Why TR2 Will Fail

As we are all aware, despite the TR omnishambles having been widely and comprehensively condemned, the government is seemingly intent on imposing TR2 on us. Despite the constant distraction of Brexit, we must keep the pressure up for a change of direction and in this vein I've obtained permission to reproduce the following from Facebook:-  

Further outsourcing of public services should not be considered unless this can be independently proven to be overwhelmingly in the public interest.

This does not rule out the public sector contracting the private sector to provide services where appropriate for instance in cases where they are the only supplier of a required service and where this cannot be provided economically by the public sector in-house.

We need to dispense with the myth that the private sector drives innovation when public services are outsourced. Because of the way TR was conceived and other factors, that are well known to most of us, the Probation CRC contracts promised innovation is only now being delivered - as referred to in the recent NAO report.

The private sector can indeed bring about efficiencies in certain areas as they aim to bring down costs but this is usually at the expense of a supportive learning culture, quality, and the retention and development of experienced staff as the bedrock upon which to build integrated and strong organisations with appropriate values and beliefs. In a probation context the appropriate values and beliefs at the heart of our professional practice and service should predominantly be about rehabilitation and care rather than punishment/retribution and control. We should perform an important role as a service that provides the essential checks and balances in the system and this should be valued by society rather than dismissed as irrelevant or turned into a political football by government.

Let us not forget that public sector probation isn’t achieving probations traditional aims either so a new unified public sector probation service (free from the execrable taint of the twice failed centralised NPS projects) needs to be established that is one step removed from direct government control and political manipulation and interference. It’s aim should be the care, rehabilitation and resettlement of offenders/service users. There is a clear need for this service to be performed and for the trajectory of the whole criminal justice system to be realigned to produce a more humane system fit for the times we live in now. This is a future probation service worth striving for and one that we could be proud to work for again.

We have seen in probation how some providers have hollowed out services purely to cut costs stripping them of their rehabilitation ethos, their probation identity, value base and quality, and then replacing them with lean process heavy target focused failing organisations that miss the point of probation organisations as a powerful protective forces in communities that bring about positive societal change and contribute to the balance of social good and well being in some of the most deprived and neglected areas that few services serve.

The private sector should not be calling the shots in this new organisation (National Probation Agency) but neither should those who do not believe that the aim of probation is to care for, rehabilitate and resettle offenders/service users and that incarceration and proportionate use of technologies of restraint and control should only be reserved for and applied in the case of the very few people who cannot be safely supervised in the community.

David A Raho

--oo00oo--

Now this puts me in mind of something I've been meaning to highlight for some time - discussion of how we got here and why it's doomed to fail. A bit lengthy, but well worth reading this extract from a fascinating book on the subject:- 

Kittens are Evil 

Little Heresies in Public Policy

Foreword 

Saying that ‘payment by results’ is fundamentally flawed is like saying kittens are evil. It’s heresy. 

The official consensus around payment by results is that it’s a no-brainer, and if there are problems with it in practice, it’s your fault: you’re not doing it right. Coercive and simplistic thinking informs a whole range of practices aimed at improving public services, so good people try hard to make bad initiatives, based on bad theory, work. Teething troubles, poor governance, bad apples and unintended consequences are cited as reasons for high-profile failures, such as disability assessments, Universal Credit and the Troubled Families initiative. 

This book argues that best efforts and poor excuses aren’t good enough. The authors describe how a bad system beats well-meaning individuals every time. They argue that no amount of tinkering, re-branding or good governance can compensate for the serious and widespread harm inflicted by a fundamentally flawed set of beliefs. George Monbiot succinctly described these beliefs and their consequences in The Guardian (April 2016): 

We respond to these crises as if they emerge in isolation, apparently unaware that they have all been either catalysed or exacerbated by the same coherent philosophy; a philosophy that has – or had – a name. What greater power can there be than to operate namelessly? 

So pervasive has neoliberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin’s theory of evolution. 

The authors of this book challenge manifestations of neoliberal assumptions in public services – through family intervention, personalisation, numerical targets, marketisation, league tables, economies of scale, inspection and payment by results. 

