TUC Response to the Julius Review of the Public Service Industry
May 2008
The TUC is pleased to respond to the invitation to submit evidence for the Public Services Industry Review commissioned by the Secretary of State for the Department of Business, Enterprise and Regulatory Reform.
However, the TUC is very disappointed that it was not invited to join the advisory panel for the review in the first instance. The TUC not only represents trade unions with significant numbers of members delivering public services, but is a key social partner. This means that the TUC and its affiliates have a wealth of information about the realities of working in the public sector and on public sector contracts and plays a significant role in representing the views of workers as providers and users of public services.
We find it difficult to believe the review can operate without a strong representation of public services employees' views on the future of the services they deliver.
The TUC notes that call for evidence is focused on a series of questions (appendix 1) relating to the public service industry size and potential growth; making the market work more effectively; competition and productivity; and the potential for overseas and inward investment. We cannot accept the overall premise of these questions and the way in which they are framed.
Question one raises the issue of the optimal extent of private and third sector involvement, and areas where service provision is 'best done in house'. It is the view of the TUC that the areas where service provision is best done in house are extensive and should be explored fully by the review.
But question two asks what current government policies and practices have been most effective and should therefore be continued or expanded in increasing the role of the private and third sectors in the public services industry. This question highlights what the TUC considers the fundamental fault at the heart of this review, in that it assumes that 'increasing the role of the private and third sectors in the PSI' is an end in itself. But these questions need to be assessed in relation to the aims and objectives of public service provision, not the commercial interests of the private and third sectors.' The role of the private and third sectors should not be expanded if this does not further the goal of improving public services and relevant social outcomes. But these goals are not referred to anywhere in this reviews terms of reference.
Neither the TUC nor the public services unions are against reform. Indeed, we recently commissioned a discussion document from the Office for Public Management on public service improvement, enclosed for your information setting out such arguments. We recognise that public services need to innovate and improve continuously to ensure that they deliver value for money and are responsive to user needs. But we reject the notion, implicit in the terms of this review, that public services should be reformed with the end of increasing commercial opportunities for the private and voluntary sectors.
However, we question the assumption implicit in question 2 that further public sector and third sector involvement in the delivery of public services is the best or indeed the only way to do this. It should certainly not be entered into without a thorough review of its impact on public services. It is the TUC's view that the time is right for a fundamental examination of the effect of competition and outsourcing on service quality and innovation, long-term value for money, accountability and equity, workforce skills and capacity, management expertise, the user experience and cooperation and collaboration within the public sector.
Merely transferring services from the public sector to the private or voluntary sector does not in itself guarantee any improvement in service quality, efficiency or innovation - indeed, it is increasingly found that the contract process can 'lock in' processes and patterns of provision that then become impossible or prohibitively expensive to reconfigure. All these aspects are missing from the ten questions included in the call for evidence and it is the TUC's view that these cannot be ignored in any review of the role of the private and third sectors in public service delivery.
It is the TUC's view that this review is based on an 'economic model' of public services. While it is true that public services contribute to economic prosperity, this model ignores the wider social justice role at the heart of public services. Moreover, the way public services are funded and delivered requires means that issues of accountability, equity and fairness are secured and promoted. All of these are compromised once they are taken out of the public realm.
To the extent that private and voluntary sector providers are involved in public service delivery, this should be based upon fair and consistent employment standards. This would be the most effective way of promoting the 'competition' and 'productivity' raised in question 7, since it would mean providers bid for contracts on the basis of quality provision rather than undercutting labour costs, and would help ensure that false economies are not achieved at the expense of investment in the workforce. Evidence gathered by trade unions and others indicates that this has all too often been a key driver behind increased outsourcing.[1]
This review should also take the opportunity to take stock of existing legislation, particularly in regard to workforce issues, in order to examine how policies and procedures in force are operating in the current environment. This is necessary to evaluate whether they have been successful in promoting good employment relations and workforce experiences.
In this submission, we point to two very different policy developments in the public sector which demonstrate the need for caution in rolling out further reforms in the public sector. These are the codes of practice relating to the two-tier workforce and the development of public sector duties.
The government has recognised that terms and conditions offered by contractors 'must be sufficient to recruit and motivate high quality staff to work on the contract and designed to prevent the emergence of a 'two-tier' workforce', dividing transferees and new joiners working beside each other on the same contracts.[2] The Department of Health acknowledged concerns that the 'two-tier' phenomenon 'was poor employment policy' and 'put service quality at risk'.[3] But at present it is not possible to say whether the existing patchwork of agreements are successful, either in preventing a two tier workforce or stopping the driving down of pay and conditions, since so far, the government has provided no evidence on the impact of the codes. However, trade union evidence shows that a two-tier workforce still exists and fundamental problems exist with implementation and monitoring of the codes of practice.
The various public sector duties are a positive development in the promotion of equality and diversity in the delivery of public services. However, the TUC has consistently objected to any suggestion that the duties should only apply to public authorities of a certain size or in particular sectors. We have urged that the duties should apply to private and voluntary sector organisations performing public functions as a matter of principle and of consistency among all public service providers. This was also the recommendation of the recent Equalities Review chaired by Sir Trevor Phillips.[4]
These examples illustrate that the rapid creation of markets, new models of delivery and deeper public and third sector involvement are occurring at a faster rate than public policy is able to respond to the problems which then emerge.
Conclusion
As indicated, the TUC has concerns about the approach of this review, as reflected in its language of the 'Public Services Industry'. This effectively presents the public services as if they were a commercially driven sector, in the same way, for example as tourism, financial services or manufacturing. To look at public services in this way ignores the valuable contribution made to social cohesion and justice made by the country's public services. Public services are much more than commodities to be traded in the market, they are vital assets which protect people, bind the nation together and boost our prosperity.
We believe that this ideological partiality towards private and third sector provision both denies the ability of public service managers to make clear and evidence-based decisions on public service improvements and ignores the contribution of millions of public servants to service delivery.
[1] See, for example, National Audit Office, Protecting Staff in PPP/PFI Deals, March 2008.
[2] Cabinet Office, 'Code of Practice on Workforce Matters In Public Sector Service Contracts', 4 May 2007.
[3] 'Agenda for Change and NHS Contractors Staff - Implementation of the joint statement for soft facilities management staff', letter from Norman Warner to SHA Chairs, Department of Health, 14 August 2006.
[4] Fairness and Freedom: The Final Report of the Equalities Review, February 2007, pp. 104-5.
Appendix 1
BERR
'Call for Evidence' questions
PSI size and potential for growth
1. Does the Government engage with private and third sectors to the optimal extent at present? Where is there scope for increased involvement and where is service provision best done in house?
2. What current Government policies and practices have been most effective - and therefore should be continued or expanded - in increasing the role of the private and third sectors in the PSI?
Making the market work more effectively
3. What are the biggest barriers to the private and third sectors entering and operating in the PSI?
4. Which procurement models apply best in what circumstances and why?
5. How can the Government and providers achieve a clearer allocation and balance of risks?
6. What are the key differences between different markets within PSI in the UK and how do these markets facilitate or hinder business development?
Competition and Productivity
7. What specific changes would you like to see in the way the Government procures services which might promote competition and/or productivity in the PSI?
Potential Overseas
8. What can the Government do to improve access to overseas markets for UK companies operating in the PSI?
9. What are the key differences in market conditions outside of the UK? What could the UK introduce from these countries and what might be best to avoid?
Inward Investment
10.What can the Government do to promote inward investment in the PSI in the UK?
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