Lewisham £60 million cut choices - outsourcing, democracy?

[Tim Lund]

The Evening Standard business news journalist this Tuesday certainly knew how to grab this reader's attention in her first paragraph:

The outsourcing firms waiting to swoop on the wizened remains of the UK's public-spending projects at last waved around evidence that their highly anticipated plethora of contracts was close today, sending the boys and girls of the City rushing to grab a slice of the lucre.

http://www.thisislondon.co.uk/standard- ... at-last.do

Two questions arise for me: (1) will such companies be able to provide services more efficiently than Lewisham, and (2) what sort of local democratic control would that leave?

On (1) I have little doubt that at least some, and probably the majority of services, could be done better if managed by some organisation other than Lewisham Council - but not all. At the Sydenham Assembly this Saturday, however, the senior officer present did not seem to be aware of any comparisons done between Lewisham's efficiency and the potential alternative providers - in the public sector - that they said they were looking at. Not a good starting point for trying to make real efficiency gains.

On (2), it will depend on the terms and transparency of the contracts. With Lewisham's previous enthusiasm for complex arrangements such as PFIs and 'Building Schools for the Future', it's not clear that they will be able to deliver the sort of local democracy anyone should want. Instead we are liable to picked off by the next generation of commercial interests.

And Robin, when I write 'we', it is not just the 'sharp-elbowed middle classes' I refer to, since Council Tax is effectively capped by central government. Rather it is the poorest and most vulnerable, the beneficiaries of those Council services which will get cut because of general inefficiency.

[simon]

I have a problem with the outscourcing of public services on a very basic level and have felt the same since the early 1980s when local authorities first started privatising refuse collection. While a private company may be run more efficiently than a public body that is more down to poor public sector management. If a private company is supplying a service at least some of the cost to the local authority will go towards the private company's profits. So a proportion of our Council Tax ends up as a dividend for the shareholders of Capita, Logica, Serco or another company ending in a vowell.

An alternative would be having some public services run by not for profit social enterprises, something I should imagine Lewisham is looking at seeing as Sir Steve Bullock is a speaker at the launch of Transitions "an introduction for public sector workers who wish to explore the options for developing a social enterprise out of their existing department or organisation" next week.

http://www.sel.org.uk/transitions-public-services.aspx

[Paddy Pantsdown]

There is a fallacy in your argument simon.

A private enterprise is likely to deliver a lower cost service AND make a profit. Not by magic but the demand to maximise value to shareholders and/or director's emoluments focusses their management skills and removing cost from the process. Pushing down wages and conditions, delivering to specification and not to need are but two.

A social enterprise by definition has problems in this area. Paying decent wages and making people happy adds cost. While we may pay lip service to the latter we also insist our savings get the highest interest and our pension plans head towards solvency, oh and tax cannot increase etc

It is us who are largely the cause of the 'lowest bidder' problem we bemoan.

PP

[simon]

Paddy it is not fallacious. I fail to see how the ownership structure of a company automatically defines its efficiency. You are right in that the only ways private companies can deliver services competitively and make a profits are by pushing down wages and conditions or actually not delivering.
I think it is reasonbale to demand that public service workers are paid a decent wage and that public service managment drives down costs. I cant see why a public sector manager cannot be as efficiency focused as his private sector counterpart.

[Tim Lund]

Simon writes:

a private company may be run more efficiently than a public body that is more down to poor public sector management

Agreed - so the questions are where, and why. On the 'where' those in the best position to say, Lewisham Council, appear to be in the dark. It's easy for us as outsiders to say where we think there are the greatest inefficiencies, but we hardly see the big picture. I'm no more a fan of participatory cost cutting than I am of the sort of participatory budgeting we went through at the Assemblies for where the Localities and Mayor's fund moneys should go - it simply is not 'incumbent' on us.

It is interesting that Lewisham is looking at social enterprises, but I suspect that only the most self-confident public-sector workers will actually wish to "explore the options for developing a social enterprise out of their existing department or organisation" - so probably just those we'd most want to stay where they are. Instead, the social enterprise option will feel for many like a way of shuffling off the responsibility of actually managing those involved in delivering services. So much more comfortable for senior management to make some such transfer, with lots of inspiring words about a new era of partnership, the Big Society, etc., rather than look at which of the staff you've been employing over the years, the activities you've been responsible for, facing up to the truth about where you've been wasting money, and telling your weaker employees they have to go.

As to whether social enterprises do deliver better services - well, some do, some don't. There are some very good ones around - Nationwide, the Co-op, John Lewis - but there are also very well run companies around which succeed in both paying dividends to their shareholders and satisfying their customers. Indeed, the two tend to go hand-in-hand.

Do not forget the Quirk Review - Quirk as in Lewisham's CEO - http://www.communities.gov.uk/publicati ... assetswork - and yet I understand that Lewisham has not had much success in transferring assets to the community. It is not encouraging that the Mayor is now going off talking about social enterprises, while the CEO is working with the new government and senior execs from Tesco and Jaguar helping bring an end to 'Building Schools for the Future' http://www.education.gov.uk/news/news/bsf-review

[Tim Lund]

On the subject, this from the latest Private Eye is of interest