THE BLOG
05/02/2018 09:38 GMT | Updated 05/02/2018 09:38 GMT

The Carillion Aftermath: Don’t Throw The Baby Out With The Bathwater

The failure of Carillion has sent a shock through the system. But we must resist a knee jerk reaction which would see the public service market place quashed

In the wake of the collapse of public service outsourcer Carillion, some are aggressively calling for an end to all independent delivery of public services. A better response would be to create a more diverse public service market place which doesn’t allow huge providers to become dangerously dominant and embraces new models such as public service mutuals.

It would be an understatement to say it’s been a bad couple of months for private companies delivering public services. Carillion went into compulsory liquidation leaving major civil engineering works, school meals services, cleaning services, and even a range of public library services up in the air. On top of this both Interserve and Capita, two of Carillion’s major competitors, have issued profit warnings and seen their share prices tumble. This has led to some predictable (and not entirely unreasonable) reaction calling for an end to all non-public sector delivery of public services.

Whether a public service is delivered “in-house” or “outsourced” shouldn’t be an ideology. In fact one of the things we know for sure is that both public and independent provision can enjoy great success but also suffer catastrophic failure.

The public service marketplace has been wildly imbalanced for years with monopoly public sector providers and a small number of large private sector companies overly dominant. Both of these models have strengths. The public sector brings a strong public service ethos (most of the time) and the private sector focuses on delivering innovation and value for money (most of the time) – but both seem to lack something the other has.

Focusing on “in-house” vs “outsourced” in such a binary way completely ignores the emerging body of excellent social enterprises, charities, mutuals and publicly-owned companies. They occupy the middle ground between the state and the traditional private sector and have that strong public service ethos of the public sector but also employ the entrepreneurialism and commercial discipline of the private sector. Equally important is the disruptive effect these organisations can have on the behaviour of the traditional public and private sectors. They are making the public sector think more commercially and private sector providers focus more on staff empowerment and social impact.

So the focus of government and commissioners across the country should be on encouraging the development of a mixed market of public sector provision, private sector providers and (critically) social enterprises, charities and publicly owned companies. A great example is the work central government is doing to encourage the set-up of public service mutuals i.e. services moving out of the public sector into new models which have a much higher level of staff ownership or engagement. These are often still “owned” by the public sector but are more innovative and entrepreneurial and (critically) embed shared accountability across the whole staff group. This started under Labour, continued under the coalition, and is now a key part of the Conservative domestic reform agenda.

Ed Mayo from Co-operatives UK has written persuasively about how mutualisation could be a specific answer to the Carillion problem and the services and staff who are now facing a very uncertain future. He is getting some important political support for this idea from Bernard Jenkin, the Conservative Chair of the Commons Public Administration Committee. This broad support for the idea of mutualisation shows that this is not an idea of the left or right – it is just a good idea, pure and simple. A rare commodity these days.

Devolution presents a great opportunity for local commissioners to proactively work towards a good mix of providers. The exact local solution is not something that can or should be dictated from central government – there are simply too many local variables. Commissioners must balance the opportunity to integrate services (where scale might be the obvious attraction) with the need not to be overly reliant on a small number of “too big to fail” providers whether they be public or private sector. They should be assessing the strengths and weaknesses of all their local providers and working with them to co-produce solutions to the range of wicked issues that persistently hold communities back.

The failure of Carillion has sent a shock through the system. But we must resist a knee jerk reaction which would see the public service market place quashed. The UK has always been a market driven society and it is important to protect that. But without careful stewardship markets sometimes fail and it is now up to central government and local commissioners to work together to ensure it is balanced and functioning properly.