Value for money starts with effectiveness

Bing Image Creator’s take on a value for money audit in progress. Mid-2020s technology serves us with 20th Century images…

Inflation stalks the modern economy, and the public really doesn’t like it. Meanwhile public services are under stress, demand for welfare rises, and taxes are as unpopular as ever. Increasing public spending when the economy’s supply side is stretched either leads to more inflation or more taxes. How to square the circle? More immigration? That isn’t very popular either, and puts housing under stress. Economic growth? But that means facing severe headwinds, from the popular demand for more leisure (aka retirement), to NIMBYism, and resistance to globalisation. Public policy is a tough gig these days if you want to solve problems rather than just stir up resentment. But one thing pretty much everybody can agree on is that it’s a good idea to get better value for public spending. But how?

Back in the 1980s when I was in accountancy training I read up about value for money auditing, which was coming into fashion then, as accountants sought to expand their remit. The textbook said that value for money should be viewed at three levels: the three Es. First, Effectiveness: is the spending achieving the results it was meant to? Second, Efficiency: could the outputs be achieved with fewer inputs? And third, Economy: could those inputs be bought at a lower cost? This remains an excellent framework for looking at value for money. As you progress along this chain, though, the scope of questioning gets narrower, and the questions become easier to answer. Which means that too often the analysis gravitates towards Economy before the question of Effectiveness has been properly dealt with. In his recent speech on value for money, the Head of the National Audit Office, Gareth Davies, picked five themes for the achievement of better value for money, focused on Efficiency and Economy – Effectiveness hardly got a look in. The five themes were: large infrastructure projects, asset management, procurement, digital transformation and reducing fraud, error and tax evasion.

At the Economy level, lets’s look at two issues in particular to get a feel for the difficulties of focus on the third E – pay and procurement. Pretty much every time some senior executive is asked for ideas on value for money, they come up with the idea of more centralised procurement, so that government can drive a hard bargain with suppliers. This is a common idea amongst leaders of big organisations, who need to keep promoting the idea that size brings benefits, and that their massive salaries are just a rounding adjustment in the great scheme of things. And it makes sense in the right context. When buying drugs from massive pharmaceutical companies, it is best to do this a big centralised way, as the NHS does, or otherwise the suppliers will take advantage. But there is a dark side. When I worked for a big multinational bank as a unit finance director, I remember being hauled into a meeting at head office alongside my counterparts in other parts of the organisation, in which we were instructed to refer all significant purchasing decisions to the centralised purchasing department. The message was delivered by the head of that department, who showed no evident expertise beyond bullying, and it was received in a silence that bespoke passive resistance. This was yet more bureaucracy that was going make getting things done even harder. I applied for voluntary redundancy not long after. One story in particular always comes to my mind to illustrate the problems of centralised procurement. A hospital bought surgical gloves in packs of 50 as part of its procurement deal, but the hospital had no system for dealing with partially used packs. It was commonplace for staff to take a pack from stores, extract what they needed and discard the rest.

Things aren’t any better at the level of public sector pay. The government, in cahoots with unions, likes to negotiate pay levels centrally. The Treasury is in control of the government side, and clearly feels that its monopoly buying power can be used to keep pay rates down. It is generally right, which is one reason that public services are wading through a series of disruptive strikes as employees try to improve their pay without leaving and getting a better paid job elsewhere (perhaps in a another part of public service…). The particular needs of particular services in particular places is lost. With high staff turnover generating lots of additional cost, as well as staff shortages affecting performance, the actual value for money of this approach is very much open to question, never mind the strikes. Economy defeats Efficiency and Effectiveness.

To make real progress on value for money, you really have to get to grips with that first E. But there are a number of problems. One of the bigger ones is that we have divided public services up into so many fiefdoms that the issues aren’t being seen in the round. Mental health, physical health, housing, benefits and criminal justice are very clearly bound up with each other – but they are usually the responsibility of separate agencies and strategic cooperation between them is beyond anybody’s pay grade. The further up the chain of need you can define effectiveness, the more impact you are likely to have. The best way to secure value for money in many services is to find ways of preventing people getting into trouble, and so keeping them out of hospitals, police stations, courts and so on. But that’s nobody’s job, and so the question doesn’t get asked. It’s easier to try to keep pay down and order surgical gloves in packs of 50.

