Monday, 1 April 2013

How have public sector spending cuts affected Government outsourcing?

Serco sauce - putting the sauce into outsourcing

In the wake of the financial crisis of 2007-8, Britain found itself with one of the largest budget deficits in the developed world. In 2009/10 the deficit peaked at 11.3% of GDP, the highest since the levels of borrowing required to finance the Second World War. Inheriting such unsustainable levels of borrowing, the Coalition Government came to power in 2010 on a promise to undertake a significant program of retrenchment. But what is the effect of austerity measures on government outsourcing?

Despite the association of outsourcing with cutting costs, one might expect government spending cuts to result in less outsourcing, as fewer new contracts become available. Indeed, the surge in outsourcing predicted by many failed to materialise in the immediate aftermath of the 2010 election; the number of government contracts awarded actually fell by 13% between 2009 and 2011. However, the entire value proposition of firms like Serco, G4S and Capita is that they can provide the same level of service provided by the government for less money. Thus, outsourcing services and functions should be seen as key to mitigating the impact of public sector spending cuts on services. In fact, despite the initial dip in the number of contracts awarded, the total value of government contracts awarded has doubled since the financial crisis, rising from £9.6 billion in 2008 to £20.4 billion in 2012. Austerity, then, has quite sensibly resulted in more outsourcing.

The scale of the cuts is also seeing outsourcing make inroads into areas where it has not yet penetrated. Barnet Council, for example, is in the process of outsourcing around 75% of its functions, including core services such as planning and environmental health; the next logical step for the government’s education reforms would be allowing for-profit enterprises to run schools in the state sector; and in March 2012, the Cabinet Secretary, Sir Jeremy Haywood, even suggested that it was time to end the monopoly of Civil Service mandarins on providing policy advice to ministers, opening the function up to competition. Austerity is thus seeing a greater range of services and functions being outsourced than ever before.

However, with more outsourcing will also come greater scrutiny, and a pressure for ‘smarter’ outsourcing, especially as outsourcing firms profit while the public finances ail. In an early example, shortly after coming to power, the Cabinet Office Minister, Sir Francis Maude met with 19 outsourcing firms for discussions to press for better terms. Similarly, in 2010, Sir Phillip Green’s efficiency review criticised government procurement “for failing to leverage both its credit rating and its scale.” Multiple contracts for services have been signed with major government suppliers by different departments at different prices. Serco, for example, runs prisons for the Ministry of Justice, air bases for the Ministry of Defence and hospitals for the Department of Health on a large number of different contracts. Austerity has brought pressure for rationalisation. As a result, we should begin to see fewer, but larger government contracts, allowing the government to take advantage of economies of scale.

Smarter outsourcing also means introducing new models of outsourcing. The model currently looked upon most favourably in Coalition circles is Payment by Results, which links returns to outcomes. This is hoped to drive improvements in service quality, and represents better value for money for commissioning bodies, as they pay less if intended outcomes are not achieved; it can also ease pressure on budgets by staggering payments over longer time periods. Payment by Results schemes are quickly becoming entrenched, the most prominent example being the multi-billion-pound Welfare-to-Work scheme, which links payments to providers to service users staying in employment. Other examples include the Serco-run HMP Doncaster, where 10% of the contract price during the first four years is conditional on Serco reducing the reconviction rates of offenders within a year of release by 5%. Similarly, Social Impact Bonds, which promise returns funded by commissioning bodies to private investors if certain social outcomes are met, are currently being used to tackle homelessness in London and reoffending in Peterborough.

In conclusion, austerity has resulted in a greater number and variety of outsourced services, and a pressure towards a rationalisation of contracts and new models of outsourcing such as Payment by Results.

Sunday, 31 March 2013

The role of a Conservative backbencher under a Coalition Government

The traditional view of the British backbench MP is as something of a miserable creature. A strong party system ensures that party leadership is dominant. The role of MPs is to march loyally through the division lobbies, supporting their government’s legislative programme (or opposing it in less fortuitous times). If this is done with flair and competency, they may be lucky enough to find themselves sitting on the front benches.

