It is time to challenge the central ideological dogma of recent times

Last week, Ed Miliband said that the times we live in demand “a new culture in our public services. Not old-style, top-down central control, with users as passive recipients of services. Nor a market-based individualism which says we can simply transplant the principles of the private sector lock, stock and barrel into the public sector.”

In place of the Coalition’s dogmatic decision always to outsource, Ed’s speech is a call to look at the evidence and ask the question: how do we best ensure that the public interest lies at the heart of our provide public services.

Several years ago my Dad was in hospital and in the final phase of heart failure; there was nothing more the doctors could do for him. He came home to stay with me; he died there three months afterwards. Every day it seemed like the sun shone in through the windows. It was a golden summer which I will never forget. And it was made even more golden by the council’s carers. Nothing seemed too much trouble for them and I will never forget the love and compassion which they showed us.

These carers were not limited to 15 minute visits as they are now. The service they provided did not adhere to the Tory approach of tickboxes and bean counters nor was it driven by the primary aim of profit-making. Public services are in danger of being reduced to a set of transactions rather than being built on relationships between providers and beneficiaries.

Public services do not need to be like this. Britain can do better.

Public services can be both cost effective and caring; I have experienced it. Those carers who looked after my Dad exemplify the public service which a One Nation Labour Government wants to see, with the patient, the parent, the user of whichever service being at the core of what happens. However, the central assumption of the Tory approach is the claim that public service provision is always worse than private sector. This is an ideological claim, but its weakness is that there is no body of evidence which shows conclusively that outsourcing is the most cost effective route for the taxpayer, or that it is a guarantee of high quality. Often the cost to the taxpayer of a privatised service is much more than the price of the successful tender.

The Tory approach fails to understand the distinction between the price of the tender and the total cost of the life cycle of a contract. Before a tender is even let there are transaction costs to the taxpayer of preparing, letting, evaluating and then monitoring the tenders, which often adds millions of pounds to the price.

There are also hidden costs after a tender has been let. Firstly, there is the price of post tender contractual variations. The infamous G4S Olympic contract reportedly increased their administrative costs by over 800% from £7.3 million in their tender to a final outcome of around £60 million.

Second, it is worth noting that risk and its associated costs almost invariably remain with the taxpayer. For example, within weeks of signing the Olympic security contract, G4S announced that it could not recruit sufficient numbers of security staff. The possibility of catastrophe a meant the government was left with no choice other than to deploy 3,400 troops.

As can be seen, the costs of each of the above points can be substantial. They should at a minimum cause us to rethink the simplistic assertion that on grounds of price all services should be outsourced.

And indeed, this is now happening.

Over half of councils are “insourcing” services which were previously outsourced frequently citing poor value for money. Many Tory councils have done so, including Essex, Basildon and Surrey. Deloittes found that in the private sector 48% of outsourced contracts had been terminated, frequently for price reasons. So the task for the next Labour government is to ensure that all future contracts make a proper evaluation of their full life cycle before they are let out.

In addition to cost the Labour approach will promote a public service ethos rather than “market based individualism” This is the ethos of the carers who looked after my Dad. But the Tory low cost business model for public services often requires a remorseless attack on the pay and conditions of the staff. Our country cannot expect to obtain the best from our public servants if their jobs are low paid, temporary and undervalued. Particularly so when we see the explosion in executive pay for those at the top of our outsourced services. For example, the Chief Executive of Serco is reported as earning 22 times more than our Prime Minister.

And it surely cannot be right if the companies, who benefit from tax payer funded contracts, make arrangements to evade paying tax in the UK. Nor should it be the case that a company which is found to have defrauded the taxpayer can continue to be the beneficiary of outsourced services. At the heart of our approach must be strong performance management of contracts designed to secure the public interest in high quality, responsive services.

Labour in office will work in partnership alongside users to drive up standards of service. In doing so there will be a community right to challenge service providers. This right to challenge may ultimately result in termination of contracts, and either re-tendering or services being brought back in-house where there is breach of contract conditions. Never again should we have a situation when the Chief Executive of an organisation providing tax payer funded public services can tell MP’s that in providing a service, her company (G4S) could not distinguish “right from wrong”.

For us it is the public interest that must come first. The task for the next Labour government is to reject the easy answers peddled by this government and ensure that all services put their users at the centre of what they do.

That is what Ed Miliband was setting out last week, and that is what the next Labour government will do.