I can think of two attempts to break this deadlock. In the last years of the last Labour government it was decided that multiple agencies should get to together to focus on the needs of individual children who were at risk. It was called “Team Around a Child”. Alas it wasn’t clear who was accountable, and it often meant lots of unproductive meetings – though I suspect this was still worth doing. The Conservative-Liberal Democrat coalition that replaced Labour swept the system away as part of their austerity policies. But the new Prime Minister, David Cameron, was struck by a particular insight that a small number of individuals (a few hundred, I think) were driving an utterly disproportionate amount of work as they kept circling the various agencies. What if somebody was to focus on their individual cases and try to resolve the issues instead of passing the parcel? He managed to get an initiative going on this, but it soon collapsed amid wrangles over accountability and measuring performance.

The Coalition, in fact, was chasing up a blind alley in its attempt to radically improve value for money. What it tried to do was redefine what needed to be done, split it into digestible chunks and put these out to tender to social enterprises and private businesses, linked to clear performance measures, with, in some cases, incentives to improve measured efficiency. This led to a big drive towards the third E, with rapid de-skilling in many areas, such as probation services and social work. The first E quickly collapsed. The system could not deal with complexity, and multi-agency coordination (which was a lot of what those sacked highly-skilled workers had been doing) went out of the window. Only the consultants won out.

There is a very important lesson to be drawn from this. Public sector work is very different from that of the private sector, and often needs to be approached in a very different way. The private sector can walk away from the hard cases, and often that is a critical business strategy. If the costs of dealing with a particular customer are too high, you tell them to go somewhere else. It is the other way round with public services. For them, if you deal with the difficult cases well, the rest falls into place. Walking away might solve a problem in the short term, but it creates a bigger one later. This requires a completely different way of looking at the problem.

I have had the opportunity of seeing this first hand as a school governor in primary schools – and English primary schools are one of the most effective and efficient public sector institutions around. There is a growing issue of dealing with children with special needs – arising from autism or dyslexia, for example. This does attract additional funding – after succeeding in an arduous hurdle race to document the needs and interventions required. Some schools (and it’s been a big issue here in rural East Sussex) deal with this by trying to avoid special needs children. Head teachers develop skills in identifying such children and encouraging them to go elsewhere. Sometimes the schools that took a stronger ethical line were overwhelmed with pupils discouraged elsewhere, suffered a deterioration in their reputation and were eventually forced to close, as parents took their children elsewhere. But the three headteachers it has been my privilege to work with (two of them in Lambeth, not here) have taken an entirely different attitude. They see it as their duty to help all the children that come to them, if they can, whatever their needs. It is very hard, but they get a huge amount of satisfaction from it. Indeed they feel that it helps all the children if multiple needs can be dealt with in the same class. These headteachers and the teams they lead could do so much more if they had more resources to play with.

The reason why state primary schools do so well is because they operate with the right balance of focus on effectiveness, accountability and high professional and ethical standards. This was not always so, and it has been a long journey over the last thirty years or so. It helps enormously that they are relatively small and self-contained. It also helps that it is self-evident that the service needs to focus on the needs of particular children, rather than the ever-changing cast of characters that pass through hospitals, law courts and so on. There is plenty more work to do, but the progress has been huge.

How to progress? I think you have to start with accountability. The problem currently is that people are often not accountable for the right things. I think it would help greatly if accountability was more focused on smaller geographical units, with political leaders in these smaller units being empowered to set the agendas of the various agencies in their areas. Of itself this does not guarantee progress: indeed the record of Britain’s devolved institutions is patchy at best. But it is hard to see how things can improve without it. We need to get used to the idea that effectiveness is about solving problems for people – rather than simply improving the throughput of particular services.

But the public service ethos is there, waiting to be tapped and directed constructively. New technological tools are available to help. I detect a lot of pessimism amongst political commentators that public services are doomed to gradually fail. That need not be the case – we just need to encourage and empower the right sort of leadership.

The Post Office scandal shows the limits of nationalisation

More fun from the Bing image creator. Post Office management about to conduct a branch audit. Actually I told Bing to portray gangsters…

The big British political news of 2024 so far has been the scandal of the Post Office’s persecution of sub-postmasters from the late 1990s on, based on erroneous reports from its Horizon system. The scandal itself wasn’t news; it had been making a number of people’s blood boil for years (including mine), but no politician in government felt the need to deal with it with any urgency, and all tried to manage it through the organisation’s dysfunctional management. An inquiry had been set up – the classic British method for kicking institutional problems into the long grass. But a television drama over the Christmas holiday caught the public imagination, and at last pushed it to the level of public attention it has deserved for years.

