Debate Opinion Public sector ‘market’ failures undermine children’s services reforms First published in CYP Now on 15th February 2017 Salutary tales from public service markets have been escalating in number and seriousness lately. For more than three decades, government policy (throughout Labour, Coalition and Tory administrations) has been to view “old monopolies” in public services as a problem; with the solution being more “businesslike” providers competing. But from academies and grammar schools to foster care and electronic tagging, evidence is now coming thick and fast that outsourcing public services to “the market” offers no greater financial sustainability; no great savings to the taxpayer; no automatic improvements in quality or outcomes; and in too many cases creates new, and worse, problems of its own. First, let’s consider the news that many auditors are reporting a significant increase in academy chains that are “financially unviable”, “raiding reserves and running out of money”. Since their inception, we’ve been encouraged to believe that academy sponsorship brought significant additional investment and business acumen to running schools for state pupils. Yet it seems increasing numbers of these businesslike schools cannot balance the books. That’s clear evidence to me that running and sustaining a good public service is not like any other business that can be improved by being good at business – a fact that academy leaders are just now finding out. Reports have also emerged of grammar schools threatening to charge parents “top ups” for their child’s right to a free state education if the government’s funding formula reforms go ahead. Perhaps their howl of “unsustainable market panic” is best understood as more proof that no matter what your management structure, or legal form, you can’t run a state school well, let alone “better”, if the government doesn’t pay you enough. The astonishing news from the care provider market is that the Competition and Markets Authority (CMA) (formerly known as the Monopolies and Mergers Commission) is to conduct a serious investigation into the merger of The Fostering Agency and Acorn Care. The CMA believes that they may have created a new privately owned monopoly in foster care provision, placing council purchasers at risk of being ripped off for lack of other choices. There may well be a case that their combined scale makes them effectively a monopoly provider, or indeed the organisation may yet take some action to avoid the charge and fall back beneath the threshold for the CMA’s concern. The harder truth is that the creation of cartels and monopolies makes inevitable “good business sense” in a “market” where there is only one paying customer – the state – and where that customer has such deep cuts to contend with in their spending budgets. On a straightforward economic analysis, all competition in public service markets will ultimately end either in new monopolies or in market collapse. I’ve explained why this is so in a new book Kittens Are Evil: Little Heresies in Public Policy, published before Christmas. It appears the foster care market is the first to reach the attention of the CMA. It won’t be the last. In the justice sector, a number of Serco and G4S staff have finally been arrested and face charges for electronic tagging fraud. Now it has emerged the Ministry of Justice is investigating allegations that Capita staff received payments from criminals for loosely fitting their electronic tags. I certainly don’t intend to suggest that all outsourcers would commit crime to maximize their income – I hasten to add – but the systemic drive to “game and cheat” in payment-by-results contracting is actually inbuilt. There can be no organisation that gets paid by national or local government to deliver their services to children and families at the moment, who isn’t staring with trepidation into the abyss of cuts to councils and school grants, and wondering how to keep things going. Whether you’re a charity, a company, community interest company, trust, academy or a good ‘old fashioned’ public service, the maths of meeting rising children’s needs with the diminishing funds from government really doesn’t add up at all - however great your daily practice or skilled and dedicated your practitioners and managers. It certainly doesn’t resemble a healthy “marketplace” where all need can be met well at the right price for the best quality. With council children’s services facing a reform programme explicitly modelled on academisation, let’s stop and consider how crazy it is to ignore all this evidence piling up. The idea that “breaking up old monopolies” and creating “disruptive” new providers will drive efficiency, innovation and quality in public service really isn’t a new idea, it’s as old as the hills, older than my whole career. It’s been tried in almost every other area of public service provision already, and all the longest-run of those marketplaces are now the closest to collapse, cartels and monopolies. With the Children and Social Work Bill reaching its latter stages in the Commons, why not ask your MP if they know why anyone would want to send child protection services down the same path as academies, just when many academy chains are being declared ‘unviable’?