Fear and discipline in the public sector – does Letwin have a point?

One of the more interesting (and inflammatory) stories of last weekend was Oliver Letwin, at what we were told was a ‘meeting of the offices of leading consultancy firm’ http://bit.ly/ohUgcY, making the following claim:

“You can’t have room for innovation and the pressure for excellence without having some real discipline and some fear on the part of the providers that things may go wrong if they don’t live up to the aims that society as a whole is demanding of them,” he said.

“If you have diversity of provision and personal choice and power, some providers will be better and some worse. Inevitably, some will not, whether it’s because they can’t attract the patient or the pupil, for example, or because they can’t get results and hence can’t get paid. Some will not survive. It is an inevitable and intended consequence of what we are talking about.”

So is Letwin right? Well….partly.

First of all productivity is something of a sore point in the public sector, but also the source of a range of misunderstandings. Concerns about productivity aren’t new – the problem is called Baumol’s cost disease (after William Baumol, who came up with the idea in the 1960s). The argument goes as follows:

In service sector jobs, the main cost of doing the job is the staff you employ. So about 75% of the NHS’s costs are staffing. You can increase productivity in that environment by treating more patients with the same numbers of staff, or by reducing the cost of your staff, or both. The problem is that it’s difficult get a GP to see more patients without ruining the quality of care they offer, and there’s only so much room in hospitals to treat them. It is possible for hospitals to be more efficient, but beyond a certain capacity level, infections tend to be a problem as patients are being ‘turned over’ so fast. So it’s difficult, beyond a certain level, to see many more patients.

What about reducing pay? It’s certainly true that the 2000s has seen an improvement in pay for money working in the NHS, but I think I’d argue this was overdue. Doctors are highly qualified people and deserve to get paid as such (they get paid a lot less than bankers but save lives rather than ruining them), and it’s pretty tough to argue that nurses are over-paid – the opposite continues to be true. So can we squeeze the pay of all the other workers who don’t deliver front line services? Possibly, but do we really want to penalise some of the most vulnerable workers in the public sector even more?

I don’t think increasing output or decreasing cost is very sensible then. As such, it’s little wonder that NHS productivity has fallen in the 2000s – it’s because we paid doctors and nurses better. This makes me wonder whether productivity is a sensible measure at all – what we have here is a private sector idea being applied to the public sector – a thoughtless comparison that isn’t appropriate. I have no problem with the public sector being held accountable, but this isn’t the right measure.

So how is Letwin partially right? Well I think he’s got a point about discipline, but for the wrong reasons, and I’m not sure wanting to instil fear into anyone is really sensible. I’m am rather struck by how many public sectors workers (speaking as a public sector worker) offer a frankly, bloody awful service to those they are meant to be looking after. Now this isn’t exclusive to the public sector – it happens a lot in the private sector too. But the difference of course is, that we all pay the wages of public workers through taxation. My own view being paid from the public purse brings with it a responsibility to try and do my best. I don’t think I always do a good job, but I do try (most of the time anyway).

Is poor service excused by poor pay? It’s certainly the case that if I have a generally unrewarding job and am not getting paid well, then my motivation might be pretty low. I have had some pretty awful jobs, and didn’t have a lot of fun doing them. But I still don’t think that’s an excuse for doing a job badly. The only reason for allowing work to be done badly is that the NHS is being an employer of last resort, providing jobs that don’t really need doing (a variation of what we might call the Pickles argument). I don’t think that really applies though. I tend to think that where a public sector service is being delivered really badly that is the fault of both the managers and the employees in that situation, and both have a responsibility to improve things (especially, of course, the managers, but that doesn’t let others off the hooks as well). If they can’t improve things (and this is the thing we really shy away from), we need to find others to replace them – which is not too far away from Letwin’s point. We shouldn’t be living in fear of losing our jobs in the public sector, but being aware that providing a consistently poor service has consequences.

Here’s the thing. If we don’t accept that there are problems in the public sector, and we don’t believe this is an issue that better management or improved service standards (or something else, like perhaps even employee ownership) can achieve, then we are left with the Coalition argument the the only thing that can help is introducing competitive forces. I’m going to argue in a future piece that there are some public services where competition is appropriate – but in the example I’ve used more here, the NHS, I think that doesn’t work, as I’ve made clear in many other posts here.

We need to stop pretending that the public sector is problem-free, and needs no change, when the service we sometimes get is pretty dreadful. Public services generally deal very badly with complaints, and have been laggardly in making improvements in many areas. If that means that we need better discipline, then part of Letwin’s diagnosis is correct. But if we don’t come up with a solution that is based on something other than competition, then that just leaves Letwin’s competitive market and fear. Is that really what you want?

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