Neighbourhood governance: Community empowerment or containment?

21/01/201303/10/2013 / inlogov / Leave a comment

Madeleine Pill

In the UK, the deprived neighbourhood has long been a site and scale for intervention and action, giving rise to a variety of forms of neighbourhood governance to achieve a range of purposes. The four predominant rationales for neighbourhood governance are defined by Lowndes and Sullivan (2008): the empowerment of citizens and communities (the civic rationale); partnership to take a holistic approach to an area (social); government through new forms of representation and participation (political); and management in terms of more effective local service delivery (economic).

The relative emphasis upon these rationales changes over time due to policy shifts, exacerbated given central government’s hand in the instigation and operation of neighbourhood-targeted initiatives. Initiatives have increasingly stressed the civic rationale in terms of encouraging neighbourhood-level ownership of problems and of attempts to resolve these. This, paired with the need for deficit reduction, is demonstrated in ‘Big Society’ policy rhetoric. Its amorphous bundling of approaches seeks the transfer of responsibilities for services to local communities and third sector agencies. Its promotion of social enterprise models contrasts with the neighbourhood management approach of influencing other service providers rather than engaging in direct service provision.

The associated shift to ‘small government’ heralds the end of central government-led initiatives targeting deprived neighbourhoods which have left a heritage of varying types of neighbourhood governance infrastructure. How is this infrastructure affected by changes in its governance context?

An evaluation of neighbourhood management in the City of Westminster, delivered through a third sector organisation, the Paddington Development Trust, enabled exploration of these issues. The findings show that the Trust was recognised as delivering an effective form of neighbourhood management which emphasised community involvement and the civic rationale of neighbourhood governance, but which absorbed large amounts of officer time and was resource intensive. The Westminster approach to neighbourhood management was a product of New Labour strategy and of a genuine desire to tackle the problems of the most deprived wards in an otherwise affluent local authority.

While funding was provided, the City Council sustained a strong commitment. But the approach was contingent on the prevailing ethos and funding regimes and remained relatively detached from mainstream services. It proved easy to decouple the deprived neighbourhood infrastructure from ‘normal’, mainstream service delivery with the advent of the coalition government in 2010. As neighbourhood initiatives have been largely instigated by central government, it is unsurprising that the principal purposes of neighbourhood governance have been imposed, with additional funding offered as an incentive. In reality, once funding ends, the ability of neighbourhood governance to be sustained, despite the rhetoric about ‘capacity building’ towards neighbourhood empowerment, is very much in doubt.

Herein lies the paradox of the centralised approach to neighbourhood initiatives in the UK: commitments to localism, devolution and community empowerment are largely dependent on central government resource provision. While community empowerment is an important part of the policy rhetoric, in practice a ‘strategy of containment’ operates whereby residents in deprived neighbourhoods have relatively little control.

A full account of this research is available in my recent article with Nick Bailey: ‘Community Empowerment or a Strategy of Containment? Evaluating Neighbourhood Governance in the City of Westminster. Local Government Studies. 38 (6), 731-51.

Madeleine Pill is a Research Fellow at the Cardiff School of Planning and Geography. Her research focuses on critical governance studies exploring the scope for and limits to community action at neighbourhood level and she teaches on the MSc Regeneration Studies.

You couldn’t make it up – except DCLG just did

18/01/2013 / inlogov / 2 Comments

Chris Game

Did you see manager Arsène Wenger’s explanation of Arsenal’s feeble performance against Manchester City last Sunday? While most players are galvanised by home supporters and see playing at home as an advantage, Arsenal’s apparently are scared by theirs. “They have a great desire to do well, so maybe they’re a bit too anxious that they don’t respond completely to the expectation level of the crowd.”

A strong bid, certainly, for this week’s You-couldn’t-make-it-up prize, were it not for the Department for Communities and Local Government (DCLG), who, not satisfied with inventing their own measure for disguising the severity of their grant funding cuts to councils, have now disguised it still further by double-counting. If the whole grant-slashing exercise weren’t so serious, the ineptitude really would be laughable. Ridicule aside, it can only serve to validate and reinforce the allegations of unfairness that core city leaders in particular have been making.