I personally still don’t understand what went wrong. As an accountant who has had quite a bit of experience unravelling knotty problems, I have not been able to get any sort of clarity. The drama did help a bit here – as the previous press reporting was extremely uninformative as to what the problem with the system actually was. Just what were the deficits that the sub-postmasters were being asked to fund? Usually these should fall into one of three categories: missing sales, false expenses, or missing assets. This doesn’t seem to be any of these – but just muddle. The Horizon system doesn’t seem to have been properly integrated with the accounting systems, and appears to have lacked basic accounting controls. This is not so uncommon with systems designed by computer programmers rather than accountants. But the system does not appear to have been adequately managed or audited by the Post Office’s accountants. The suggestion made by one of the characters in the drama was that the differences were parked in a suspense account, which was then not properly interrogated or investigated. That may not make much sense to my readers, but it does to me. As an auditor most of the big errors I have found arise from pulling apart suspense accounts.

Meanwhile responsibility for managing the problem seems to have been split between senior managers unable to grasp the detail, and junior auditors not given a wide enough scope to explore what the problems actually were – they were just hired bullies. There was a missing middle. But the senior managers should have asked questions as problems started to emerge; as should the investigators. Instead they swept the problems under the carpet, assuming that people raising concerns were just trouble-makers. People have a natural tendency to compartmentalise their lives, and set boundaries to the sort of things they worry about. This is one of the leading causes of organisational dysfunction as those boundaries always leave gaps (as well as overlaps). Still, senior managers should be alive to those sorts of risks and much of the Post Office managers’ behaviour was clearly unethical. Injustice to individuals should not be sacrificed to maintaining an organisation’s reputation. The propagation of untruths is not quite the black and white issue we might like to think – but the Post Office managers clearly went into the black zone far too often.

But such a lack of ethics in senior management is extremely common. This transcends time (think of the Dreyfus scandal in the 19th Century), and culture (problems are at least as bad in China and India, for example; would you believe what an Iranian government spokesman said?). It affects all types of organisation: government, commercial and religious (think of child abuse scandals in various churches). Having said that, I haven’t seen it, or not in extreme, in any of the commercial, public or political organisations I have worked with. There is always a defensive first reaction to bad news; but what happens next is more telling, and here things were better. But those organisations have almost all been relatively small; I have worked in two multinational groups, however, although in one of there were ethical questions haunting senior executives, they didn’t last long. That’s not to say these organisations were perfect – it’s just to say that I didn’t witness the extremes evident in the Post Office, and often witnessed its opposite – the owning up to problems and mistakes.

But what tilts an organisation towards ethical conduct? Prevailing culture in society clearly helps. Most developed countries have a bit of a head start there. I don’t think there is anything special about Western culture here, even though it generally prevails there. All cultures know what strong ethical standards are (think of Confucianism in China, for example). The more ethical conduct becomes the expected norm in a society, the better. Accountability is clearly critical. If it is easy to sweep things under the carpet, and if you are confident that you will never be scrutinised aggressively, then the temptation to do so is often irresistible. It is easy to persuade yourself that you are protecting something more important, and that it is all for the greater good. But accountability comes with a certain precariousness amongst senior leadership; the more entrenched, the less accountable. That precariousness was visible in all the organisations I have worked for. But in the Post Office it seems to have been lacking. It was a publicly owned organisation, accountable to, in theory, everybody but in fact nobody. It had extraordinary control over the information required to make judgements. The politicians to whom they were nominally accountable are good at some types of scrutiny, but not the oversight of large, complex organisations, and still less the operation of their IT and accounting systems.

This is a huge problem with all nationalised industries. Being accountable is to a large extent a choice made by the people running those organisations. I have witnessed this at first hand as a school governor. Fortunately all the headteachers I have worked with thought accountability was a good thing, and accepted scrutiny, even when it got annoying. But I have seen cases of schools where this is not the case, and where the governors were bypassed and flanneled – and looked woefully ineffective. This is less of problem with commercial entities, because they are judged on commercial success, which is hard to fake, or not for long. Public organisations seem to have a degree of political protection that most commercial organisations do not.

This is a problem for the sort of left-wing narrative that suggests that capitalism has failed, and that the solution to any given market failure, especially in public utilities, is nationalisation. They are often right to point out the failures of commercial organisations, such as Britain’s water or rail companies. They are wrong if they think that nationalised organisations will be any better. They are often worse. Water companies are accused of milking their assets to pay fat dividends to investors instead of investing in infrastructure. And yet tight public Treasury management has a similar practical effect, with holders of public debt being the beneficiaries. Perhaps the division of the spoils would be fairer, but it won’t stop the under-investment. The nationalisation of the water companies was undertaken in the first place to increase the level of investment – which it did.

