ResPublica's Deputy Director, Asheem Singh, on the enduring public sector procurement muddle - and the policies that will make it worse
The Institute of Directors last week
suggested that we can make savings of £25 billion by centralising great wads of public sector procurement. They want, in short, a public sector that looks a little bit more like Tesco. Ching ching! (Or is that ASDA?)
The idea, anyway, has our
friends over at the Taxpayers' Alliance excited, for the following reason. Centralisation can produce great savings of scale. The TPA, as we, welcome innovation-driven savings in a tight fiscal climate. The TPA, as we, have been insistent that the bureaucrats in central Government have been too quick to meddle and micromanage the townhalls that should be delivering services and, from our point of view, taking their place in the civil fabric of neighbourhoods and communities. The TPA, as we, are localists. Oh. Wait a minute.
If I have read the TPA's latest (corporate?) blog post on the matter right, they seem to think this contradiction between centralising the money and delivering truly localised services can be squared. So let us follow this reasoning. What, after all, is procurement, anyway? It is in many cases getting the supply chain right for things like Government office paperclips, rubbish trucks, skips and the like. Things that can be better bought in bulk. Tesco have been super-successful because of their mastery of the efficiency/scale nexus. So you centralise the procurement of 'structural' goods - mugs, sellotape, copier paper - and you draw an imaginary, non-negotiable line at the 'service' goods, or 'bits' (to use a technical term) of procurement that are germane to the service in question: the contract you pay to whatever voluntary group receives the tender, social care home that you purchase.... is that right?
Well, er, no actually. The report has a section on the various ways local agencies could input local information to personalise the central procurement spend. And a series of matrices on how a new centralised contracting structure might look. Great stuff, but that is localisation, not localism and therefore necessarily top-down not bottom-up. But let's cut the waffle here: what about these red-meat savings? The £25billion worth of savings is actually an estimate based on cost savings produced by increased outsourcing (£15bn) and centralisation (£10bn). Some savings from the report:
"20 per cent for non-social care elements of local government procurement, including construction and IT – £6bn per annum saving"
Ok.
"10 per cent of social care procurement – £1bn per annum saving"
Hmmm.
Without knowing what these figures allude to in detail, we cannot be too critical. No satisfactory evidence or like-for-like case studies are given for any of the savings cited; it remains a series of rather unbaked assertions. It is hardly red meat territory for the low tax hawks: there is nothing there in to which to seek the fangs. Or is there? We are entitled to ask whether, per the intention of the report's authors, adult social care homes have somehow crossed that magical boundary between 'structural' and 'service.' At the risk of unfairly putting words in another's mouth, let us further ask: so what if they have? After all, if we can get homes for the elderly for cheaper, what does it matter from whence they are sourced? But then can we say the same thing about medications? (probably). Coordination software? (possibly). Care workers? (almost definitely not).
This is not the post to go into why bottom-up, locally commissioned (rather than 'procured' - the distinction is importantly redolent of the enabling state/welfare state distinction) services are better. The arguments are well rehearsed and I will sum them up here only as (a) social capital arguments (b) trust arguments and (c) long-term effectiveness arguments (there is much more about this in ResPublica's manifesto, available
here). Both Labour and the Conservatives understand and are on this agenda. And as the leach towards centralisation begins with the bulk purchasing of paperclips, and evolves to the mass development of titan-care-homes, what price the emergence of the 'supesaver-tender,' and a Serco or similar super-service provider bidding for Government super-duper-contracts to get people into work, to house the homeless or to help tackle drug addiction with the 'tag line,' 'every little helps'; pushing out those small and medium sized organisations that are so vital to the life of a community, who can't consort to super-duper tender?
But let us be very generous and suppose that considerably more detail in the paper might well put to rest the above criticism. What is not so easily assuaged, however, is criticism of the incomplete thinking behind it. It is incredible is that even now, with our economy in tatters and our society broken, the wise owls at the IoD are still putting out literature that trumpets a purely fordist approach to cost reduction and public sector management. The same fordist model that has done so much to eviscerate the opportunity for better public services offered by ten years of record investment. And that has done so much to squeeze out the service culture of the civil middle. Even if they don't buy or regard the idea that public services are delivered best and most effectively when part of a vibrant civil society, operating under a value system that measures social outcomes, not simply financial ones, the IoD must be aware that the New Public Management approach to cost cutting was the hallmark of the previous consensus. They must be aware of the pernicious effects of audit and micromanagement that has seen public sector productivity fall by 3.4% in the last 11 years, while private sector productivity has risen by 27%. They must be aware that the audit commission are a huge drain on service quantity and front line empowerment. We know the TPA are aware of all this: it's their bread and butter.
The IoD's idea is not 'by definition' bad; localism should never become dogma; and the quest for efficiencies is necessary and noble. However these ideas do not get us where we need to be; indeed they bear all the hallmarks of that very approach that needs to change: a bloated, centralised state, crippled, attampting to manage, micromanage and rein itself in by increasing further its pernicious culture of audit that has been in the ascendancy for all too long, at the expense of local difference and vibrance. Standardise the basics by all means, but let's do it for the right reasons; not just because of efficiency or scale but because it means in our local services we can better platform civil society. This well help reduce the perverse outcomes attendant upon this approach. This will mean we draw the line between 'structural' and 'service' while empowering rather than crippling our communities. It will mean drawing that very important distinction between innovation-driven savings (good) and 'fordist' savings (not so good). Whether you are a red Tory, a lower tax hawk or a wise institutional owl, perhaps this is an idea on which we can all agree.