Nick Forbes, Newcastle City Council leader, kicked off in November, writing personally to David Cameron to complain about the ‘unfair’ impact of funding cuts on councils like Liverpool with cheap housing and therefore a low council tax base. Then on December 19th, local government finance settlement day, the leaders of all seven English core cities – Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle and Sheffield – wrote jointly to Local Government Secretary, Eric Pickles, demanding an urgent meeting to address the “looming financial crisis” their authorities were facing.

The scale of the potential crisis was illustrated by reference to the ‘Jaws of Doom’ graph – Birmingham’s version of Barnet Council’s now famous and similarly apocalyptic ‘Graph of Doom’, produced by the London borough to shock residents, but particularly Ministers, into realising that by 2020 councils would be facing a £16.5 billion shortfall, with no money left for anything apart from children’s services and adult care.

The ‘Jaws of Doom’ graph appears in Birmingham City Council’s budget consultation document (p.8) and does indeed resemble the gaping jaws of a crocodile, attacking from stage left, but unable to swallow the monstrous £600 million budget deficit for which the council estimated, last October, it was heading – and now, following the finance settlement, closer to £625 million.

This is on top of the £275 million of mainly ‘efficiency and transformational’ savings, including a 25% staffing cut, already made over the past two years, and that have brought the council to the point where the Labour administration, elected last May, claims further efficiency savings are no longer enough. The severity of the reductions in government grant will necessitate significant cuts in front-line services. Hence the budget consultation: outlining the Council’s proposed four-year savings programme, and seeking residents’ views on detailed service cuts for 2013/14, and on alternative council tax scenarios – a further freeze, a limited increase of under 2%, or a larger increase requiring referendum approval.

One question, however, that the consultation document neither asks nor, judiciously, attempts explicitly to answer is: IS IT FAIR? So I thought I’d have a go.

Are Birmingham and urban councils generally, or Labour councils, or the most deprived areas, being particularly harshly treated by these grant funding cuts? Or was Pickles right, when he insisted in his finance settlement statement that “overall the average spending power reduction for councils in 2013/14 is expected to be limited to just 1.7% per household”, and that “concerns that the poorest councils would suffer disproportionately are well wide of the mark”?

Well, let’s start right there, with that phrase ‘spending power’ (SP) reduction – used by Pickles and his civil servants in preference to the ‘grant reductions’ quoted by council leaders and measured by the ‘Jaws of Doom’. Are they different? You bet. SP was introduced in 2010/11, when the new Government announced its intention to cut central government grant funding of council revenue spending by an unprecedented 28% in cash terms (nearer 40% in real terms, allowing for inflation) over four years, with 21% ‘front-loaded’ in the first two years.

To disguise the savagery of that front-loading, and to make before-after comparisons more difficult, the DCLG first restructured the whole grant allocation system, and then created ‘revenue spending power’ – a measure Ministers claimed that, by including council tax receipts, certain specific grants, and NHS social care funding, gave a fuller picture of a council’s overall financial position. Fuller, yes, but not full. If it really was a full, rather than politically beneficial, picture that Ministers wanted, they could have included income from fees, charges and investments. These, however, are income sources that tend to decline in a recession and whose addition to SP would emphasise, rather than de-emphasise, councils’ grant dependency – so nothing like as helpful as the DCLG’s contrived measure, which could instantly reduce a 28% grant cut to a 14% cut in spending power.

You’d think this was sufficient, but this year, it seems, they’ve really over-egged the pudding by double-counting council tax support in two separate elements of SP. Sadly, at the time of writing, the Department was refusing to help Local Government Chronicle journalists with their enquiries into how the double-counting occurred, and whether it was intentional or accidental. Either way, Pickles’ claim of an average 1.7% spending power cut in 2013/14 was clearly wrong and should have been about a percentage point higher.

Having changed the system and invented new terminology, Ministers’ next rule is always to describe funding reductions in overall percentages, not cash. This fools no one who gives a moment’s thought to how grant funding works, but then there are plenty who don’t.

