In its study ‘Making public service markets work’, the Institute for Government (IfG) finds that markets can work well in services such as refuse collection, but complex areas need “much more thought about design”. The think tank urges government to slow down plans to expand markets in public service delivery, warning that implementing too many market reforms at once poses a “clear risk” to the quality of public services, and calling for external reviews of big new outsourcing schemes.
The lead author of the report, Tom Gash, said: “Markets in public services can and do often work, but our research shows that mistakes can have a real impact on people’s lives and value for money."
“Unless Whitehall and other agencies improve their skills and techniques for ensuring public service markets work, mistakes will be made and the public may lose confidence in this approach to reform."
“The current pace and scale of reform is a clear risk, and we’re calling for government to think carefully about how fast it is going. We want to see government carry out external reviews of all new outsourcing programmes worth over £100m per year, to assure themselves and the public that they will work.”
An IfG spokeswoman said that ministers and mandarins are “going in the same direction, but not at the same pace”, and that moving from a role of directly supplying services to stewarding their delivery by others is “still relatively new for Whitehall”.
This new role, she said, requires a range of new skills, including “designing and managing that market, overseeing its implementation, managing its failure and competition”.
She added: “We don’t think those skills are ready to manage quite this number of big new markets and public services at once and at this scale.”
The service providers G4S and Serco are already having all of their contracts with government reviewed, following allegations that government has been overcharged. Earlier this month, justice secretary Chris Grayling told the House of Commons that an audit of outsourced electronic monitoring contracts with the two firms showed “instances where our suppliers were not in fact providing electronic monitoring. It included charges for people who were back in prison and had had their tags removed, people who had left the country, and those who had never been tagged in the first place but who had instead been returned to court. There are a small number of cases where charging continued for a period when the subject was known to have died. In some instances, charging continued for a period of many months and indeed years after active monitoring had ceased.”
Gash pointed out that the IfG has asked the government to name all the sectors in which these two firms operate, but the government has not yet been able to supply a full answer.
He also said the IfG has come across “anecdotal evidence” that suppliers are “carving the UK up into a number of different monopolies to rip off the government”. While the IfG has not done comprehensive research into this, Gash cautioned, he's not aware of any government efforts to look into these allegations.
A Cabinet Office spokesperson said: “Our reforms already address the need for the civil service to improve its commercial capability and how it manages contracts. But we must accelerate the pace of change to make more savings for the taxpayer, create better-quality, more efficient public services and promote growth.”
Read the full IfG report here
See also: CSW's interview with Ministry of Justice permanent secretary Ursula Brennan