Last week, Sir Merrick Cockell, the head of the Local Government Association, made some interesting comments about how the government provides public services. In an interview with the FT, he warned ministers not to assume that the private sector was necessarily best.
He said there had been a period when “public bad, private good” had “almost been a mantra”, accompanied by a belief that “the right way for local authorities to do things was to outsource everything”.
I hope we’ve moved beyond that, because there are very good cases for outsourcing. There are even stronger cases for testing a service properly to see whether it’s the right service to outsource, to see whether there’s a mature market out there that may be suitable to tender against it and then properly to reach a conclusion that there is, or there isn’t.
It seems a similar strain of thinking is going on at the top of government too. Philip Hammond, the defence secretary, gave a very frank interview to the Independent this morning in which he said:
I came into the MoD with a prejudice that we have to look at the way the private sector does things to know how we should do things in Government. But the story of G4S and the military rescue is quite informative.
I’m learning that the application of the lean commercial model does have relevance in areas of the MoD but, equally, you can’t look at a warship and say, ‘How can I bring a lean management model to this?’ – because it’s doing different things with different levels of resilience that are not generally required in the private sector.
Jeremy Hunt, the culture secretary, made similar noises this morning on BBC Radio 5 Live.
It is interesting that the two minsters saying this are two of the most known for their love of the private sector. Philip Hammond was brought into the MoD, in fact, largely because of his experience as a successful businessman, which Number 10 hoped would bring a forensic ability to spot possible efficiencies and outsourcing opportunities.
But if these ministers really do mean that they might stop buying so much from the private sector, investors don’t believe it yet. Here are the share prices of three of the government’s largest suppliers (G4S, Serco and Capita) this morning: