Balanced marketplace needed to drive quality in public services

The recent publication of the Francis report into the scandalous neglect of patients at the Mid Staffordshire hospital (and the failure of those in positions of power to do anything about it) has triggered a wide ranging debate on the most appropriate model for delivering public services. Andrew Laird argues that a balanced marketplace is the crucial factor.


Given the public sector environment within which the events in Staffordshire occurred, the majority of commentary has come from those urging an end to public sector’s dominance of delivery and more competition to drive up standards. Others, such as former Downing St advisor Sean Worth, have added to this by calling for more transparency through performance league tables etc, which would allow the public an informed choice of provider.

However, there are those who will take no comfort from this call for more competition - and they include many public sector workers who deliver excellent and caring services from within the public sector and who feel public service should be a general force for good away from the pressures of the market. They fear that competition will mean an end to the public service ethos and a focus on profit rather than quality.

However, there is no reason why a properly balanced marketplace cannot ensure that those who focus on profit over quality do not win. My colleague David Fairhurst recently argued that a key macro benefit of the government’s mutualisation agenda, will be a more balanced market place. There is no one size fit all approach when it comes to delivering public services to diverse communities, however, at present the public service market is dominated by in-house public sector delivery and straight out-sourcing to the private sector. For there to be a genuinely balanced market there needs to be a mix which also includes substantial numbers of mutuals and social enterprises. Each model has its particular strengths: state delivery tends to be free from external financial motives and as such is generally protected from unplanned financial failure; private provision can create scale, efficiency and system-level innovation; and mutuals and social enterprises are usually smaller scale and focused on social impact and innovation at a local level. It shouldn't be the government's job (national or local) to pick a winning model but it can commission services more wisely to allow a balanced market place to emerge.

The challenge is not so much breaking the public sector monopoly on service delivery by opening service provision to the market (this is happening) but rather adopting a commissioning strategy which ensures a balanced market and real choice for service users.  A recent study commissioned by SEUK showed that public service commissioning practices are failing to rise to this challenge and are not supporting the development of a balanced market. Private sector oligopolies are emerging where a single provider dominates a market and achieves “too big to fail” status and as a result is under no real market pressure to improve services.

It’s not hard to see why commissioners get themselves into this position. When budgets are tight the temptation is to bundle up services and let large contracts rather than small contracts for individual services - the idea being that the provider will be able to deliver economies of scale. However, as the SEUK report points out, commissioning on scale (based primarily on immediate price) can create loss in other areas and often doesn’t take into account the wider cost over the whole life cycle of the contract.

So what can be done? I believe the responsibility is split between commissioners and front line staff groups.

Commissioners should implement a strategy that encourages a balanced market of provision and genuine choice for service users rather than taking the easy route of large block contracts as standard.

For front line staff, the road to mutualisation can seem long and bumpy. However, if they do not persevere and push the case for setting up independently then the pressure on commissioners to  change their behaviour is that much less.