This view has been subject to revision recently. The House of Commons, and Parliament as a whole, is having something of a renaissance with respect to its power vis a vis the government. Under the Blair government, the Select Committee on the Modernisation of the House of Commons advocated a number of reforms, later adopted, that have put power in the hands of backbenchers. These include the introduction Public Bills Committees, with the power to take oral and written evidence, to replace Standing Committees; the introduction of systematic programming for government bills as an alternative to the use of guillotines; and salaries for Select Committee Chairs, offering an alternate career path to Government office. The recommendations of the Wright Committee, set up in the wake of the expenses scandal, have further empowered backbench MPs. Firstly, in June 2010 Select Committee Chairs were elected by secret ballot of the House of Commons for the first time, while members of the committees were elected through internal ballots of the parties, thus removing Select Committee membership and chairmanship from the hands of the whips. Secondly, the introduction of the Backbench Business Committee has given backbenchers more control over Parliamentary time, allowing issues to be debated that would not have been debated if the two frontbenches had their way, such as the EU Referendum debate of October 2011. Thus, the story of the last fifteen years has been one of an enhanced role for the backbench MP.
I have painted two conceptions of the role of an MP. The first is as mere lobby fodder, desperately grasping at the lower rungs of the ministerial ladder. The second is as a more independent minded and autonomous creature, empowered by a decade and a half of reforms to the House of Commons. By and large, it is for each MP themselves to decide what role they will stake out for themselves, depending on their own career aspirations and prospects. However, the advent of the Coalition partly shapes this choice, making Conservative MPs less likely to take the path of dutiful obedience.

The single most important reason for this is that coalition government inevitably results in greatly diminished powers of patronage for the party leadership. MPs are willing to march through the division lobbies so long as the prospect of ministerial advancement is a live possibility. But under the auspices of coalition a significant portion of ministerial posts must go to the junior coalition partner. Further, as Nick Clegg’s agreement is required for changes in many posts, government reshuffles will be less frequent. Thus the loyalty of Conservative MPs is less likely to be rewarded with ministerial office. With the increasingly fleeting prospect of government office as the Parliament progresses, those very capable MPs who might have found themselves in a frontbench role in a single party government are likely to try to acquire status in other ways. Be that speaking out on Select Committees like Andrew Tyrie, or organising rebellions as Jesse Norman did on Lords reform.

We live in an age in which Parliament is reasserting itself. Reforms to the House of Commons have empowered MPs; disaffection with the mainstream political parties means that idiosyncratic politicians are more likely to be looked upon favourably by the public; and the increasing importance of social media has rendered the command and control communications characteristic of the Blair-Campbell years impossible. The formation of the Coalition has conspired with these factors to create a Conservative backbench more autonomous, more outspoken, and, of course, more rebellious than ever before.     

Saturday, 30 March 2013

Come Dine With Me - All Time Favourite From History Edition

If the best thing about a dinner party is the food something has gone seriously wrong. This was the truism missed by the BBC Four flop, Dinner with Portillo:
I was recently asked who my dream dinner party guests would be, and unsurprisingly neither Michael Portillo nor George Galloway feature in my list, as they do in the above video.

 All of history, four guests... It's Come Dine With Me All Time Favourite From History Edition! 

Melvin Bragg – The broadcaster, author and Labour Peer Melvyn Bragg would be my first dinner party guest. Since beginning to host The South Bank Show in 1978, Bragg has been a staple of British cultural life. He also presents In Our Time on BBC Radio 4, in which he and three experts discuss a topic in science, history, philosophy or culture. The polymathic scope of the radio and television shows Bragg makes would almost be enough to satisfy my intellectual curiosity on its own, and having him as a dinner party guest would provide enough variety of conversation to keep everybody entertained. Moreover, his experience of chairing the discussions in In Our Time makes him the ideal person to bring order to the conversation around the dinner table.

David Cameron – Prime Ministers do not get to the top of politics by being boring dinner guests. Moreover, dinner with a sitting Prime Minister offers a unique insight into the major political issues and public policy challenges of our age. There is also the attractive proposition of being able to give David Cameron my two cents on what his government is doing. The idea that one can influence government policy over a few courses and a glass of sherry is sometimes thought to be an outmoded and mistaken model of how policy making is done; yet many people have donated substantial amounts of money to the Conservative Party for the privilege of dining with David Cameron, and there is an entire industry of lobbyists and advocates. Surely, they are not entirely wasting their time and money?

