http://www.investorschronicle.co.uk/MarketsAndSectors/Sectors/article/20100804/4b2f945e-9f08-11df-ac15-00144f2af8e8/Maude-for-it.jsp
Maude admits in this article that the public sector has been short changed by big business – nothing of course to do with rip off contracts and lack of regulations, but the naivety of Whitehall mandarins who managed to negotiate dodgy deals, but then goes on to say that services ought not to be delivered in-house. And that he says is coalition policy. This may come as a surprise to some liberals but not that big a surprise to observers in local government. Sheffield the Lib Dem flagship council has outsourced virtually all services in the name of course of ‘partnerships’. Scratch below the service and Lib Dem councillors in many areas are as villainous as the Tories when it comes to hiving off public services.
This ‘coalition policy’ claimed by Maude is in stark contrast to the pre-election statements by Cameron which were if anything a departure with Tory ideology on outsourcing and took a much more provider neutral approach (for example his speech to the conservative councillors association in 2009). But it is startling to think that one of the Con Dem governments Star Chamber members can be so mixed up on the operation of the public sector marketplace. First Maude admits that the public sector has been ripped off but then prescribes the medicine for this to be more of the same in the form of an increase in outsourced contracts.
The reason that the public sector has been short changed by the private sector has been the failure of the public sector to retain its own core capacity to deliver – creating a sellers market whereby the private sector can name their price. It is therefore an utter nonsense to suggest that you can generate cash savings for the public sector by shoring up the very system that has created the conditions for markets to rip off the public sector.
This seller’s market phenomenon is not unique to the public sector. A study of USA businesses by a major accountancy firm, found that those businesses that had outsourced services found that promised savings were rarely realised. This was even more evident where the companies had lost the capacity to deliver those services for themselves. This should ring alarm bells when we look at areas such as ITC contracts. Even Maude’s lovers in big business recognise the nonsensical economics of attempting to achieve savings on contract price whilst at the same time shoring up a sellers market.
The Liberals should be arguing that to make savings we should be investing in the public sector and in doing so we should be ensuring the public sector always has its own capacity to deliver services so that we can’t be held to ransom by the private sector. But that would be an inconvenient which would risk upsetting the parties paymasters.
Anna Rose