4S?  Yes or No?” (or similar words) one MP asked Nick Buckles, the hapless G4S Managing Director, this morning, showing the sort of skills of forensic questioning that make people wonder how useful parliamentary select committees really are. Mr Buckles had to agree.  It wasn’t just the size of the recrutiment gap, it is that nobody at the top seemed to have any idea that there was trouble until a couple of weeks ago.

Another revealing encounter was on Radio 4’s Today programme this morning.  John Humphreys was interviewing the senior police officer coordinating Olympics security.  The latter referred to G4S as a “partner”.  They’re not a partner, retoted Mr Humphreys, they just a private company only interested in profit.  And that seems to summarise a widespread attitude here.  Private companies are greedy and heedless of ethical standards.  Meanwhile the good old public services, like the police, the armed services or the NHS are selfless public servants working for the good of us all.

What a difference 30 years makes!  Back in the 1980s public services were supposed to be crassly managed, unable to control their unions and unable to deliver anything on time or efficiently.  The private sector on the other hand, the odd (state supported) car manufacturer apart, was all enterprise, innovation and efficiency.  It says a lot for the process of public sector reform that has happened since that public services command such respect now.  The private sector, on the other hand, has not come out of the banking crisis well, as the parallel case of Barclays seems to demonstrate.

This matters because further public sector reform, especially in the NHS, implies greater use of private businesses.  This was already a hard sell politically.  It’s not getting any easier.  Should it?

Well, management screwups are by no means the unique preserve of the private sector.  Last week a coroner reported on a case of a patient dying at our local hospital, St George’s.  This looks like a case too many people being involved, not aware of the complete picture, and nobody taking the initiative to sort problems out.  The hospital said that it had changed its procedures to prevent future incidents like it.  You can almost guarantee that this means an extra check or process spatulaed on top the ones already there – theoretically dealing with the problem, but actually making the process more complex and difficult to manage.  Reengineering of operations to deal with risks like this seems to infinitely more difficult in public sector organisations than in private sector ones, perhaps because it means trampling over well established demarkation lines.  Cases of bad management abound.  The quality of police management was shown in very bad light by last year’s riots, especially in London, where they were caught flat footed by youngsters with Blackberrys.  And as for the armed forces, whose public stock is currently very high, the amount of money they have wasted in equipment procurement programmes is absolutely eyewatering.

And as for the G4S scandal, the wider story is not necessarily against the private sector.  The company is clearly accountable, and is picking up the extra costs instead of the taxpayer.  And surely the procurement process is a much to blame as the contractor?  G4S may have been suffering from “winner’s curse” – required to cut costs to win the contract, and then finding that it had been unrealistic, or taking too many risks.  Realistic or cautious bidders simply get eliminated.  But this is a well known procurement problem – and surely the commissioners should have seen fit to take precautions?  Some rather obvious questions are being asked about how such a large and important contract was being supervised.

And it’s interesting to reflect a little further on the currently popular subject of “culture” in organisations, that, for example, was supposed to be so bad in Barclays.  Well senior managers not knowing about problems building up within their organisation is often a sign of bad culture.  Mr Buckles said he was a “no excuses” manager; so were staff afraid to pass up bad news?  The twist on this is that this sort, tough, no excuses style of management is beloved of politicians and the public (provided they aren’t actually working in the organisations concerned).  I’m not sure that most politicians would recognise healthy corporate culture if they saw it.  And that is bad news for the public sector.

So it would be a pity if this episode slowed down the process of involving private companies in public service reform.  But it would be as well to learn the lessons for public sector procurement and contract management.

Lesson from the banking industry: sometimes people need to be treated as people.

This article from the Economist struck me like a bullet on reading it today.  Not so much for the subject matter itself (US banking practices) but what the whole episode says about the modern world.  We have never had more data readily available on people – but we seem less able than ever to take decisions on their individual merits.  More data, less information.  This problem is usually shrugged off y economists and reformers with a laugh; it shouldn’t be.