Formula Grant – the general grant allocated in the annual finance settlement – is calculated in four blocks, the two key ones being Relative Needs, to compensate for areas’ differing service needs, thereby broadly reflecting economic and social deprivation; and Relative Resources, reflecting the strength of an area’s council tax base and ability to raise its own revenue. In combination, these two elements mean some councils are much more reliant on central government grant than others. The more deprived the area, the greater is its need for council services, the lower its council tax base and tax receipts, and therefore the higher the proportion of its revenue spending that needs to be funded by central grant.

Overall in 2012/13, 27% of councils’ revenue spending is funded through council tax. But that proportion ranges from averages of 16% and 22% among Inner London and metropolitan boroughs to over 50% among shire districts. Even neighbouring councils’ grant/tax ratios can differ considerably – like Birmingham’s 84% grant/16% council tax and Solihull’s 67%/33%. What can be presented, therefore, as a uniform 10% grant cut across the country means for Birmingham a budget cut of 8.4%, for Solihull one of 6.7%, but for some shire districts barely 2%. Not so uniform after all.

The reforms to specific or targeted grants have hit councils in deprived areas relatively harder still. Some grants specifically conceived for deprived communities, like the Working Neighbourhoods Fund and area-based grant, have been run down or scrapped altogether. In contrast, the Council Tax Freeze grant to councils agreeing to follow the Government’s tax-freeze policy comprises a 3.5% addition to a council’s existing tax revenues, so benefiting most those with higher tax bases. Likewise, the New Homes Bonus Scheme, funded by top-slicing the central grant to all authorities by equal proportions, benefits disproportionately those in the south, where the bulk of the building is.

Obviously, there have been and will continue to be numerous other technical changes in the grant funding system, with criss-crossing impacts on different kinds of councils. Even a year ago, though, the Audit Commission’s Tough Times report was clear that “there is a strong link between local deprivation and the scale of funding reductions”, with “deprived areas in the north, the midlands, and inner London [experiencing] the greatest cuts”.

There have been several comparisons of the scale of funding cuts across individual local authorities, among the most accessible being the Guardian newspaper’s analysis and interactive map. English local authorities were found to be facing, on average, a cut of £61 a year per person in the total central government funding they would receive between 2011 and 2014, but the range extended from over £250 per person in Hackney, Liverpool and Knowsley to North Dorset’s £2.70.

The severity of cuts correlated closely with the Government’s own Index of Multiple Deprivation (IMD), examples including Liverpool – IMD 2nd, funding cut 2nd (₤252); Manchester – IMD 4th, funding cut 5th (₤210); and Birmingham – IMD 13th, funding cut 16th (₤166). Of the 30 councils facing the severest cuts, 28 are currently Labour controlled. All of which suggests – returning to Pickles’ other bluster from his finance settlement statement – that “concerns that the poorest councils would suffer disproportionately” are not so wide of the mark after all, and certainly not as wide of it as his own 1.7%.

Chris is a Visiting Lecturer at INLOGOV interested in the politics of local government; local elections, electoral reform and other electoral behaviour; party politics; political leadership and management; member-officer relations; central-local relations; use of consumer and opinion research in local government; the modernisation agenda and the implementation of executive local government.

PCCs and appointments – When the word ‘fire’ is a verb!

18/01/2013 / inlogov / Leave a comment

Ian Briggs

This week, the news media is full of concern for certain newly elected Police and Crime Commissioners (PCCs) making personal appointments to their staff. At face value it does seem rather strange that we are replacing one partially elected body with a handful of appointees with another, but perhaps a more serious issue does sit behind this rather ticklish situation.

