The Open Services White Paper: flattering to deceive?

The Open Services White Paper has finally been published. In February this year David Cameron heralded the beginning of the, ‘decisive end of the old-fashioned, top-down, take-what-you’re given model of public services’.

The white paper elaborates further and identifies the need for increased diversity of provision, the importance of innovation and quality in public services, and the role for strong local authorities.

It is, perhaps surprisingly given the delays to its publication, light on detail and firm policy positions. More disappointingly, the relationship between the government’s public sector reform agenda and local economic growth is not explored at all.

As the white paper says, £42bn was spent by local government on external contracts. Rather than thinking in terms of spending billions on the supplier base, government should be shifting mindsets towards thinking about how these billions can be invested in local businesses, local neighbourhoods and local assets.

Managing for local outcomes is the key to establishing and maximising this relationship between public sector reform and local economic growth yet, as with the other good ideas in this white paper, there is no real insight into the challenges and opportunities this new approach to managing contracts presents.

There is frequent reference to the localism bill – why did this piece of legislation not make it a duty, rather than a power, to include social and environmental criteria in public service contracts, thus making it a legal requirement to commission beyond cost?

‘An immature market in public services will, by its own volition, bring neither innovative, high quality service models to market, nor those that lead to investment
in local organisations and neighbourhoods.’ My fear is the lack of detail at the policy level suggests, at best, a lack of coherence at the strategic level. Despite the many years of contestability in public services, the market for public services remains an immature one.

This white paper itself suggests this: it both implicitly endorses the increased contestability in public services over the past 20 years and highlights the drop in productivity in public sector performance since 1997. Reading this, why would anyone expect an extension of the ‘modernisation agenda’ to result in increased productivity?

An immature market in public services will, by its own volition, bring neither innovative, high quality service models to market, nor those that lead to investment in local organisations and neighbourhoods. Whether it is managing the supply chain, or commissioning beyond price and for social and environmental value, current market structures and the wider macro-economic climate reinforce the commissioning bias towards large providers who can win contracts on price.

The government’s intention to remove barriers to entry and exit represents the classic British liberalising approach to creating and managing markets – open them up and then disengage. Other countries, such as Germany and Japan, opt for a more strategic approach, particularly when dealing with new markets. They assess the number of organisations the market can bear and manage entry and exit accordingly. Once stable market share is achieved, strategic intervention by the government is withdrawn.

Diversity, innovation and recognition of the role for local government – this is what local government needs to hear. However, without both the operational detail and strategic understanding of how to manage markets for local public services, this once in a generation opportunity to crack pubic sector reform will pass us by.