Let the public sector go free

In June 1979, a group of bright young Englishmen threw a party at Harvard Business School. They were celebrating the election of Margaret Thatcher. Among them was a man called Gerald Corbett who, eight years later, by which time he was finance director at Dixons, confided to the Financial Times that the Thatcher years had "cleared out the crud" and seen to it that "industry is not badly managed any more". One wonders if Mr Corbett, as he leaves Railtrack with his £400,000 pay-off, to put his feet up and play golf before he "goes forward" to another well-paid job, sees the slightest reason to regret his youthful enthusiasms. Why should he? Mrs Thatcher set out to liberate and reward talent, enterprise and (some would say) greed, provided it was deployed in the private sector to the benefit of what Sir Keith Joseph called "the trading base". Mr Corbett has spent his life in the private sector, and continues to reap the benefits. But at least his period at Railtrack has given him an idea of the dire condition in which Mrs Thatcher and her colleagues left the public services.

Only now is it becoming clear how profound was the destruction that the Tories wrought. It was not just that trains, railway lines, flood defences, school and hospital buildings, water supply and sewers were left in a state of disrepair and underinvestment. Nor was it simply that a mixture of low salaries and inadequate provision for training left chronic shortages of doctors, nurses and teachers. Far more important, we can now see, was that public services ceased to attract any kind of dynamism, talent or initiative.

Why, in the Thatcher years, should any bright, ambitious young person have joined the civil service, local government, the education service, the NHS or any nationalised industry? The avowed aim of Thatcherism was to shrink a public sector full of lazy good-for-nothings. Recruits faced a lifetime of managing decline, amid a climate of derision and suspicion. A clever new idea, if it had emerged at all in a regime of growing centralisation and regulation, would have been squashed for lack of money. Under a prime minister who argued that there was no such thing as society, and who fashioned her policies on the belief that only high profit and high pay could deliver enterprise, the idea of a social or civic entrepreneur (see Charles Leadbeater, page 29) seemed a nonsense.

Now we see the results. It was no use privatising the railways and bringing in clever chaps like Mr Corbett, because most managers below him - the people actually responsible for keeping trains running - were the same people, and had to be, since the private sector had no railway experience. As anybody who uses the railways or London Underground knows, the problem is not only the repeated breakdowns of track, signals and engines (some of which are bound to occur in the best-regulated transport system), but also the lack of flexibility, the complete inability to improvise in a crisis. Now, a combination of London Underground, the London borough councils, the royal parks authorities and the police has stopped a fireworks display in the capital on New Year's Eve. Public services are suffused with a "can't do" culture. When Mrs Thatcher came to power, they were frequently paralysed by strikes and union obstruction. Now, they are just paralysed. The Tories set the private sector free, but locked the public sector in chains.

It was not always thus. Think of how speedily the Wilson government got the Open University going in the 1960s; think further back to the establishment of the BBC and to the success of municipal authorities in gas and water supply. Labour's challenge is to re-establish a sense of pride, purpose and dynamism in public services, to liberate them as decisively as Mrs Thatcher liberated the private sector, to make social and civic enterprise as much a magnet for young talent as the City or e-commerce. What in the private sector would be celebrated as admirable risk-taking is in the public sector dismissed as waste and recklessness. As Mr Leadbeater puts it, the public sector has no tolerance of failure (except perhaps for a politically driven, prestige project such as the Dome). There is something deeply wrong when, as has just been revealed, government departments are undershooting spending projections at the rate of nearly £6bn a year, a large fraction of which was intended for public sector investment. The culture of Whitehall, rippling outwards, remains one of caution and risk-avoidance. Far from changing that culture, Labour's mantra of prudence, efficiency and target-setting has reinforced it. But change it must.

This article first appeared in the 27 November 2000 issue of the New Statesman, The rise of stealthy wealth