In the run up the last year’s election of PCCs, it was highlighted that central to their role would be the power to ‘hire and fire’ Chief Constables – all police officers are technically ‘Agents of the Crown’ and therefore fall outside the scope of much of UK employment law as applied to the remainder of us. Therefore, it is more than reasonable that certain safeguards need to be in place that represent the interests of those who foot the bill for them – us. With PCCs now firmly in place the Home Secretary and other Ministers could put their heads on the pillow at night safe in the knowledge that if any abhorrent Chief Constable were to go off the rails (just think Greater Manchester Police some years back) it would be the PCC who had to deal with this – and if they did make a bit of a hash of dealing with it they could turn around and wash most of the dirt off their hands, by saying “you elected the PCC and they have the powers” so let them get on with it!

But how can you offer an elected individual the power – invested in them through the ballot box – to ‘fire’ if you cannot allow them to hire? If we must trust the PCC to make the right decisions in holding the Chief Constable to account over their performance in the job then does it not follow that we must also trust them to make the right appointments? What we need to concentrate upon here is the word ‘trust’. There is a case to be made that we have seen a progressive erosion of the level of trust that we in civil society place in public officials with successive populist headlines in the press of ‘councillors with their noses in the trough’, senior officers with salaries in multiples higher than the PM and now ‘jobs for the boys’ (and girls) appointed by PCC’s. In other countries, and foremost amongst these is the USA, much is made of the ‘revolving door’ issue of elected officials bringing in with them a cadre of appointees only to see them disappear when the winds of political change blow and a new mayor or ‘Commissioner’ is brought in.

So what is at question here is the whole issue of executive powers invested in someone through an open and fair democratic election. It would be a fair bet that in more than one police authority there is someone looking carefully at the content of the ‘swearing in’ oath that the PCC made. For decades Tony Benn amongst others has observed that we are often too concerned with the mechanisms of giving power to people and not enough attention is made of who has the power to take that power away from them.

In the final analysis, any democratic society must be judged on the basis of where real power lifes – is it in the hand of the elected or in the hands of the electors? Any lack of transparency or any fudging of this will always lead to problems. There can be little doubt that an already democratically infirm role such as the PCC is now further weakened by these recent revelations and it will take all the political skills that elected PCCs have to bring to bear and shore up the trust we hold in them.

But is it not the weakness of Ministers in not seeing this potential moral hazard in the first place? Any fracturing of trust in PCCs could be potentially problematic upstream for the Home Office, the Cabinet and all those who made the rash statement in the run up to the elections that PCCs were not intended to be in any way political. Perhaps the Home Secretary may not be able to rest her head on her pillow at night safe in the knowledge that if something does go pear-shared, others will take the blame?

Ian Briggs is a Senior Fellow at the Institute of Local Government Studies. He has research interests in the development and assessment of leadership, performance coaching, organisational development and change, and the establishment of shared service provision.

City deals: A missed opportunity?

15/01/201315/01/2013 / inlogov / Leave a comment

Martin Stott

Today is the deadline for the submission of the second round of ‘City Deals’. Twenty cities and city regions are putting proposals to DCLG based around four ambitious objectives to:

Boost local economic growth
Rebalance the economy spatially and sectorally
Decentralise the powers and levers cities need to drive local economic growth and
Strengthen their governance and leadership

When they were originally announced by Deputy Prime Minister Nick Clegg in a speech in Leeds in December 2011, City Deals were part of the carrot to encourage large cities to opt for elected mayors. Devolution of major new powers and budgets to new city leaders were promised. Unfortunately with the exception of Bristol, the electorates didn’t play ball. But DCLG pressed on and the deals were announced in July 2012, with Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield – thereby ironically, cutting the new mayor in Bristol, George Ferguson (who wasn’t elected until November 2012), out of the process. At the time of the DPM’s announcement, there was a sense that this might be a real and significant constitutional change, in tandem with the arrival of the new city mayors. But between the launch speech and the reality of policy on the ground, things became a lot more prosaic, as the agreements struck in 2012 lay bare.

As ever with central-local government relations, the reality has in no way matched the original hype and in a time of retrenchment generally and ever smaller budgets for local government in particular, DCLG have been in no position to provide anything very much in the way of new resources. Staff in Councils and Local Enterprise Partnerships (who are key players in the proposed new ‘city deals’ because of their focus on private sector led economic growth) comment that ‘there is no real money in it’, and that the process and likely outcome is similar to that seen in the negotiation of Local Public Service Agreements (LPSA) and the abortive ‘Total Place’ initiatives under the last Government.