There is no easy answer. Public services are usually natural monopolies, which often bring out the worst in capitalism. But there is no fool-proof way to make public organisations properly accountable.The answer is surely some sort of messy mix private contracts, regulation and intelligent structure.

Meanwhile, Post Office culture looks so rotten that it surely needs to be wound up and replaced by something with better organisational design and stronger governance.

Britain’s failing public services need a new management approach

British public services are flagging – even without the wave of strikes provoked by the government’s attempt to force below-inflation payrises. Many are assailed by staff shortages – health services in particular. Backlogs mount in health, the courts and the processing of immigrants. The police seem to be dealing with a diminishing proportion of crimes. The government seems to have little idea how to address this.

What is the cause? There are three obvious ones. The first is the austerity policies in place since the great financial crash of 2008/09, ratcheted up by the coalition government of 2010-2015, and intensified by the Conservatives alone from 2015 to 2017. The second is more demand for services from an increasing population of elderly. On top of these came the disruption of the covid-19 pandemic, which caused many backlogs. These have all doubtless contributed, but the problems go deeper, and will require a new mindset to fix. Take the issue in hospitals of patients who cannot be released back into the community, causing a shortage of beds. This problem goes back a very long way. I remember people talking about “bed-blocking” thirty or more years ago. Or the bullying, racism and misogyny that are rife in the police and fire service, and doubtless elsewhere. Most of us thought that these problems were being stamped out after the 1960s – it is shocking to see that they are unchecked in this day and age. This bespeaks generations of weak management, fending off the modern world with defensive strategies, like extra bureaucracy, rather than true problem-solving. Every time that one or other service says that lessons will be learned after some failure (and it happens more than weekly), you can guarantee they mean that some extra rule has been layered onto the existing thicket of unmanageable procedures.

A lack of leadership, from senior politicians down, is clearly part of the problem – though more in some services than in others – in fact there are many pockets of excellence. But this problem results from institutions being trapped by a system that constrains initiative and crushes rather than rewards enterprise. This arises from how the work is organised – which leads to two related problems. First of all the system is heavily biased to fixing problems rather than preventing them. The best way of stopping health service backlogs is for people to be healthier, after all. Secondly almost all the difficult problems, and especially those that focus on prevention, require multiple agencies to cooperate without adequate structures to ensure that cooperation is effective. Somebody on the radio recently listed all the agencies that had to come together in a criminal trial (courts, police, prosecutors, defenders, the prison service, the probation service, and so on); it’s no wonder that they don’t work efficiently. No wonder, but also nobody’s responsibility.

Problems with public services are nothing new. People have been wrestling with it for as long as I can remember. The Thatcher government of 1979-1990 had the big idea of privatising large swathes of services, which then included many public utilities. In many cases this was very successful – in telecoms and energy, especially. But it soon became clear that there were limits. Privatising prisons, for example, may have solved some problems, but created many others. The next major push came from the Blair/Brown government that took power in 1997. They had two main ideas: establishing quasi-independent agencies in a sort quasi-market economy (academy schools and NHS Foundation Trusts, for example), an idea more closely associated with Tony Blair; and close performance management, with the use an array of performance targets, and managers being disciplined if they were not met, an approach more closely associated with Gordon Brown. For convenience I will call these the Blair and Brown approaches, though both men supported both approaches to some extent. We can learn much from what became of them.

The Blair approach had easily the best press – praised by many right-leaning think tanks and journals like The Economist. They were picked up, and in places turbo-charged, by the coalition government that followed Labour. They had one important success: university education in England. This was linked to a dramatic increase in student fees, linked to a student loan system that works like a graduate tax. This gave the universities a degree of operational independence. Problems continue, but Britain’s university system remains world-class; rationing of university places, as required by Scotland’s directly-funded system, has not been required, with the result that a higher proportion of the population can attend. Elsewhere the reforms are being quietly buried. Much success has been claimed for academy schools, and there have been success stories – but the main thing that can be said for them is that they have not made things much worse. They have been linked to the waste of public money, however, with senior management overpaying themselves. In the NHS the system is being quietly dropped, as it entails much bureaucracy, while doing little to address fundamental performance issues, like integration of care or patient safety. In both health and education, the services were linked to massively complicated and prescriptive funding models, which failed to work like commercial tariffs in the way the designers hoped. This is one way in which it differed from the university reform.

