Ian Mulheirn, director of the Social Market Foundation,wrote on the PF Blog this week welcoming the prime minister’s article in the Daily Telegraph . This called for competition to be the norm in public services.  The PM argued that what has prevented decentralisation is that Whitehall wants to hold the purse strings. It should now relinquish them and allow the market to determine value for money.

However, few public servants will recognise the happy market place Cameron conjures up.  As Mulheirn acknowledges, the prospect of more schools and hospitals being available than are ‘strictly necessary’, so that there is real consumer choice, is not exactly realistic given the current spending cuts.

While this doesn’t deter Mulheirn from arguing for a social market, it should certainly give us pause to question the likely outcome from the planned reforms.  Cameron argues that they will move the public sector away from top-down targets, encourage diversity, deliver services at the lowest possible level and, once again, provide opportunities for the voluntary sector. He says, ‘…power will be placed in people’s hands. Professionals will see their discretion restored. There will be more freedom, more choice and more local control.’

The public sector’s last experience of being a market place was in the 1980s through compulsory competitive tendering. Does anyone who remembers CCT recognise it in this description?  As far as I recall, the outcome was either that, after an expensive and time-consuming process, the in-house teams won – or, in a few cases, that one of a very small number of big providers won instead.  Is this diversity?

And flexibility? As those involved in housing PFI contracts know only too well, a service specified in mind-boggling detail in a contract is not a flexible service.  Yet miss out the detail and quality inevitably suffers.  Contracts only provide the flexibility included within them, at whatever price is specified.  Anything beyond this is likely to be prohibitively expensive.

And encouraging the voluntary sector? Three years ago I co-wrote a guide, widely circulated to commissioning bodies, to encourage them to engage refugee and migrant organisations in providing services relevant to their needs.  Did commissioners start to make more use of these groups as service providers? Perhaps to a tiny extent, but it was hardly revolutionary.  Many agreed that, even if in theory they would like to use small providers, in practice the pressures of securing ‘value for money’ and a cautious interpretation of EU competition rules usually resulted in the opposite.

And finally, of course, none of this reduces bureaucracy, it increases it. Cameron talks about ‘bureaucracy over-ruling common sense, targets and regulations over-ruling professional discretion.’  As CCT showed, you need more staff to run a service because to administer a complex contract you need a ‘client side’ to ensure that the contractor is doing their job.  Can those on the client side dispense with bureaucracy, targets and regulations? No, they are the essence of any contract. Do they largely have to give up exercising their professional discretion? Yes, because using discretion will cost money that is no longer available because the contract price has determined the budget.

Mulheirn’s version of a public service marketplace is a nice idea in theory. But it is dangerous, because it helps to legitimise changes that could have a very different outcome in practice.

Original post and comments: Public Finance