There is one striking difference between city deals and LPSA’s, picked up by the Green Alliance in their report Green Cities; using city deals to drive low carbon growth. Whereas LPSAs all had a climate change/green economy strand in them, the city deals struck with the ‘big eight’ cities have this dimension largely as an add-on, if that. The Green Alliance found that only Leeds framed its approach to growth with a low carbon vision for the city and that apart from Newcastle, few deals acknowledged the role of tackling climate change in securing resilient economic growth. Bristol, a city whose image has been predicated on an at least vaguely greenish tinge, has a City Deal that makes no mention of the subject.

Now the programme is being extended to a ‘second wave’ of twenty localities from ‘Sunderland and the North East’ to Plymouth. The group is made up of the 14 next largest English cities (after the ‘big eight’) plus a further six – such as Greater Cambridge and Milton Keynes – which recorded the highest population growth between 2001 and 2010. One of the striking aspects of this group of cities – the smaller and fast growing ones – is that they in many cases already have a significant ‘green economy’ dimension, or are cities whose location brings opportunities waiting to be exploited, such as Hull and Teeside. But if the poor record of the first round of City Deals is any kind of baseline – and with the second round of city deals focussing on a single initiative rather than a range of measures – the prognosis for more than a handful ending up taking advantage of this crucial part of the ‘rebalancing’ of the UK economy looks pretty bleak.

Martin Stott was Head of Environment and Resources at Warwickshire County Council until the autumn of 2011, when he concluded a 25 year career in local government. He has recently become an INLOGOV Associate.

Jo Moore was right – councillors’ pensions finally are bad news

14/01/201315/01/2013 / inlogov / Leave a comment

Chris Game

There’s an album track by the heavy metal band, Skyclad, inspired by the most infamous civil service email ever – the ‘good day to bury bad news’ message by Jo Moore, special adviser to Local Government Minister, Stephen Byers, at 2.55 p.m. on September 11th 2001, an hour after al-Qaeda terrorists crashed their hijacked jets into the twin towers of New York’s World Trade Center. I’m no metalhead anyway, but there are two things about the track that especially grate.

First, the title, which, presumably in the interests of scansion, is mangled into ‘A good day for to bury bad news’. Oh dear! Even more distressingly, it’s all stuff about the West waking up to a terror attack, but having the muscle to give it all back. Not one mention of councillors’ pensions – which was, of course, the toxic news on Jo’s mind when she actually typed: “It is now a very good day to get out anything we want to bury. Councillors’ pensions?”

You must admit, it’s intriguing. Not just that anyone should think that the most embarrassing thing New Labour was up to was contemplating pensions for councillors, but that at the time Ministers themselves intended it to be, if anything, good news. Following some unenthusiastic reports of the early months of executive-based local government, they were looking for ways of making council service seem a more attractive prospect to existing and, even more, to potential members.

In the consultation paper published the next day, there were proposals for councils to determine their own travel and subsistence allowances and, if their independent remuneration panels recommended, to pay pensions to those councillors – executive members and chairs of overview and scrutiny committees – whose special responsibility allowances would be likely to qualify them to join the council employees’ Local Government Pension Scheme (LGPS).

To repeat, it was definitely not Labour’s initial intention to extend the acknowledgedly generous and secure LGPS to all councillors, for most of whom, the consultation paper suggested, the Government’s recently introduced employer-sponsored Stakeholder pension scheme would be more appropriate. The consultation, however, changed all that.

The Local Government Association (LGA) and its Pensions Committee were opposed in principle to any differentiation of councillors based on work patterns and remuneration levels, seeing it as untenable, discriminatory and unhelpful to the cause of attracting and retaining councillors. They wanted the LGPS open to all councillors.

