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Chris Nicholson, of KPMG consulting, on the IPPR's recent controversial report on public/private partnerships ...
Chris Nicholson, of KPMG consulting, on the IPPR's recent controversial report on public/private partnerships
Much sound and fury has been generated over the publication of the Institute for Public Policy Research's report on public/private partnerships.
Much pre-publication publicity has focused on the so-called privatisation of health and education services. This risks obscuring some of the IPPR's detailed analysis and recommendations, which are far less clear cut in terms of advocacy of private sector involvement in public service provision. The report's title Building better partnerships itself recognises all has not gone well.
The past 20 years have seen the increasing involvement of the private sector in the delivery of local government services. The potential of the private sector to play an increased role in improving public services now forms the core of the government's policy.
So last month's publication of the report was particularly timely. But what does it actually say?
The underlying presumption is the continued provision of publicly funded services. It is not about the privatisation of health, education or indeed any other public service. Rather it draws an important distinction between the funding and provision of public services.
The report assumes the public sector remains the commissioner of public services, but is open about whether the provision of these services is from the public, private or voluntary sectors. It does not suggest the private sector should provide these services - it simply proposes a level playing field with no presumption in favour of public or private sector involvement.
It is recommended local government private finance initative projects and joint venture companies should be treated in the same way as conventionally financed projects.
This means there should be no arbitrary boundaries erected, such as those surrounding the public sector provision of clinical services or education. A wider range of providers maximises the likelihood of innovation and improved management, breaking through the often stultifying effects of public sector monopoly provision.
Finally the report recognises the importance of a well-motivated workforce in the delivery of public services whatever changes are made. Obtaining value for money from public/private partnerships should not be about cutting the wages of staff.
In education there has already been considerable growth in the use of the private sector in managing failing schools. However, it is important partnerships for the delivery of core education services should not be seen as an emergency measure, but as a logical consequence of the best value process. The report recommends restrictions on the use of partnerships, bar instances of under-performance, should be removed.
A greater challenge will be in devising structures which enable the full benefit of partnerships to be enjoyed in education and more generally. In particular, the relationship between an education department and its school's governing bodies frustrates the development of PFI and public/private partnerships. Greater diversity in arrangements needs to be specifically permitted.
Similarly, partnerships can add real value where the private sector is working with several public bodies, whether it be councils, central government or the health sector. However the experience of multiple public sector clients has generally not been good. If partnerships are to reach their full potential this is an area where new pilot structures should be investigated.
More generally, as citizens demand a better quality of public services, accountability structures will need to be devised.
The private sector has to change if the full potential of partnerships is to be realised. Some of the hostility to PPPs in the public services arises from its own failings. For example, it is important a partnership is not seen as just a way to cut wages.
The private sector needs to work in genuine partnership with the public sector, with not just token adherence to partnership principles. This has all too often been the approach of private companies to public sector bids
The private sector must respect the need for a public service ethos. This should be less of a problem than many believe as the private sector is used to the need to provide good customer service and in some ways it is more experienced in this than the public sector.
Finally it must be sensitive to accusations of greed. Much of the hostility to privatisation in the past has arisen through the image of fat cats benefiting at public expense.
Chris Nicholson
Member, IPPR Commission into Public/Private Partnerships and
partner, KPMG Consulting
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