Exploding privatisation myths

[lexin]

Summary (from here.

While the recession places increased demand on local public services, they are also under mounting pressure to make savings and become more efficient. One suggestion often put forward to tackle the country’s growing debt problem is to outsource or privatise our public services. The TUC have produced a pamphlet which examines this proposition and attempts to explode some of the myths and misconceptions about privatisation to show that it would cause more problems than solutions.

MYTH 1 During the economic downturn, the best way to save money is to privatise public
services

In reality, public money is best kept within the public sector during the downturn. For every pound of public spending in a local area, this generates an additional 64p. Outsourcing and Public Private Partnerships – often undertaken with large multinational companies – take money out of areas when local economies and communities most need to be supported. Public spending has a stabilising effect, particularly during a recession; privatisation would only undermine this.

MYTH 2 The private sector costs less than the public sector and is more efficient.

In reality, there is no evidence that the private sector is more efficient than the public sector. Outsourced services are concentrated in a few large firms which dominate the industry and have proved able to earn large profits. PFI projects often go far over budget while contracts are inflexible, binding the public sector into contracts for buildings and services which often later prove unfit for purpose. PPPs and outsourcing are too often the cause of a downward pressure on staff terms and conditions, the
fragmentation of services and a divisive effect on public sector ethos.

MYTH 3 Competition is the best way to improve public services

In reality, public services are too important to compete on price. Public services reduce inequality, promote economic, social, and environmental security. Competition merely leads to a race to the bottom, with providers racing to compete on costs to the detriment of service quality. Competition leads to the fragmentation of services and increased transaction costs, linked to making and monitoring contracts, accounting, auditing, legal services, advertising and shareholders’ profits.

MYTH 4 The private sector is more responsive to service users’ individual needs

In reality, only the public sector can respond to society’s collective needs. Public services must be subject to democratic accountability and transparency. Privatisation erodes this accountability and treats vital services merely as contracts to be bundled up and sold off.

Myth 5 The public sector has a worse productivity record than the private sector

In reality, public services create public value – but this is hard to measure. It is notoriously difficult to measure public sector productivity and even harder to compare it to the private sector. An increased class size might appear to show a teacher working more productively, but it is doubtful this would improve the quality of education. Private sector productivity can be assessed by looking at the balance sheet. In the public sector, it is more about public value, with services that respond to the needs of citizens, that are sustainable, provide long-term value for money and are trusted by citizens.

Myth 6 “Back-office” functions can be outsourced without impacting on the front-line

In reality, support functions are just as important as the front-line. Without “back office function”, frontline workers would not be able to do their job. The NHS would not be able to survive without the people who book appointments, analyse blood tests, process X-rays or make sure staff get their wages on time. A false division is being created between front-line and support services which is fragmenting and damaging vital public services.

Comments

[oursin]

Where is the *Like* button to click?

[lexin]

I know, that's one thing that Facebook has that DW/LJ lacks.

[legionseagle]

How on earth can anyone still perpetuate myth 6 post-MRSA?

[lexin]

I know, it's bizarre. The thing which has led to problems with MRSA etc. is privatisation of cleaning services.

[legionseagle]

MYTH 1 During the economic downturn, the best way to save money is to privatise public
services

In reality, public money is best kept within the public sector during the downturn. For every pound of public spending in a local area, this generates an additional 64p. Outsourcing and Public Private Partnerships – often undertaken with large multinational companies – take money out of areas when local economies and communities most need to be supported. Public spending has a stabilising effect, particularly during a recession; privatisation would only undermine this.

In addition, the costs incurred by the act of privatisation are themselves very significant. To make a privatisation work, and to comply with relevant EU legislation, a competitive tender process must be undergone which entails significant professional and management expediture to manage, a cost which can run into six- or-seven figure sums depending on the size of the privatisation and with significant hidden costs such as, for example, those incurred taking advice on and in not infrequent cases engaging in litigation against disappointed unsuccessful tenderers. Unless these costs are fully factored into any value comparison, that will fail even on a straight "private sector" style value comparison, leaving out the social added value component.

[lexin]

I hadn't thought of that, but you're right.

[actionreplay.livejournal.com]

"Back-office” functions can be outsourced without impacting on the front-line

Please try and explain this one to my employer.

And anyone who thinks the private sector is more efficient has never worked there.

[lexin.livejournal.com]

I know. Mine is a public employer and they seem to think that back office services can be outsourced - with the result that if we want anything changed to do with our computers, we have to fill in a three page form which asks for various numbers not readily available. I hate EDS with a passion - it was so much easier when we wandred by the desk of 'Fred in IT' and just asked for what we needed.

[actionreplay.livejournal.com]

A lot of former and current EDS employees hate EDS with a passion too.

[lexin.livejournal.com]

Why does that not surprise me?

[lexin.livejournal.com]

"wandered" even. I'm particularly sore about this because I just had to have a new keyboard - hence the spelling fail.

[the-magician.livejournal.com]

I dislike the wording they have used, as it is very emotive and feels sort of "well, you wanted an answer in pounds, shillings and pence, and we've given you an answer in terms of hands-waving unmeasurable benefits".

I *do* think that most public services work best in public ownership and control, particularly ones where you can't sensibly have competitive pressure at the point of delivery ... e.g. in the old days there were two cable companies that "prevented a monopoly", but in reality, at most one of them had a cable in your street, so your only choice was "pay what they wanted for the service they wanted to give" or do without.

And in many places, there isn't room for two competing providers (small post offices in villages, single bank branches in small towns etc.), not enough business to keep two going, so the one that is there either has a monopoly, or is closed down to the detriment of the community.

There is no competitive Accident & Emergency department, small letter delivery service etc. and that's all to the good.

The union should just actually compare the costs and services provided under PFI and/or privatisation against similar costs and services provided by public owned bodies, that would show that it is cheaper *and* better to leave it in public hands!

[smallship1.livejournal.com]

What amazes me is that anyone believes these myths. Assuming anyone actually does. Possibly the world is divided into (a) those who know they're rubbish but can't do anything about it, and (b) those who know they're rubbish and are profiting from them, with no-one left outside those groups.

[melodyclark.livejournal.com]

To the above myths, I being a person of the American persuasion can only add

BWAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[shezan.livejournal.com]

It's much more nuanced and complex than this - and having lived in five different countries with each a different tradition of both public service and private enterprise, I would add to this that cultural differences play a part as well. The US private sector dealt much better with a natural catastrophe like the San Francisco earthquake than the public sector dealt with Katrina in New Orleans - both beforehand planning and aftermath organising. French public hospitals are better than private ones. Etc., etc. Half the secret of a successful public-private partnership, assuming there is such an animal, is drawing clear lines of who's in the driver's seat, and what is to be expected at every stage.