Public-private partnerships (PPPs) look set to become the single most contentious public sector policy issue of Labour’s second term, bringing to a head simmering battles between ministers and unions and New and old Labour, over how best to reform public services.
Public sector unions have already turned their guns on the government threatening strike action. The biggest public sector union, Unison, has threatened the withdrawal of donations to the Labour party as part of its campaign against what it sees as the “privatisation” of public services.
On the other side, the Institute of Public Policy Research (IPPR) – known as New Labour’s favourite thinktank – has produced a report – Building better partnerships – suggesting there should be no bar to the private sector provision of any public service, from teaching to hospital care.
Meanwhile, the government argues for a pragmatic approach. It claims it is against full scale privatisation of services, arguing it does not matter who provides public services (it could be public, private or voluntary sector) so long as it is efficient, responsive and of good quality.
Labour’s election manifesto states: “Where the quality (of public services) is not improving quickly enough, alternative providers should be brought in. Where private sector providers can support public endeavour we should use them.”
However, the IPPR report warns that the government must be more rigorous and discriminating in its use of the private sector, particularly its private finance initiative (PFI) hospital-building scheme, which the IPPR says has a “patchy” track record. Gavin Kelly, the IPPR research director said: “Partnership has an important role to play but government needs to be willing to rethink when and how partnership is to be used and must avoid sending out the signal that only the private sector has the answers to the challenges facing public services.”
Prime minister Tony Blair is especially keen on what he believes to be the cultural values of the private sector. He wants to inject a fresh, innovative and entrepreneurial “can-do” approach into public services, which he believes are essentially entrenched, reactive, and conservative.
He said: “We need to break decisively with the tradition of monolithic, centrally driven public services. We need to mobilise the small battalions and give them freedom to innovate and change. I want local managers and professionals to be entrepreneurs.”
Health is where PPP has its highest profile. There is the PFI to build new hospitals and GP surgeries and a “concordat” with private healthcare providers to encourage NHS trusts to send patients to private hospitals for treatment to cut waiting lists.
Under the NHS plan more than 100 hospital schemes will be delivered between 2000 and 2010, and private sector investment under PFI will rise to £7bn. A further £1bn worth of private investment in primary care health centres is planned through PPPs.
According to the Department of Health (DoH) the NHS spent £1.25bn in 1998/99 on operations carried out in the private sector, worth 4.6% of the NHS budget. This paid for about 350,000 operations – and the concordat, signed in November 2000, could see this figure rise. Elsewhere, private sector providers are running prisons; local authority revenues and benefit services; the majority of residential homes for the elderly, and even schools.
Council white-collar jobs in education, human resources and “back office” administrative functions have also been outsourced to private firms, as well as blue-collar services such as refuse collection and street cleansing.
One of the biggest controversies involving PFI is the proposals to use the private sector to refurbish and modernise London Underground’s Tube transport system. The PPP scheme to upgrade air traffic control has also run into opposition.
In housing, a quarter of all councils have sold off their homes to housing associations, which can raise private money to meet repair bills and build new homes. So far housing associations have raised £20bn on the private financial markets in this way.
The recent controversy over PPPs belies the extent to which the private sector already provides many public services, often on the margins in the less controversial areas of public sector service provision.
The IPPR report signals a new phase of the debate over public-private partnerships. The future will decide how far the private sector will move from the margins into “core” areas, transforming the nature of public services.
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