Comment: How privatisation killed the 'big society'

Wall Street Rules: Private firms underbid on contracts then cherry-pick the most profitable elements
Wall Street Rules: Private firms underbid on contracts then cherry-pick the most profitable elements
Ian Dunt By

Back when David Cameron was in opposition, he painted a very pretty picture of what Britain would look like under austerity. As the state swept back, it would be replaced by charities, community groups and private firms, who would club together to deliver public services. These local forces would cater to people's needs much more effectively than the dead hand of bureaucrats.

He followed through on his promise, but the pretty picture did not follow. Instead, huge corporations outmuscled the competition. They underbid for massive public sector contracts and cherry-picked the most profitable elements. Smaller charities are brought in only for the very difficult, risky jobs. They were set bruising performance targets that impoverished them and failed users.

It's about economies of scale. It was all very well Cameron singing songs about charities large and small working hand-in-hand with corporations. He takes a benign view of private interests, one which is presumably informed by the type of people who fund his election campaigns. But in reality there are only a handful of firms who can take jobs this big, who have the financial clout to deliver it. They also happen to be the same firms with pockets deep enough to underbid their competitors. Charities – outside of a few mega-charities – just don't have the resources to compete.

A report by Laird Ryan published this week by the National Coalition for Independent Action lays out how things look a few years into this disastrous experiment. Voluntary groups are now in a very dark moral place, "imposing zero-hours contracts on staff, asking unpaid volunteers to take on additional obligations they feel morally unable to refuse, and in many cases, prioritising core services around a narrower spectrum of people in need".


Even the Centre for Social Justice, which typically is rather in favour of this sort of thing, is voicing concerns. Its research found English charities with annual incomes of under £100,000 now receive 3.5% of total voluntary sector income, down from 5.4% in 2006. Mega-charities with over £5 million a year and constituting just 1.2% of sector organisations currently attract 69% of total income.

The move from grant funding to large-scale pay-by-results contracts has played into the hands of the big players. Market return to shareholders trumps public accountability or social justice.

Ministers assured us their interests were aligned. The best way to help vulnerable members of the community, according to them, was to link performance in this area to shareholder return. The problem is that these vulnerable people are hard to help. They are hard to reach, hard to convince, have diverse needs and often are in a pattern of problematic behaviour or disastrous personal or economic circumstances which refuse simple solutions. They are hard to profit from.

Big companies therefore underbid in order to win the widest possible contract. They then subcontract out to the voluntary sector, under stringent terms in a bid to save as much money as possible. Often they subcontract back to the public sector itself.

Take welfare to work, a famously ineffective Department of Work and Pensions programme. Under Labour, the voluntary sector delivered a third of the initiatives. This has now dropped to one fifth. Ninety per cent of the 'prime' organisations receiving the government contracts are huge profit-making companies, like G4S and Serco. It wasn't always this way. Many charities were primes at the start. They fell victim to economies of scale and are now relegated to sub-contractor work in regional 'contract package areas', dealing only with the toughest cases.

They call it 'creaming and parking', which sounds like it's related to dogging, but is actually more perverse. Niche charities – the ones Cameron was so keen to praise in opposition – are ignored and utilised only for the cases it's hardest to make a profit from.

The cuts in council budgets act directly against smaller niche charities. They can't afford to provide their services to their quality standard for the money now offered by local councils. In children's services, many have folded. In their place came private equity firms. They aimed to cut corners and save money. It's in their DNA. The easiest way to do this was to move children to wherever rents were lowest. That's why Greater London has 130 children's homes and Rochdale, a speck in its shadow, has 41. Ofsted found care in private children's care homes was consistently more "inadequate" than in council or voluntary homes. But the six-figure profits roll in.

In private agency care homes, cutting staff is the best form of cost cutting. So the workforce is reduced and care workers – overwhelmingly women on low wages with family responsibilities – are paid on a 'task and tick' system. Basically, they are being paid by the minute, not the hour, furiously running through their tasks just to be able to financially stay afloat. For home visits, this leads to the infamous 15-minute visit.

Carers are paid by visit, without a recognition of journey times. Their only way to make ends meet is to do a bad job: that is the inevitable endpoint of public services run for profit.

"This places care workers in the invidious position of having to choose between providing lonely and vulnerable clients with care visits that meet their individual needs and fulfilling their payment-by-results contract," Ryan says.

The idea that the state runs things terribly and private firms run things efficiently is so deeply entrenched in all three mainstream parties that we won't see a change anytime soon.

Financially, it is not even clear if it is true. It seems the big companies get all the cheapest and most profitable work while smaller charities, and failing them the taxpayer, get lumped with all the most expensive operations. The immediate cost often comes back to the Treasury. The long-term costs of scrimping on the most difficult cases may well make it a false economy.

But far more concerning is the effect on the people using services. The profit motive does not recognise quality. It is a tick in a box, a number on a spreadsheet: nothing more. The people left unable to dress themselves after a 15 minute visit by an impoverished care worker have not experienced an efficient service. But their discomfort does not figure in that spreadsheet. It is not a box to be ticked. We no longer care about these things.

The opinions in politics.co.uk's Comment and Analysis section are those of the author and are no reflection of the views of the website or its owners.

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