Public Services and the Social Economy

All sides have their arguments, but what is needed now, more than anything else, is a transparent and honest debate.

Those on the left might characterise the debate as being between the current model of universal state provision and those who would seek eventually to privatise the lot, leaving only the most chronically unattractive and unprofitable services for the state to bear. The result would be a woefully unequal service leaving only the well off with an acceptable quality of service. Those on the right might see it as “reformers versus statists”. They suggest that a monolithic and inefficient state sector is pointlessly maintained, yielding sub-standard results and in desperate need of modernisation and restructuring. The battle lines are drawn. As I see it, both sides have been disingenuous to a certain extent; key issues are being studiously avoided; politics, as usual, prevails. Yet these are fundamental questions and vital for those with an interest in the growth of the social economy.

First, the “elephant in the room”. What we seem to choose to ignore is one simple truth: we no longer can afford all of those things we want from government. The state, as we knew and enjoyed it, is simply unaffordable. There is no alternative but to make choices. We all argue passionately for those causes nearest and dearest to our hearts — and of course each spending line means something to somebody, otherwise the line would not be there in the first place. Politicians, bidding for our votes, line up in support; a local hospital here, a care centre there, more police on the beat, better schools, secure pensions, investment in our universities, R&D spending… the list is endless. All are worthy causes — at least to some. Politicians wielding a red pen gain few if any votes, but there is no choice. An honest debate should begin with widespread acceptance of this fact.

Second, we need to recognise that if the state does shrink or unravel, as now seems inevitable, there is a broader range of alternatives. Whereas once the only answer seemed to be the private sector, there is now a rapidly expanding pool of social or community owned enterprises, capable of meeting a growing percentage of public service needs. ClearlySo is dedicated to strengthening this segment of the market and believes much more progress can be made. There is a great difference, I believe, between the transfer of services to private firms on the one hand or social businesses and enterprises (SBEs) on the other. In the latter case, profits are largely retained in the business or are reinvested for the benefit of the community, although in some cases investors are also rewarded, but not to the same extent overall as in the private sector. Is there not some justice in seeing the community at large benefit, especially in sectors such as health where successive governments have invested billions of pounds over decades? Should the ultimate recipient of the profit therefore be a key factor in awarding contracts to different sorts of enterprises? The positive social impacts generated by SBEs must become a vital component in the process of public services reform.

Lastly, transparency needs to be substantially increased. Previous governments did the public a considerable disservice by hiding behind Private Finance Initiative (PFI) contracts, or Public Private Partnerships (PPPs). In these, contracts were initiated ostensibly to save money, but the reality is they represented poor value for taxpayers. Governments used accounting tricks to move activities “off balance sheet”, and thereby make the deficit appear smaller. A recent Observer piece by Heather Stewart assessed public comments made by Margaret Hodge (Labour) and Andrew Tyrie (Tory) that things had gotten seriously out of hand. According to Stewart, Tyrie claimed that, under ex-PM Gordon Brown, PFI had become a “drug” which officials now must wean themselves off. We will pay the hidden costs of these contracts for decades to come, but will never know how much, because details of these dealings are generally covered by “commercial confidentiality”. This is outrageous. SBEs pride themselves on transparency and, without the goal of profit maximisation but with key societal impacts being central to their mission, surely have less incentive to engage in accounting skullduggery.

We do not expect the quality of the debate to improve, but we live in hope.