Category Archives: Public Sector

Public sector management and including all not for profit organisations

The Lessons of Carillion and Grenfell

Back in 1989, J K Galbraith addressed newly graduated women students of Smith College, Massachusetts. He was advocating the pursuit of simple truth and warning of the dangers posed by ‘institutional truths’. They were not truths at all, but overarching lies which had to be bought into if an individual was to survive and prosper in a particular setting.

Neoclassical economics was perhaps one of the most elaborate systems of institutional truths yet invented. Generations of dedicated economists have bought into it and then added further intricate detail of depth and breadth of institutional truth to the ideology.

The neoclassical foundation was built on simplistic assumptions of homo economicus, profit maximising business and a complete disregard for observed reality as well as for any wider context such as social and ecological systems. It also excluded any consideration of values and for the long term impacts of economic decisions. The maths simply was unable to accommodate such fundamental factors.

The generation of neoliberals associated particularly with Chicago University and in particular, Milton Friedman, added final touches to the ideology which was grasped by the Reagan and Thatcher administrations and has maintained its stranglehold on Anglo-America ever since. Those final touches include commitment to minimised flat rate taxation, minimised state involvement in the economy, minimised market regulation and the conversion of profit maximising business – which at least allowed potentially beneficial allocations of maximised profit – to shareholder value maximising which denominated everything, not just profits, as the property of shareholders.

The many institutional truths, that is lies, on which those various tenets of neoliberal economics are based have been well covered elsewhere on this website. Minimised market regulation doesn’t lead to competitive markets benefitting customers, but to markets regulated by financialised monopolists for their own benefit. Minimised government for the people by the people, doesn’t lead to freedom for the people, but to government by organised money for organised money. Minimised flat rate taxation doesn’t reduce the tax burden on the mass of people but on the rich monopolists who lead the self-perpetuating organised money establishment.
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Outsourcing: What a Waste!

Occasionally I have read stuff which seems so timely and apposite to work on which I am then engaged, that I’ve been motivated to provide an aide memoire of the text. This posting provides such a review of one 2015 text; it is not a summary and includes some personal interpretation; it is more a personal aide memoire of the opening chapter.

The book starts off with two rivetingly relevant-to-today quotes, one from 1936, the other from 1885.

Reading Review: What a waste: outsourcing and how it goes wrong, Bowman et al, 2015, Manchester University Press

Chapter 1 Outsourcing: organised money and disabled government

“We had to struggle with the old enemies of peace – business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs.  We know now that government by organised money is just as dangerous as Government by organised mob.”  F D Roosevelt, announcing the Second New Deal, October, 1936.

“The common rights of ownership have disappeared. Some of them have been sold; some of them have been given away by people who had no right to dispose of them; some of them have been lost through apathy and ignorance; some have been stolen by fraud; and some have been acquired by violence.  Private ownership has taken the place of these communal rights, and this system has become so interwoven with our habits and usages, it has been sanctioned by law and protected by custom, that it might be very difficult and perhaps impossible to reverse it.  But then, I ask, what ransom will property pay for the security which it enjoys?” Joseph Chamberlain, Birmingham Town Hall speech, January, 1885.

1.1 Introduction: The text addresses new problems created by outsourcing public services to private contractors. It considers the gap between efficiency rhetoric and delivery reality and between public service and the outsourcers’ profit maximising and tax manipulation.

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Saving the NHS

What does it mean that the NHS is in deficit to the tune of £930m? It’s not a business trying to make a profit for its shareholders – the deficit doesn’t refer to losses. The forecast is that the deficit will be as much as £2.8bn by the end of the financial year next April. But that’s the difference between the actual costs of delivering NHS services, still mostly free at the point of delivery, and the budgeted costs agreed by the Health Secretary for the financial year. It looks like the Health Secretary got the figures badly wrong.

The budget figures are set and NHS Trusts have to work out how such targets can be met. Clearly a major component of costs relate to staff: doctors, nurses and other staff. The only way the budgeted figures could be achieved is to reduce numbers employed. So those cuts are made as a result of the annual budget process. The shadow health secretary quoted a figure of 6,000 nursing posts, for example, as being cut during the last parliament.
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Corbyn-led coalition government

The dominant political, financial and media establishment seems close to resolving the outstanding Labour leadership problem to its satisfaction. There will be no serious challenge from Andy Burnham or Yvette Cooper, or, of course, Liz Kendal. Nor would there have been from Mary Creagh who pulled out of the leadership race, blaming Miliband’s lack of business friendliness as the reason Labour lost the election. The only difficulty might lie with Jeremy Corbyn, should he achieve the necessary nominations to stand for the leadership.

Corbyn could be dangerous to the established Tory/ New Labour Westminster consensus simply because he does not go along with it. His candidacy would challenge that Osborne-Cameron clique in a way the other candidates would fear to tread.
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The Royal Mail Rip-off Continues

Estimates vary of the extent to which taxpayers were ripped off when the Royal Mail was privatised. Experts quote nice round figures like a billion pounds, or two and a half billion. Precision is impossible, but clearly the taxpayer’s loss was pretty enormous. It was a cock-up. Or maybe it was intended.

For three decades, UK governments have acted as liquidators of state assets. By raising cash, these disposals have enabled the administrators to continue in government till the next election, beyond which no politician needs, apparently, to concern themselves. It looks like pretty standard bankruptcy practice.
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Hope and the Green Party

We are experiencing an explosion of inequality to levels not seen since the darkest days of the nineteenth century, inequality, not just of wealth but, as George Monbiot suggested (The Guardian, 2nd April 2013), also of ‘decency, honesty and kindness’. His analysis is that the 99% have the virtues, while the 1% have the vices, and the money. It may seem a bit simplistic, but there’s a whole lot of truth in it.

So why does the largely decent majority put up with it? Well, first of all, the media barons, such as Murdoch and Rothermere are still calling the shots. And the corporates continue to invest billions lobbying to pervert true democracy, driving political momentum from the socially minded left of centre to a predatory finance dominated right. The 1% still rule, nurtured by 13 years of New Labour largely driven by the mindless free market ideology. But there is still hope that common sense will prevail over dogmatic belief and practical experience over blind theory. Monbiot suggests that a spark of that hope lies in the Green Party.
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Public Services and Predatory Shareholders

The trouble with the provision of public services such as health, education and the police by private for-profit companies is pretty obvious. Successive governments from Thatcher on, have pursued this flawed policy which derives from a hopelessly simplistic ideology. Private providers, who are subject to the discipline of the market, are held to be more efficient than public providers. The late lamented Milton Friedman claimed they were twice as efficient. Therefore, the argument goes, services would be most efficiently provided by private firms operating in competitive markets so that, for example, NHS patients have choice, and providers who are not good enough to get chosen, will fail. That’s how markets work.

So far so good, despite the famous lack of supporting empirical evidence, and the difficulties, where real markets don’t exist, of creating pseudo-markets without the costly bureaucracy of targeting, monitoring and supervising pseudo-competitive performance. But another thread of that same ideology, most famously enunciated by the same late lamented Friedman, is that those who run for-profit businesses have no social responsibility other than to make as much money as possible for shareholders.
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