It is becoming clear
that a key part of the right-wing agenda for our schools is privatisation. Proponents argue that the profit taken from schools would be more than made up for in greater efficiency. However where is the evidence that public services can be delivered well by the private sector?
There are plenty of examples of the failures of the private sector. There was the disaster of Southern Cross and its mis-management of care homes. There was G4S and the Olympics. There is the example of mutual building societies, like Northern Rock or Bradford and Bingley, that converted to banks and had to be rescued at massive cost to the taxpayer - compared with the sound performance of Nationwide Building Society, still a mutual acting in the interests of its members. There is the vast cost of PFI. Brown's forced privatisation of tube repair was a disaster that cost an estimated £2 billion. The railways swallow many more billions in subsidy than they did under public control and most (including, it seems, Cameron) regard the privatised energy companies as ripping off the customer. I could go on and on.
Where, in contrast, are the examples of private sector success in delivering public services?
RM Education: A Case Study in Poor Service
For a detailed example let me look at a school I know well. A condition (under Labour) of refurbishment under Building Schools for the Future was that services like IT support had to be privatised. The school would no longer have direct control and instead would rely on a long and complex contracts - but they were told that the combination of targets, Key performance Indicators (KPIs) and penalties would guarantee great service.
The school's IT used to be cutting-edge and widely admired. The contract was awarded to RM Education (a public listed company and probably the largest supplier of IT support in UK schools), The service was so bad that penalties in some months reached 50% of the contract value. That was the first lesson. Companies providing consumer products have to respond to competition in the market, which can improve service and prices. Private provision of a public service generally relies on KPIs and long contracts.
How Government Ensures Market Failure
These contracts are generally long-term and very difficult to get out of. In this case even though schools across the borough would like to be rid of RM, they have so far found no way out. One thing private providers are very good at is contracts. I asked one private provider of public services if they were worried about certain changes in government policy and whether it would affect them. Their response: "No, we spent half a million pounds on the very best lawyers. There is no way they can get out of that contract, whatever their new policy is."
For much of the private sector the market is effective. If a company produces faulty cars or too expensive yoghurts, they are likely to lose sales. The school would happily give up all its KPIs targets for the option to change supplier at the end of the year, to bring into bear the pressure of competition. Most government contracts cut out the very mechanisms which ensure the success of the market model. One director of a government department, who was mid-way through a 20 year contract for IT supply told me "We are their second biggest customer worldwide and they treat us like shit". There was simply no market pressure to do anything beyond the contract.
RM Education: A Continued Story of Failure
Four years into the contract, staff say the IT is “worse than is ever has been”, that many have simply “given up” on the IT working reliably and cannot rely on the technology working when preparing a lesson. RM Education seems to be taken by surprise each year by standard activities at the start of the school year, changes are slow to implement and upgrades, that in the past would have meant a long weekend working for the dedicated IT staff, are now quoted at £20,000 or more.
One irony is that the RM staff present in the school are actually well liked and seen as helpful. However the combination of restrictive software, of rigid protocols, of lack of ownership and bureaucracy prevent them providing quick and effective solutions. That seems to be a common problem with the large companies that are involved in public sector procurement - procedures and rules are everything, and actually get in the way of providing a good service. And most government procurement is structured to be on such a scale that small companies or social enterprises cannot apply.
I asked one colleague, who had been responsible for running contracts like this for a private sector supplier (not RM), whether he would recommend using such a firm. He was clear: "No way. Our targets are to maximise income. It is very clearly understood that the aim is to fulfil the contract requirements at minimum cost. Providing a great service simply doesn't come into it."
I write as somebody who has run a private sector company for over 20 years. However I also know the pressure of a customer who can change their mind tomorrow is a far better driver of provision than a contract that guarantees income for years.
We Need the Private Sector. But We Also Need the Public Sector
The failure of the planned economies in Eastern Europe and elsewhere showed that provision entirely by the public sector did not work. But that is not an argument for going to the other extreme, provision of everything by the private sector. I would agree with free-market economists that market competition ensures value and innovation in markets like consumer technology (though even there key innovations, such as the world wide web, have come from the public sector).
But providing a high quality education to our children is a very different matter to creating a new brand of ice cream or a new phone. There is no evidence that profit-maximisation is a good mechanism to deliver public need.
Fortunately the school is delivering steadily improving results despite the ICT problems. When the contract comes to an end (and the school is pleading with RM to be let out early) IT support will not be provided by RM or by any other large contractor. Instead it is likely to be brought back in house, where dedicated public sector employees - managed by the school leadership - will work to get the school back to the forefront of technology in support of student learning, something the private sector supplier seems unable to do.