The Brown model, on the other hand, received a much worse press. People complained of complex targets, misaligned incentives, and macho sackings of senior managers – creating a climate of fear that undermined creative problem-solving. All of these criticisms were well-founded, but the system had some notable successes. The Labour government oversaw a dramatic improvement in the quality of teaching in schools, and especially in London. The new academies were part of this success, but local authority schools did just as well, if not better. As a primary school governor, and chair of governors, I saw this improvement happen at close quarters. There was some rather crude top-down management from the ministry, but the professionalism of school and local authority leaders by and large rose above this – and pushed through dramatic improvements. I have seen a quality of management that easily matches what happens in the private sector. Four things stand behind this success. Firstly, schools already had a huge amount management autonomy compared to other public agencies, as their services are relatively self-contained; second standards were enforced by an independent standards agency, Ofsted, which carried out regular inspections of schools and local authorities, and used well-designed metrics to act as benchmarks; third, local authorities proved effective intermediaries between central government and the schools; finally funding was increased, which gave managers more ability to achieve change. Interestingly the coalition government, while pushing the largely irrelevant academies initiative, picked up were Labour left off, by sharpening the focus on quality of teaching, and dramatically improving the funding system with the (Liberal Democrat) pupil premium system, and its attendant focus on disadvantaged pupils. Since the coalition, the focus has been somewhat lost, and funding squeezed; Ofsted went off the boil (doubtless thanks to funding cuts) by easing pressure on top-rated schools.

The Brown model was applied to the NHS too, and the quality of NHS services drastically improved over the Labour years. But this is mainly attributed to an equally dramatic increase in funding. The easiest thing to say about this is that the combination of extra funding and close scrutiny of results achieved much more than either of these would have alone. The Brown government, towards the end of the Labour period, did try to address some of the problems with the performance management system. I remember a new system called “team around a child” which aimed to bring multiple agencies together to address issues around individual cases. But it wasn’t clear whose job it was to knock heads together. Most of this was swept away when the Labour government ended.

Over the last decade or so, the Conservatives have adapted rather than overturned the previous Labour government’s approach, with the important difference that they have squeezed funding relative to demand. They have revived and extended an older idea too: tendering and outsourcing to outside agencies, be they non-profit enterprises or commercial providers. This has been disastrous. The aim has been to save money, and this has meant redefining the services as a skeleton of what they should be to play a fully functional role. The outsourcers then duly cut the service back, by, for example, replacing skilled professionals with less skilled recruits following standard scripts, and who are unable to to make proactive interventions or prevent difficult cases becoming “frequent flyers”.

The problem is that none of the various things that governments have tried in the last forty years have addressed the fundamental organisational problem – which is that responsibility is divided among so many agencies, which in turn are managed at national level. The system is centred around specialist service provision, and not people. Crime, housing, mental health, physical health and family dysfunction are all closely linked together. We may find all these contributing in a particular serial offender, say, who causes multiple agencies to commit resources. But instead of the agencies coming together to find a solution, the system encourages them to continually pass the parcel.

So how to progress? Public services need to be more focused on their users, and services intermediated by professionals empowered to bring different elements of service together. This means more localised control of services, so that those intermediaries don’t have to escalate issues far up the chain of command in order to resolve blockages. It means a local political leadership able to focus on the needs of particular people, and accountable for the overall results in a particular locality. That, inter-alia, means substantial devolution of political power to regions and local authority areas. That is necessary but not sufficient. Scotland and Wales have just as disappointing record on public services as England, in spite of substantial devolution. We need more specific policy reform ideas.

Interestingly Labour’s recent proposals on constitutional reform (proposed by Mr Brown) show that there is a political consensus around further devolution. However the narrative is based more transport infrastructure and economic growth, rather than making public services more effective. I’m not sure if many politicians grasp what is needed to improve public services. Still, in the dying days of the coalition a deal was done make a more substantial devolution of public services to the Greater Manchester Mayor, including some NHS and social care services. As I recollect this was criticised by Labour at the time. According to this study, it has been a modest success, with a slight improvement to life expectancy.

Still the forces of conservatism are powerful. It is always tempting to try and make the current, departmentally bound and centralised system work, rather than undertaking risky reforms – especially ones designed to give credit to regional and local politicians. But politicians need to improve the effectiveness of public services urgently – and through the extra effectiveness reduce demand by solving problems. This needs a huge change in political culture, but once one area starts leading the way, that should generate momentum. With Scotland distracted by the debate on independence, the most promising place to start looks like Greater Manchester. we will probably have to wait for the next government, though.

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.