No privatisation without centralisation?

By Daniel Burke

This was one of the questions I was left pondering after a fascinating Beesley lecture from Tom Winsor recently, on the topic of Public service reform: parallels between the regulation of the railways and inspection of the police.

Tom Winsor is currently HM Chief Inspector of Constabulary, a role he was asked to take on by the Home Secretary having earned his reputation for independence as the Rail Regulator in the turbulent early 2000s. His talk compared and contrasted the process of rail privatisation and modernisation with recent efforts to reform the police service.

I believe that policy-makers seeking to restructure public service markets can learn valuable lessons from the process of utilities and telecoms privatisation and regulation from the 1980s to the present day. But comparisons are not simple and direct.

Mr Winsor’s reassessment of rail privatisation pointed out that it followed a long period of steady centralisation to the point where government controlled and owned pretty much everything. The rail industry started as a collection of speculative, competing and inefficient private companies. But by the time of privatisation in the mid-90s, it was one national service, run from Whitehall which allowed ministers a free hand to design the market in exactly the way they wanted. This meant that reform could be forced through quickly, and if mistakes were made, they could be put right quickly.

Mr Winsor contrasted this transformation with the story of reform of the police service which has been far slower. Like rail, the police service started as a voluntary enterprise with anti-Napoleonic public opinion strongly opposed to any role for the state. There were over 600 forces in the days of Robert Peel, with no national planning.

Efforts to improve national coordination between forces have been stepped up over the last decade, but policing still remains a largely local issue with chief constables running their own shows. This entrenched localism has, Mr Winsor proposed, acted as a drag anchor for governments seeking to introduce further reform into policing. Lack of commercial skills is possibly another factor. The market for commercial providers of police IT and other non-frontline support services is still small because most procurement happens at force level and is not attractive to the big players.

If the conclusion drawn about police reform is true for other public services, this presents ministers and civil servants with something of a problem. Successive governments have promoted both market reform (in the form of competition and encouraging a greater plurality of suppliers) and localism (more decisions made outside London SW1) as twin levers to improve public services. But the experience from rail and policing suggests that local discretion can hold back reform – particularly when it comes to introducing competition and new providers.

A look at one other public service supports this theory. The probation service has for 100 years been run through independent local boards. They successfully resisted ministers’ attempts to sub-contract specialist services to the expert voluntary sector (never outsourcing more than a paltry 3%). An act of Parliament was needed to abolish the Boards and bring the whole service under ministerial control. This has paved the way for a massive reform, with the majority of the service now being contracted out. A similar story could be told for the schools sector, where the Department for Education is directly commissioning services from academy operators and free schools, bypassing local authorities, and transforming the supply of education.

Big reform needs a big push. New public service markets won’t emerge unless government plays the lead role in designing them. To do so successfully, they need to:

• Be  clear about the public interest they want the market to serve
• Have a long term vision for the market
• Design the market structures carefully
• Think hard about the right regulatory model
• Implement well and pick the right moment to do it!

Daniel Burke:
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