Re: Privatisation. And the loser is........Democracy : Wed May 22, 2013 12:58 pm  

Just a small example from when I worked in the NHS, but I often found that when there was a problem (in this case lack of storage space for medical records) the initial response was to put it out privately. Not due to cost, but simply because it was easier.
Eventually we managed to persuade the powers that be that it was far cheaper and more efficient to store the files locally ourselves, but it took a couple of years of constant badgering of senior execs at the Trust and evidence of cost savings. The kind of work that should have been undertaken at the point of the original decision and wouldn't have happened had we not been awkward buggers.
I later worked out the additional cost of putting it privately for 2 years compared to in-house was around £7500.
Not much in the grand scheme of things I know, but its still frustrating when it's money that could have quite easily been saved.

Re: Privatisation. And the loser is........Democracy : Wed May 22, 2013 3:18 pm  

This thread obviously has a strong ideological disposition against the private sector delivery of publicly funded services, but it isn’t really making a strong pragmatic case for the why the public sector should internally deliver those services.

Ultimately the underlying principle is economies of scale can often be delivered by using specialist providers, this goes beyond local authorities and can apply to any sort of organisation. Unless they happen to operate in that specific industry most organisations don’t have their own postal service, telecommunications network, refuse collection and disposal service, own utilities provision etc etc... It is recognised in the “real world” that specialisation (and division of labour) on aggregate delivers greater efficiency than trying to do everything oneself. All organisations need to find their own mix of what can be done most efficiently in house versus outsourcing, whether it’s IT support, printing, catering or whatever. I don’t believe it is always most efficient to outsource, but it can be depending on the hard cost benefit analysis, not the ideological position for or against. If it is genuinely more efficient to do internally then that’s what should be done as outsourcing shouldn’t be done out of laziness no more than internal provision should be used because of an ideological predispoition that it's the way things should be done.

Whether money ends up on the balance sheet of a private company is an utterly facile ideological irrelevance. The money has to come from somewhere and it has to go somewhere, the important thing is that in between it achieves the desired outcome, and that’s the sticking point. There are those of us who see it more narrowly as a means to an end, a matter of fulfilling a given responsibility legally and decently but efficiently and cost effectively (some find it all too easy to forget they are spending other people’s money), and those who have a more statist view. There is a long standing ideological argument against the pursuit of efficiency, but it’s not one that many who hold it are brave enough to openly promote.

Now a local authority is precisely what the name suggests “a local authority”, it should be responsible for defining policy and providing overview and scrutiny of the statutory responsibilities it has to provide. It’s as equally ideological to say a local authority has to physically deliver those things internally as it is ideological to say that they can often be delivered more efficiently using contracts. The democratically constituted local authority is there to ensure that the statutory responsibilities are met, which can just as reasonably mean that contracts and service levels are structured properly, are monitored properly and are ultimately met. Your local councillor doesn’t usually empty your bin or approve your planning application, so whether the person who does is a direct authority employee or a contractor is irrelevant for the purposes of democratic accountability

Those who are ideologically opposed to public services being delivered by private companies struggle with the contradiction that if the people responsible for commissioning an outsourced service are not capable of negotiating and managing an external contract, why should we believe them capable of managing the same service internally? In the absence of a magic sack of money or some other mythical exogenous factor this contradiction can only really be passed over quickly with the hope that nobody has noticed it. But by far the biggest problem for those ideologically opposed to private delivery of public service is that when it comes down to it the majority are indifferent to their ideological position e.g. people want their bin collecting and if it isn’t they’ll complain to their local councillor, the fact that the person doing the collecting may or may not work directly for the council is for the most part not of concern.

Re: Privatisation. And the loser is........Democracy : Wed May 22, 2013 3:38 pm  

Your first point seems to be that a private business can be cheaper. Which I wouldn’t argue with. I just wouldn’t equate cheaper with either better or more economical.

On your second point regarding the ideological problem some may have with the private sector in the public sphere. I would simply turn the question around. If we cant trust these public sector employees to run the service with the correct mix of economic efficiency and quality public service, how can we trust them to outsource it to a private company correctly?

There is no doubt in my mind that, all things being equal, it would always be better to run the service in house. You would have to be doing a bad job for ‘cost of provision’ to be greater than ‘cost of provision + profit’.

Re: Privatisation. And the loser is........Democracy : Wed May 22, 2013 3:51 pm  

I don't see how anyone can seriously argue that privatising services doesn't lead to amazing drops in cost. Just one look at things like the incredibly cheap utilities we all now enjoy should tell you that. Why, those wonderful people at NPower just the other day wrote to me that they are, somehow, only putting their absurdly high costs of gas up again in July by a meagre 9.8%. How can I be anything but grateful? I may hold a party. Then there's bargain basement rail prices, almost free water services, the list is endless.

Re: Privatisation. And the loser is........Democracy : Wed May 22, 2013 3:54 pm  

Ferocious Aardvark wrote:

I don't see how anyone can seriously argue that privatising services doesn't lead to amazing drops in cost. Just one look at things like the incredibly cheap utilities we all now enjoy should tell you that. Why, those wonderful people at NPower just the other day wrote to me that they are, somehow, only putting their absurdly high costs of gas up again in July by a meagre 9.8%. How can I be anything but grateful? I may hold a party. Then there's bargain basement rail prices, almost free water services, the list is endless.