At the heart of neoliberalism is a belief about people. Individuals are perfectible: anyone can (and should) be successful, to ‘make something of themselves’, if they only try hard enough. If they are unsuccessful, they should be forced to compete harder. (Try watching Ken Loach’s I, Daniel Blake.) If only we ate less, exercised more, stopped getting older, were more enterprising, ticked the right boxes, remembered our unique customer reference number, were digital by default and frankly were more service-shaped. Wouldn’t that make the government’s job easier? 

A systems view has a very different starting point. This book argues that it is the system itself that is troubled, not families or individuals. As in finance, neoliberal ‘quick wins’ all too often turn into long-term disaster, and it is the same in the public sector that has internalised its thinking. 

The system is where we need to intervene. Attending to systems and their consequences for people is the only sustainable route to better lives and a better society. 

This book isn’t a conscious attempt to design a new system, although in places it makes a start. It does, however, provide strong evidence for public sector professionals, academics and policy makers to see neoliberalism for what it is – not a neutral or inevitable force, but a set of intentional and man-made political beliefs. By seeing it, we can help politicians who believe in something different, to create a new orthodoxy. 

Charlotte Pell, Visiting Fellow, KITE, University of Newcastle Business School 

Simon Caulkin, Writer and editor

2. Public Service Markets Aren’t Working for the Public Good…or as markets

In November 1989, Kenneth Clarke, then Secretary of State for Health, published a White Paper, ‘Working for patients (NHS reforms)’, which proposed to introduce a split between purchasers and providers of care, GP-fundholders and a state-financed internal market, ‘in order to drive service efficiency’ in the National Health Service. Less than a year later, the creation of an ‘internal market’ in Britain’s largest public service had passed into law. A new public policy idea had been born, one that discarded previous economic orthodoxy about the fundamental difference between public and private sectors within a ‘mixed economy’. 

This new ‘public service market’ idea was closely related, in terms of political ideology, to the Conservative government’s parallel policy of privatising former public sector industries and functions, like telecoms and energy supply. Economically speaking, however, the ‘public service market’ idea was distinct from, and far more experimental than, privatisation. While privatisation simply (albeit contentiously) transferred assets and service functions from public to private sector, the ‘internal market’ sought to blur the very distinction between public and private sector economic activity. The government claimed that under their new policy invention (the ‘internal market’) the NHS would remain a public sector service: its assets would remain publicly owned; expenditure would remain taxpayer-funded; and its effective delivery would remain the democratic responsibility of elected politicians. But, they claimed, it would only become better as a public sector service by artificially simulating commercial market dynamics within its own management structures, forcing different teams and specialist units to compete with each other on the basis of their performance, creating ‘customer choice’ for budgetholders within the NHS, heralding the adoption of the managerial behaviours, language and disciplines associated with successful commercial businesses. 

Ten years before the advent of the ‘internal market’ another piece of legislation had also been passed that, while separate in scope and intention at the time, would soon combine with public service market ideas to accelerate the proliferation of ‘service market’ orthodoxy across the public sector. The Local Government, Planning and Land Act 1980 had introduced a new duty on councils to enter into Compulsory Competitive Tendering (CCT) for all commercial works and spending they might commission, such as house-building and maintenance or highway repairs. Its stated intention was two-fold: to prevent the much documented phenomenon of ‘cronyism’ and bribery in the awarding of lucrative local business contracts, and to break the ‘closed shop’ controls that Trades Unions were perceived to exercise over the award of contracts only to firms they approved, on worker terms and conditions that met their demands. The CCT leglislation required local authorities to put any intended contract for works and labour out to open bids, including to firms that did not meet union terms, and then required them to have a transparent record of the rationale for their decision on awarding the work, on the basis of which would provide ‘best value’ to the taxpayer. 