Somewhat to their surprise, however, they were also advised by OPRA – no, not Lance Armstrong’s chosen inquisitor, but the Occupational Pensions Regulatory Authority – that, for pension law purposes, all councillors should indeed be treated as employees, and therefore entitled to join the LGPS. Which meant that if, as proposed, most councillors were ruled ineligible for the LGPS, they would also lose access to Stakeholder pensions, and could take legal action against Ministers for introducing discriminatory legislation.

It was only at that later point that Ministers must have realised that their strictly limited-scale sweetener was turning into something approaching Cadbury World – too late, politically, to turn back, so they didn’t. When the snappily titled Local Government Pension Scheme and Discretionary Compensation Regulations (Local Authority Members in England) Regulations came into operation in May 2003, the discretion exercised by councils’ remuneration panels applied to all members. A review promised in 2008, when the rest of the LGPS was significantly revised, never happened, and so that’s essentially where we are today.

Whether you describe the LGPS as ‘gold-plated’ depends probably on the newspaper you read, but it’s undeniably attractive, and popular. It’s a tax-approved, career-average scheme – in contrast to the final salary scheme for full-time employees – with benefits based, for councillors, on years in the scheme and average pay over those years, in basic and special responsibility allowances. Contributions are 6% of allowances, and additional benefits include a tax-free lump sum on retirement at 70, optional earlier retirement and ill-health retirement at any age, ability to increase pension by paying Additional Voluntary Contributions, a death in service lump sum of two times career-average pay, index-linking of benefits, and, certainly not least, the security of all this being changeable only by Act of Parliament.

The TaxPayers’ Alliance (TPA) uses Freedom of Information requests to gather and publicise such data that the rest of us can’t be bothered to, and it found that in 2010/11 over 4,500 or one in five UK councillors were enrolled on the LGPS – at an estimated annual cost, now quoted authoritatively by Ministers, of £7 million .

The 4,500 were in fact drawn from only about 240 participating councils. The bulk of non-participating authorities, as would be expected, are smaller shire districts, but by no means all. There are county, unitary and London borough councils that have chosen, with plaudits from the TPA, not to extend their LGP schemes to councillors, including – taking our own region of the West Midlands as an example – Coventry and, almost completely, Worcestershire. By contrast, nearly 90% of Warwickshire members were signed up, 54 in Birmingham, 28 in Sandwell, 22 in Solihull, 19 in Dudley, and 12 each in Walsall and Wolverhampton.

Not, however, for much longer. In a kick’em-while-they’re-down footnote to December’s finance settlement, Local Government Minister, Brandon Lewis, announced that from April 2014 councillors would no longer be eligible to join or accrue further benefits from the LGPS – though provocatively the bar does not cover London Assembly Members, Police and Crime Commissioners, and, to the particular irritation of full-time council leaders, elected mayors.

It’s a ministerial, not party, policy. Conservative councillors and leaders have been as vocal in their protests as their Labour counterparts, although it is the latter who reportedly are contemplating judicial review. Lewis, however, insisted that Ministers in this Government “take a fundamentally different view to the last Administration. We do not believe taxpayer-funded pensions are justified.” Rather, they are “a corrosive influence on local democracy and independent thought, blurring the distinction between council staff and councillors. Councillors are volunteers undertaking public service; they are not professional, full-time politicians, nor should they be encouraged to become so”.

In other words, don’t tell me that senior councillors are, in practice, full-time; that the National Census of Councillors shows one in five working over 36 hours a week. That’s their choice, as it is for other, though unpaid, volunteers – like scout troop leaders, the comparison used by Conservative Chairman, Grant Shapps, on Thursday’s BBC Today programme. So, just in case it crossed their avaricious little minds, don’t even think of it: there’s “absolutely no case for increasing councillor allowances to compensate”.

As it happened, it was allowances that prompted Shapps’ remark. He was facing Clive Betts, Chair of the Commons Communities and Local Government Committee, who have just produced a report on the role of the modern councillor, Councillors on the Front Line. There’s an important section of the report on Support and Training directly relevant to some of the Institute’s work with councillors, but it was allowances that the Today programme wanted to know about.

