New business models for public services

by WillTanner on 14 February 2012


Reform-HP roundtable seminar introduced by Professor Julian Le Grand, Richard Titmuss Professor of Social Policy, LSE and Chair, Government Mutuals Taskforce, on Monday 13 February. 


By Nick Seddon

The Open Public Services White Paper, published in July last year, advocated greater diversity of provision and new models for public sector value, including personal budgets, payment by results and employee and community-owned ventures. The third and final roundtable in our seminar series with HP was convened to explore “New business models for public services”. The lead speaker was Professor Julian Le Grand, Richard Titmuss Professor of Social Policy at the London School of Economics, and Chair of the Government’s Mutuals Taskforce, based at the Cabinet Office.

Julian Le Grand outlined the themes in his article for yesterday’s Guardian. Social enterprises, charities, mutuals of various kinds, private firms and professional partnerships will all have a bigger role to play in delivering social and public services, sometimes alongside, but more often instead of, old-style public monopoly providers. In particular, he said, robust incentive structures can be found in an employee-led 'mutual' spin-out from the public sector now operating in a competitive market. That said, mutuals “are not appropriate in all circumstances”, he added, just as John Lewis's boss, Charlie Mayfield, has observed that his model is “not the answer to all ills”.

The discussion that followed, which was under the Chatham House rules, was wide-ranging and valuable. The key take-aways for me were:

Firstly, we need to reform fast and at scale. The Cabinet Office is prioritising mutuals and SMEs as deliverers of public services, but we should be careful about inventing business models and believing that what is new and complex must be good. These organisations could take many years to make a significant contribution, while tried and tested “old” models maybe more successful, sooner. The Cabinet Office must also consider the merits of large public service providers, in the public, private and third sectors, who are able to make a major contribution immediately.

Secondly, should any areas of public service delivery be off-limits? There was a debate about the politics, but in principle the answer to this is “no “. One line of thinking was that we should go back to the idea behind Compulsory Competitive Tendering – and extend this to all areas of public service delivery to force even the most recalcitrant of local authorities and primary care trusts to put services out to bidders who can offer best value – the highest quality services at the best price.

Thirdly, to encourage diversity and flexibility we need to keep lowering the barriers to entry. Some of these we have known about for years, like the portability of pensions, access to capital, and so on. The skills and capabilities of the supply side (the new providers) are not always up to scratch; the skills and capabilities of the demand side (procurers or commissioners) also need to improve. The language of “rights” contained in various Government White Papers – such as the “right to challenge” – is insufficient if these rights are not backed up with real force. They do not have legal power. It is a minefield for new providers, so there is a long way to go to create a level playing field.

Finally, we need high quality information about the performance of the new open system – so that we can demonstrate outcomes and value for money, and move away from stale ideological arguments. The Open Data agenda of the Cabinet Office has given particular energy to the notion that what matters is not processes or organisational models but outcomes for citizens and users. 


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