At that time, the very idea of local ‘public service markets’ in statutory functions like elderly care or looking after abused children was unheard of. The provision of social care and community support services was itself a longstanding and often very locally idiosyncratic ‘mixed economy’ of public and charitable agencies, which usually had partnership agreements and grant funding arrangements that had evolved over many decades. The original compulsory tendering legislation was not overtly designed to interfere with such local arrangements between councils and charities, however the later spread of ‘public service market’ ideas, along with the evolution of council procurement regimes soon meant that the funding and decision-making about who should provide social care services to the public (and eventually a whole host of other statutory functions and community services) became deeply entangled with councils’ interpretations of their compulsory tendering obligations. 

The proliferation of competitive contracting in public services was not, however, a uniquely British phenomenon. Following the official completion of the ‘single market project’ in 1992, which focused on promoting ‘free trade’ in commercial products across all member states, the attention of the European Union shifted towards the services sector, and the development and implementation of what are now commonly referred to as the ‘EU Directives’. Successive iterations of the EU’s regulations for state procurement legally required open competition in the awarding of contracts (above a threshold amount) by all public bodies, and restricted the ability of governments to provide any financial ‘state aid’ that might give unfair market advantage to any one market competitor over others. For many professionals in the public sector today the EU directives, and their transposition into domestic procurement legislation, have become the most definitive expression of the orthodoxy that all public sector spending decisions are in essence commercial market transactions in which they, as public officials, have a duty to ensure open competition. 

By 2015 the idea that almost all public functions and services are best understood and managed as open competitive markets had become such a politically orthodox view across the political spectrum that it was a consistent underpinning theme within public policy reforms during all three terms of Labour administrations between 1997-2010, and continued seamlessly in the ‘Open Public Services’ reforms of the Tory/ LibDem coalition government of 2010-15, and to this day under the Tory administration elected in May 2015. In practice, the extent of competitive contracting with the state for public service delivery has grown to huge proportions. In December 2014, the parliamentary Public Accounts Committee reported that, ‘The private sector delivers complex services on behalf of the public sector, to the value of around £90 billion, which represents half of all public sector expenditure on goods and services.’ The voluntary services sector has also more than doubled its income from contracting with government since 2000, while public sector grant-making to charities and voluntary groups has halved. For the voluntary sector, the inexorable rise of contracting is a tell-tale sign of how far the public service market orthodoxy has spread and changed the nature of their historical partnerships with government.

Beneath the ‘market interface’ of competing for and awarding service contracts on 1-3 year cycles, the day-to-day language, design and delivery of social care practice has become profoundly shaped by commercial sales and business management disciplines – just as the architects of the ‘internal market’ had hoped. Service managers today, if they are to hope to ‘win business’, are encouraged to be able to define their product clearly; to have and to meet targets; to have data that proves their service product really ‘works’ (evidence of outcomes); to have done their market and competitor research; to know their unique selling point and have a perfected ‘market pitch’. Successful services are deemed to be those that deliver a ‘return on investment’ (whether social or in terms of financial savings), which come in at a competitive price and ‘unit cost’. The general modern view of ‘success’ for a service delivery organisation, just as it is in commercial business, is indicated by growth in turnover, which in turn delivers a market advantage through achieving economies of scale. For many public and charitable professionals today, whether working in service delivery or as commissioners and spenders of public funds, the public service market orthodoxy is so deeply embedded into their working environment they may never have experienced, or be able to imagine, a different way of organising and delivering public services. 

Heresy 

Public service markets do not, and cannot behave like open commercial markets. Continued reliance on open competition in the ‘supply’ of public services will lead to market collapse and/or new monopolies. 

Well-established (but recently widely-ignored) classical economic theory already holds the key to understanding why open market competition is an inherently dysfunctional and distorted mechanism for meeting the state’s public service duties. In order to see how, we have to unpick and examine some of the fundamental definitional building blocks in the public service market orthodoxy. 

It takes some time to find any dictionary definition of a market that could possibly encompass public services markets. The Business Dictionary defines it thus: 

Market (n): An actual or nominal place where forces of demand and supply operate, and where buyers and sellers interact (directly or through intermediaries) to trade goods, services or contracts or instruments, for money or barter. 
Markets include mechanisms or means for (1) determining price of the traded item, (2) communicating the price information, (3) facilitating deals and transactions, and (4) effecting distribution. The market for a particular item is made up of existing and potential customers who need it and have the ability and willingness to pay for it.

