Outsourcing scandals show why we need a new model of public service reform

To deal with complex problems, we need a complete reconfiguration of public services, with a shift from the 'delivery state' to the 'relational state'.

Today’s 'offer' by G4S to reimburse the public purse by £24.1m following revelations of overcharging is merely the latest turn in a series of outsourcing controversies that have shaken public confidence in the government’s public service reform agenda. This comes on top of the widely catalogued failures of the Work Programme and growing concern about the rushed privatisation of the probation service.  While each of these problems has its own independent sources, they are in fact signs of a whole public service reform paradigm in retreat.

In part the problem is a lack of openness and it is right, as Sadiq Khan has argued, that all those providing public services should be subject to the same transparency requirements. But the problem goes much deeper than this.

For 30 years, governments have deployed so-called 'new public management' methods to try to improve public services. These methods have taken two forms: bureaucratic targets imposed from the centre and external competition to incentivise improvement. The Work Programme and the probation reforms involve a combination of these 'delivery state' approaches. In both cases a silo of state provision is contracted out to (mainly) private providers who are paid if they achieve certain outcomes. My argument in a forthcoming IPPR paper is that such approaches are ill suited to tackling the kind of problems they aim to address.

Long term unemployment and reoffending are examples of ‘complex problems’. The causes of such problems are not like billiard balls, which if hit at the right angle will with certainty go into the right pocket. Nor can such problems be tackled within departmental or contractural silos: their causes are multiple and interconnected across different domains.  So, for example, supporting those who are sick or disabled into work following long periods of unemployment requires a holistic and personalised approach that attends to all of the barriers to work, including physical and mental health problems, a lack of confidence, poor interpersonal skills and a lack of qualifications.  

The Work Programme is by contrast a narrow job-focused programme and those providing it do not control most of the factors that prevent many people from accessing work.  This is why the private companies running the programme tend to 'cream' the easy candidates and 'park' the difficult cases: just 6.9 per cent of those referred in receipt of Employment Support Allowance were found work in the latest period against a 17 per cent target.  The probation reforms, based on the same model and dealing with similarly complex problems, are likely to suffer the same fate. 

The challenge of complexity extends beyond reoffending and long term unemployment: there is a growing range of complex problems taking up a rising level of public expenditure.  These include the epidemic of mental illness, the army of young people not in education employment and training and the rise of chronic health conditions. Bureaucratic and market reforms have been effective at dealing with problems that have a small number of linear relationships and that can be dealt with within the bounds of a particular service. So, for example, contracting out refuse services has often improved efficiency and outcomes, and targets have been very successful at reducing hospital waits.  But these 'new public management' tools are ill suited to tackling complex problems.

To deal with complexity we need a complete reconfiguration of public services, which means shifting from the ‘delivery state’ to the 'relational state'. This shift can be summarized in two words: connect and deepen.  First, services which are aimed at tackling complex problems need to be integrated much more at the local level so that they can develop coordinated approaches across different services. This means devolving pooled budgets in areas like welfare to work and probation to local authorities and city regions and holding them to account for the overall outcomes achieved. Rather than looking to the Work Programme for a model of how to reform the probation service the government would have been better advised to look at the successful experience of Youth Offending Teams.  These are based in local authorities and bring together mixed teams of professionals to take a holistic approach to reducing youth offending.

Second, tackling these problems requires deep relationships in place of shallow transactions: deep relationships between citizens and professionals who can work together and get to know one another over time, and deep relationships between citizens who together can be empowered to solve problems for themselves.

The coalition’s reform agenda is derivative of the kind of thinking that has dominated public service debates since the 1980s.  A more complex world demands a new approach.

Rick Muir is Associate Director for Public Service Reform at IPPR.  His new paper Many to Many. How the relational state will transform public services will be published in January.

Justice Secretary Chris Grayling speaks during the Conservative conference in Manchester. Photograph: Getty Images.

Rick Muir is director of the Police Foundation

Photo: Getty
Show Hide image

Can Philip Hammond save the Conservatives from public anger at their DUP deal?

The Chancellor has the wriggle room to get close to the DUP's spending increase – but emotion matters more than facts in politics.

The magic money tree exists, and it is growing in Northern Ireland. That’s the attack line that Labour will throw at Theresa May in the wake of her £1bn deal with the DUP to keep her party in office.

It’s worth noting that while £1bn is a big deal in terms of Northern Ireland’s budget – just a touch under £10bn in 2016/17 – as far as the total expenditure of the British government goes, it’s peanuts.

The British government spent £778bn last year – we’re talking about spending an amount of money in Northern Ireland over the course of two years that the NHS loses in pen theft over the course of one in England. To match the increase in relative terms, you’d be looking at a £35bn increase in spending.

But, of course, political arguments are about gut instinct rather than actual numbers. The perception that the streets of Antrim are being paved by gold while the public realm in England, Scotland and Wales falls into disrepair is a real danger to the Conservatives.

But the good news for them is that last year Philip Hammond tweaked his targets to give himself greater headroom in case of a Brexit shock. Now the Tories have experienced a shock of a different kind – a Corbyn shock. That shock was partly due to the Labour leader’s good campaign and May’s bad campaign, but it was also powered by anger at cuts to schools and anger among NHS workers at Jeremy Hunt’s stewardship of the NHS. Conservative MPs have already made it clear to May that the party must not go to the country again while defending cuts to school spending.

Hammond can get to slightly under that £35bn and still stick to his targets. That will mean that the DUP still get to rave about their higher-than-average increase, while avoiding another election in which cuts to schools are front-and-centre. But whether that deprives Labour of their “cuts for you, but not for them” attack line is another question entirely. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

0800 7318496