The Committee identifies three key barriers to people becoming and remaining councillors: the time involved, the unsupportive view taken by many employers of their staff becoming councillors, and the levels of allowances: “high enough to offend the public, but not high enough to encourage any sane person to give up their career and earning capacity to take it on” (para.76).

Because of the public controversy involved, “few councillors will vote themselves higher allowances, even if there is a legitimate reason for doing so”, such as attracting more and a greater diversity of people to stand for election. Councils therefore, recommended the Committee, should be given the power to transfer decisions about allowances to independent bodies, with councillors themselves no longer having the final say, as they do at present with the recommendations of remuneration panels.

There must have been select committee proposals with even less prospect of being swiftly implemented than this one, but just at present I can’t think of many.

To what extent is it reasonable to profit from the public purse?

09/01/2013 / inlogov / Leave a comment

Ian Briggs

By 1830 the East India Company had grown in size and influence to be a government in all but name. It had control over a population that was at the time ten times greater than that covered by the British Crown and amounted in economic terms to over one third of the then British economy. The power of the company was such that it has led to a deep seated suspicion of the profit motive in the private sector and individuals that has remained in national and local government ever since – whichever political party has been in control.

By the end of the first decade of the twenty first century concern over public expenditure and a fear that ‘our’ money is not being spent with our interests at heart remains. The thousands of FOI requests now received by governmental organisations from both individuals and organised groups such as the Taxpayers’ Alliance may seem like an unreasonable challenge to the primacy of those who are our elected representatives and their agents. Yet, as seemingly no stone is being unturned in the search to lift the UK economy from recession, the question remains: what is reasonable profit to make from public sector activity?

The government is increasingly convinced that contracting with commercial and voluntary providers with payment by results (PBR) is a mechanism to ensure that positive social outcomes are achieved through stimulating the motivation to succeed. This has now extended to the Probation Service where providers will increase their revenue through meeting or exceeding performance targets. While it is clear the new innovative approaches such as this needs to be tried, what is unclear in this process is the means by which we decide whether the targets have been achieved or not, who has the power to decide, and what access to information they have.

The nature of contracts between governments and commercial providers can be said to be at best murky and if history is a good teacher then we should remain sceptical of the means by which performance is judged. To evidence this we have to look at the alternative method – that is where there are penalties within contracts that limit profitability to a commercial provider. For any regular rail traveller this game is all too readily apparent. Careful management of standing time at stations – often for what are termed operational reasons – can be seen as a means of ensuring that there is conformity with published performance expectations. However, for one regular journey I take, if the train were to leave a station at its published time it would have covered the distance from its last stop in a time that would mean speeds far in excess of that permitted for the line. Such quirks in the timetable exist to ensure that this train is never late at its destination and thus distorting the annually published performance report.

So if creative methods are employed to circumvent disincentives that detract from profitability, should we be equally sceptical of achieving positive results with a profit incentive that will always work in the public interest? In the same way that disincentives could have issues within power imbalances and transparency in contracting, so might profit maximisation incentives. No matter how robust a contact is, it will always bring into conflict differing interests and have certain power imbalances built in. Undoubtedly what the East India Company achieved was as much in the interests of the British Government of the time as it was in the interests of those who invested in it, but if we are to offer increased potential profitability to commercial interests through PBR mechanisms we have to be ready to have robust and open debate as to how those payments are justified.

For the Probation Service, social outcomes are at the very centre of its purpose – reducing recidivism is crucial to society but performance contracting is complex. We should perhaps remember the experience of the East India Company, becoming such a monster power at the same time that nearly all Transportation to the Colonies was undertaken on behalf of Government by private contractors. Those very contractors were well rewarded but once out of sight of land they behaved in a fashion that was more about maximising their income than meeting the contractual need established by Government. This was exemplified by the selling off of unused victuals for the journey to increase income – for them the answer was easy – starve the convicts!

So – to what extent is it reasonable to profit from the public purse? And are we putting in place a robust enough mechanism to ensure the interests of civil society are maintained?

INLOGOV Blog

The Institute of Local Government Studies, University of Birmingham

Month: January 2013