The Business Dictionary definition of a market, above, could encompass the emergence of public service markets if – and only if – public spending bodies are understood to be the existing and potential customers generating the market’s demand. While this jars with most people’s understanding of who really generates the demand for public services, in fact this designation would be quite true to the original ‘internal market’ idea of designated, budget-holding government employees acting as customers, although common practice since then has been to term such roles as commissioners. In order to follow, as far as possible, this definition of a market, we will refer to the state as the ‘customer’ in public service market orthodoxy. The next task is to determine what kind of market most public services markets are. It is a matter of common agreement that monopolies are ‘bad markets’, and ‘open markets’ are good, for example. But there are several other types of market too. 

“This white paper says loud and clear that it shouldn’t matter if providers are from the state, private or voluntary sector – as long as they offer a great service. The old narrow, closed, state monopoly is dead.” (Cameron 2011)

In most public service markets the state is either the largest single paying customer (e.g. schools and health, where private customers account for around 10% of all demand), or the only customer (e.g. prisons, children’s homes, probation services). The table above shows that wherever the state is the dominant or sole customer (buyer) it means that public service markets are either oligopsonies or monopsonies. Many decades of development in economic market theory and learning have shown that oligopsonies and monopsonies are structurally imperfect markets, in which profound market distortions, such as price-fixing below production costs, are inherently likely, whatever the goods or services being traded. Economists have also found that if left to run their competitive course as if they were ‘free’ or open markets, monopsonies and oligopsonies inherently tend to result in the creation of cartels (oligopolies) and monopolies. 

In other words, a monopsony customer who goes out ‘to market’ in order to purchase the supply of services to meet their needs (instead of meeting it themselves) will eventually end up with only one monopoly supplier left, upon whom they are completely dependent and who can then hold them hostage at over-inflated prices because they have complete command over the capacity to meet the customer’s needs. In some of the longest standing areas of public service contracting there are signs that this is already happening, with a small cartel of ‘too-big-to-fail’ public sector contractors (e.g. G4S, Serco, Capita) evading the kind of corrective market rejection or new competitor challenge that would generally happen in an open commercial market, because the state is already too heavily reliant on their continued operations. ...

as public service markets develop, quasi-monopoly suppliers are emerging who squeeze out competition, often from smaller companies with specific experience. Competition for government business should bring with it a constant pressure to innovate and improve. But for competition to be meaningful, there must be real consequences for contractors who fail to deliver and the realistic prospect that other companies can step in. (Public Accounts Committee, 2014) 

On a purely theoretical basis using market competition to break up ‘old’ state monopolies in the supply of public services will only follow a trajectory that ends inevitably in new monopolies. The alternative, and equally possible, course of events in practice will be that the inexorable (competitive) downwards pressure on price among current competing suppliers will increasingly fail to cover the actual costs of running services, and the businesses (whether private or charitable) currently running a huge volume of public services either collapse and go bankrupt, or breach and walk away from their service contracts. This will leave public bodies with major continuing statutory duties to meet for their citizens but insufficient service capacity to meet them. It is widely reported today that adult social care providers find themselves, en masse, at that brink of market collapse. Other markets, such as residential care for children, may not be far behind.
Either outcome (new monopolies or market collapse) will be catastrophic for public service users, taxpayers and for the public officials left with all the same legal duties and none of the assets, resources or expertise needed to meet them. It is essential that the orthodoxy, that greater competition will improve public services and save public money, is rejected, conclusively – for it is reliant on market competition that will in fact accelerate the worst possible outcomes for public service markets.

Kathy Evans

Chief Executive of Children England

This extract from Kittens Are Evil contains just Chapter 2: Public Service Markets Aren't Working for the Public Good... or as markets, by Kathy Evans, Chief Executive of Children England. It is offered free of charge to help disseminate the important ideas it contains. If you would like to read more, please consider buying or recommending Kittens Are Evil. It's available from the publishers at www.triarchypress.net/kittens or you can order it from any good bookseller or you can buy it on amazon.