You ideological guinea pig hater, you.

It doesn't make any difference, remember.

PFI - another stinking, cost-saver.

Re: Privatisation. And the loser is........Democracy : Wed May 22, 2013 4:08 pm  

I doubt that any private provider can boast economies of scale greater than the NHS already has.

Re: Privatisation. And the loser is........Democracy : Wed May 22, 2013 4:16 pm  

There is a further, and completely idealogical, difference with the NHS in that more than any other area, cost relative to service just hugely lacks importance.

Nobody wants a cheap doctor, everyone wants a good one.

Profit should never detract from the provision of health services.

Re: Privatisation. And the loser is........Democracy : Wed May 22, 2013 4:37 pm  

Ferocious Aardvark wrote:

I don't see how anyone can seriously argue that privatising services doesn't lead to amazing drops in cost. Just one look at things like the incredibly cheap utilities we all now enjoy should tell you that. Why, those wonderful people at NPower just the other day wrote to me that they are, somehow, only putting their absurdly high costs of gas up again in July by a meagre 9.8%. How can I be anything but grateful? I may hold a party. Then there's bargain basement rail prices, almost free water services, the list is endless.

Utilities costs reflect different underlying costs, whether it be wholesale prices of gas, or the cost of replacing infrastructure some of which may have been originally put in place pre-nationalisation. Much of our rail infrastructure we actually owe to the private railway companies of the 19th centrury, the gas industry started out as a mix of public and private etc. Which is why a lot of the whining about "selling off the family silver" with (re)privatisation in 1980's and 1990's is often a big pile of poo, the "silver" was more like the tatty plastic cutlery left behind by the previous owner.

Re: Privatisation. And the loser is........Democracy : Wed May 22, 2013 4:54 pm  

SmokeyTA wrote:

There is a further, and completely idealogical, difference with the NHS in that more than any other area, cost relative to service just hugely lacks importance.

Nobody wants a cheap doctor, everyone wants a good one.

Profit should never detract from the provision of health services.

Its a point that has been highlighted in the recent BBC documentary series "Keeping Britain Alive" where surgeons were asked on one day last year to cost the services and operations that they had performed, without exception they did not know and did not care about knowing, they did what they had to do to maintain clinical excellence without consideration for cost - this was brought home in one hospital when an accountant labelled all of the parcels of kit that were ready for that days surgery with the cost to the NHS of each parcel - steralised instruments are wrapped into "kits" for each theatre - and it surprised some of the surgeons that each kit cost so much to bring to the point of use, surprised them, but wouldn't stop them from asking for another (expensive) kit to be brought if just one instrument from the original kit needed re-using again after it had become contaminated.

Ultimately it always brings me back to the real-life situation that I was present at in the 1980s when BUPA were making big inroads into private businesses selling private health insurance as a "perk", they would approach us on a regular basis with a cost for us to cover all our employees with one of their policies until we pointed out that one of the business partners had no kidneys and was on dialysis three times a week and would he be covered too - no was the answer of course, he would not be offered health insurance under any circumstances not even if he agreed to not make a claim for any kidney related condition.

For me that sums up the provision of health services by private companies - its fine while you're healthy but when you're sick you're fooked over by the insurers.

Re: Privatisation. And the loser is........Democracy : Wed May 22, 2013 4:58 pm  

SmokeyTA wrote:

Your first point seems to be that a private business can be cheaper. Which I wouldn’t argue with. I just wouldn’t equate cheaper with either better or more economical.

The long-term reality of both central and local government finance is that unless you subscribe to a level of statism the vast majority of the British public baulk at the options are limited to driving efficiency, we have an ageing population, so fewer taxpayers will have to support more claims on the state in the long term. In reality that means looking for economies of scale that individual local authorities (even big ones) can struggle to deliver, or simply not doing some things.

SmokeyTA wrote:

On your second point regarding the ideological problem some may have with the private sector in the public sphere. I would simply turn the question around. If we cant trust these public sector employees to run the service with the correct mix of economic efficiency and quality public service, how can we trust them to outsource it to a private company correctly?

See my response above, individual local authorities have limited scope for economies of scale, but that is where the long-term pressures are leading. If you cannot trust the administration to have the right policies and staff to outsource to a private company which will give you economies of scale then you cannot trust them to run an internal service, either way they are spending your money, and either way you can boot them out if you're not happy (or at least enought of you aren't happy, which ultimately trumps ideological direction).

SmokeyTA wrote:

There is no doubt in my mind that, all things being equal, it would always be better to run the service in house. You would have to be doing a bad job for ‘cost of provision’ to be greater than ‘cost of provision + profit’.

Unfortunately all things are not equal, there is a need to do more with less in the long-term, and where economies of scale are available they need to be taken. Any politician needs to always remember it's not their own money they are spending, and if a private company can (legally, sustainably and responsibly) make a profit whilst delivering a saving that means they are spending less of other people's money then that is something they should view positively. I'm not saying outsource for the sake of it, but if you need to meet a statutory obligation and you can make the public's money stretch further by doing so then you should do it, the role of the local authority is primarily it's statutory obligations towards the people it serves, not to be some overarching paternalistic social project.