The story starts in the US property boom, when banks were falling over themselves to offer mortgages, based on the vague idea that since these loans where secured on property, and property values always go up, you couldn’t have too much.  The banks stand accused of approving loans robotically, without any consideration of individual merits – and as a result often lending to people who could not afford to keep up with the repayments.  This accusation was commonplace, but, as the article points out, little effort seems to have been made to substantiate it against hard evidence.

Then came the crash, and many people who had taken out loans could not or would not keep up with the repayments – and stood at risk of having their homes repossessed.  And the banks once again stood accused of carrying out repossession without due care and attention, again on mainly anecdotal evidence.  This became a hot political issue, and the individual US states set about suing the banks, with the Federal government becoming involved too.  And now an umbrella settlement is proposed, to which the five main US banks and 49 out 50 state Attorney Generals have agreed to.  The banks are making a blanket payment to make the problem go away.

What remains characteristic of the whole story, from the original alleged malpractices right up to the settlement, is a failure to reconcile it to what actually happened to real people in real homes.  No attempt is made to distinguish between whether some banks are more culpable than others; and no attempt to distinguish between arrears that arise from people in genuine hardship, and those who are trying to beat the system.  All that is just too difficult.

And this type of thing is happening all around us.  Decisions are made about us using computer algorithms based on data that may or may not be accurate – or based on our membership of some or other broad group of people (men, women, over 50,  etc.) and the law of averages.  Companies calculate that it is cheaper that way.  To consider people as real people, and base decisions on the individual merits of the case, well that requires the intervention of skilled staff, and they cost a lot of money.

And so the flip side to ever advancing productivity (one of the things that makes skilled people cost so much) is that we are subjected to an increasing volume of de-personalised services and arbitrary decisions; and around the fringe a spectrum of fraud arises, as people learn to take advantage of system weaknesses.  I have been the subject of mild identity theft several times; this looks quite safe for the people who perpetrate it, since nobody bothers to find them – it’s just a cost of doing business.

But what’s the moral of the story?  We gain a lot from the increased wealth that arises because of all this added productivity.  And what’s more part of becoming a more equal society is that well off people like me can’t expect to have armies of people running around fawning on their every need.  So should I just stop whinging, and get on with all the things I can now do that would have been unthinkable in a previous age?

Up to a point.  I think there are two important consequences that many people overlook.  One big picture, and the other of more urgency.  The big picture point is that are are physical limits to economic growth, and it is no wonder that the pace of growth slows in developed societies.  Higher productivity means we consume more services with diluted human content.  But huge part of the pleasure we derive from some services is exactly because we get one-on-one attention from somebody (hairdressing perhaps, a personal trainer, dinner at a posh restaurant, and so on); as productivity advances, the proportion that these non-negotiable services comprise in the total economy rises – and so growth slows.  Economists refer to this as “Baumol’s Disease” after the economist who originally pointed it out.  But it is not a disease; it is the product of success – it’s the process of arriving at the promised land, so to speak – the place that is so good that progress is impossible.  An increasing proportion of services cannot be improved without detracting from their value, and people will resist buying them at any price; and that’s saying nothing of the distortion to incentives that arises from making decisions based on averages.  We can’t rely on economic growth to wash away society’s problems – we need to confront them more directly.

The more urgent point applies to the reform of public services.  Too many people assume that to make these more effective we must follow a similar process of sucking the human content out of them as we see in so many commercial services.  In some cases I’m sure that’s true; some Indian organisations are doing amazing things to improve the productivity and effectiveness of certain medical procedures by using economies of scale.  But in most cases the effectiveness of public services depends on joining up the dots; seeing people as people rather than collections of unrelated needs that can be picked off one by one.  An individual who is committing serial antisocial behaviour offences, may have mental health problems, addiction issues, a dysfunctional family life, educational under-achievement, and inadequate housing.  Just from listing them you can see how all these problems are interrelated and feed off each other.  We stand a much better chance of making progress if we design solutions based on looking at this individual and his exact personal circumstances and negotiating with him as a human being.  Productivity in public services is not about rate of throughput, its about solving problems and reducing demand.  This needs a completely different mindset than that needed from the commercial world.  Alas too much (though certainly not all) public service reform misses this key point.