Hillary Clinton – From present Prime Minister of the United Kingdom to future President of the United States? Perhaps. But however one rates Hillary Clinton’s chances in 2016, she can justifiably claim to be one of the most powerful women in the world, and would still be an excellent dinner guest. Hilary has spent the last twenty years at the forefront of world politics, initially as First Lady to Bill Clinton, then as an impressive politician in her own right. During her four-year stint as US Secretary of State she visited more countries than any other Secretary of State, and more than most people on the planet. If eight years in the White House, a close-run Presidential nomination campaign, and visits to 112 different countries does not make for an excellent raconteuse, then surely nothing does.

Wittgenstein – The Austrian Philosopher Ludwig Wittgenstein would be my final choice of dinner guest. As well as being widely recognised as one of the most incisive philosophers in history, Wittgenstein was renowned for an extraordinary and intense charisma that deeply impacted those he came into contact with, often eminent men and women in their own right. Wittgenstein was also idiosyncratic in his own habits and way of life. Shortly after inheriting a great fortune upon the death of his father, he gave it all away to his (already exceptionally wealthy) siblings and henceforth led a life of extreme frugality; during a meeting of the Cambridge Moral Sciences Club he attacked the guest lecturer, Sir Karl Popper, with a fire poker, giving rise to the best-selling book, Wittgenstein’s Poker; and despite being largely apolitical, he considered moving from Cambridge, where he was undertaking philosophical research, to Stalin’s Russia to become a manual labourer, even making an expedition to the Soviet Union to explore the possibility. Every dinner party should have an eccentric oddball – Wittgenstein would be mine.

Friday, 1 March 2013

A Postcard from Eastleigh

Waking up to the surprising results of the Eastleigh by-election, here are my first thoughts.
The most conspicuous aspect of the result is that UKIP have pushed the Tories into third place in the kind of seat that they really need to be winning if they are going to get an overall majority at the next election. This will re-energise those who think the party needs to tack to the right to win in 2015, and undermines the idea that Cameron dealt with the EU issue with his referendum promise.
However, that is the wrong lesson. The poor showing of the Conservatives was largely to factors that were particular to this election, and thus, extrapolating from the result to conclusions about national politics, and even the next general election, is a mistake. Firstly, the Conservatives ran a spectacularly bad campaign. Speaking to a prominent Tory MP who had been in Eastleigh in the run up to polling day, he tells me that rather than shaking hands, kissing babies and actually speaking to potential voters, the local campaign had MPs shoving leaflets through letterboxes in residential back-streets. After a few initial gaffes, the Tory candidate was not allowed out without her minders. The local party’s insight into the issues that concerned local people was also appallingly bad. There was a story in this week’s economist about Grant Shapp’s turning up on voters’ door steps on one street, and each and every one of them demanding to know, “What are you going to do about the Rats?!” This is the sort of issue that the party’s local councillors would normally be alive to… if the Tories had managed to get more than four councillors elected in Eastleigh. And last but not least, mid-term by-elections rarely go well for governing parties, especially when the economy is doing badly, and spending is being cut.
The second thing worth noting is that although the Lib Dems won the seat, their share of the vote fell by 14.5% - more than that of the Tories. I have always been sceptical of the idea that the Lib Dems will be decimated at 2015 election for the simple reason that people who have become exasperated with the two main parties and abandoned them for the Lib Dems are not plausibly going to go running back to Labour or the Conservatives. That has been born out. Despite the Tories and the Lib Dems losing 28% of the vote between them on their 2010 shares, the Labour Party gained only 0.2%. These figures should not only arrest premature sighs of relief, they should also make Ed Miliband question his prospects of winning a majority in 2015.   
Really, what the Eastleigh by-election points to is not a crisis for the Conservatives, but a crisis for all three main political parties, and our political culture more generally. Despite promises of a “New Politics” at the inception of the coalition most people are still sceptical and increasingly disaffected. Politics and public discourse has long been disconnected from the deeper moral and philosophical questions that politics is supposed to be secondary to. This led to the cynicism fostering, sound-bite politics of the Blair-Campbell years, and the largely correct public perception is that very little has changed.