Oral evidence: Citizen and Public Services, HC 800Tuesday 14 January 2014

Oral evidence, 14 January 2014.

Witnesses

Karen Jennings, Assistant General Secretary, UNISON, Clive Maxwell, Chief Executive, Office of Fair Trading, and John Tizard, independent strategic adviser and commentator, and Sir Merrick Cockell, Chairman, Local Government Association, gave evidence.

Chair

May I welcome our second panel with the same restraints on length of questions and length of answers, please? Could each of you identify yourselves for the record?

John Tizard

I am John Tizard. I am an independent adviser and commentator on public services.

Sir Merrick Cockell

I am Merrick Cockell. I am Chairman of the Local Government Association.

Karen Jennings

My name is Karen Jennings and I am Assistant General Secretary for UNISON.

Clive Maxwell

I am Clive Maxwell. I am the Chief Executive of the Office of Fair Trading.

Chair

Just as an opener, are there any comments to add to the opening question about the general pressure on spending on public services because so many of the other programmes are protected?

Sir Merrick Cockell

I think you listed the pressures. There is one you might add, which is of course the Chancellor’s declared wish that the economy goes into surplus. By definition, that will mean we will need to save more money than we might actually need to save, if we are going to go into surplus. The position that we see from representing the whole sector is that next year is going to be pretty tough. Most of you will be familiar with your local authorities, and they are setting their budgets at the moment. It may be difficult, but they will be setting budgets successfully. The following year, 2015‑16, is the crunch year, because a lot of things are coming together. We are about halfway through at the moment the savings we have to make. It is about a 43% reduction in grant, and we have saved collectively about £10 billion, with about another £10 billion to go. A lot of things are coming together in 2015‑16 and, as I say, that is going to be the crunch year. From our analysis, which is a few months old now and is changing the whole time, we think there are about 54 councils that are not going to go bust or some sort of easy term like that, but we would describe as being at risk of failing to provide statutory services. That is pretty key.

Chair

Anything other members of the panel would like to add?

Clive Maxwell

Just very quickly, I would largely agree, but I would add and stress that the question the OFT tries to address is what the opportunity is for competition and choice to help improve the productivity and efficiency of delivering public services. The need to do that is enhanced by the fiscal situation that we are in. That pressure can help drive some of the sorts of innovations that some of the previous panel members talked about.

Karen Jennings

Could I also very briefly say that Government policy has put markets at the heart of public services rather than citizen or user involvement?

Chair

What is the difference between the two?

Karen Jennings

There is a whole range of policies that, as a result of the market, are excluding citizens from being involved—transparency, around accountability—

Chair

Markets do not work unless they are transparent.

Karen Jennings

No, that is not true because, if you look at business interests, they overwrite the public interest so, therefore, you cannot always get the information that you need because of competitive interests.

Chair

Do the interests of public services sometimes override the interests of citizens as well?

Karen Jennings

In terms of citizen involvement, what I am trying to get at is that the policies that have been put in place have actually excluded citizens. The market is at the heart of that.

Chair

Can you give an example?

Karen Jennings

For example, you will be very aware of the changes in the NHS. At one time, Foundation Trusts had membership. The role of those members has been reduced since the Act just to electing board members, so they have no say, for example, in mergers or the extent of privatisation. They have no say in whether they have confidence in the director or the chief executive. If you look at shareholders, you can sack your director.

John Tizard

Can I just pick up on what Karen said? It seems to me that the introduction of greater use of market and outsourcing in particular has led to less transparency and less disclosure. The Freedom of Information Act, for example, does not apply to private-or voluntary-sector providers in the way it would have done and did for the public sector. There is a lack of disclosure often hiding behind, both by public sector client and provider, the idea of commercial confidentiality. It seems to me that, if we want to have the citizen at the heart, they need to be well informed. If we are going to have a greater role for private business and social voluntary sector providers, there needs to be, to quote a previous question, a level playing field and the same level of disclosure and transparency of performance, financial and operational, and money transfers.

Chair

Can I just focus on this question for a second? We made this recommendation that we should abolish commercial confidentiality in our procurement report, which came out in July. This has also been endorsed by the Government’s Chief Operating Officer, Mr Kelly, in the Cabinet Office, in evidence to us, and by my colleague, Margaret Hodge, Chair of the Public Accounts Committee. Does all the panel support the abolition of commercial in confidence, so that we have public contracting like the American system, which is all in the open? All the figures and profit margins are in the open.

Sir Merrick Cockell

Provided it is once the contract has been let, obviously not in the negotiation process, because that simply would not work. You have to have confidentiality in anything as you are negotiating, whether it is with the public sector or the private sector.

Chair

But that is the same in the United States, is it not?

Sir Merrick Cockell

I believe so, yes.

John Tizard

What I would add to what Sir Merrick has said is that there is no reason why a public body that is going to go to competition and outsourcing should not be obliged to disclose its business case, in order that there can be an informed decision, debate and consultation on why they have chosen that route. I agree that once you are into procurement and contract negotiation, that would need to be commercially sensitive at that time.

Chair

Karen Jennings, how much would that address your concern about the lack of transparency?

Karen Jennings

We would certainly support businesses being open to freedom of information questions and being subject to the same public sector regulations around equality, employment and so on.

Clive Maxwell

In principle, yes, but I just add one caveat that you might want to think about. That would be circumstances where detailed knowledge about what a competitor is willing to do something for or the price they were willing to accept might well help collusion in certain types of markets. That is just one area that it is important to think about, especially where products are being re‑tendered quite frequently. Depending on the nature of that market, you might just want to be careful that you do not allow the conditions for collusion to develop.

Chair

How much can that be addressed by reverse auctions, for example?

Clive Maxwell

It could, exactly.

Robert Halfon

Could I just ask what progress you think the Government has made in opening up public services to new providers, particularly given the Social Value Act that was talked about earlier?

Karen Jennings

We know that there is something like £82 billion worth of contracts that have gone out to the private sector, so it is considerable and it is growing. Clearly, there is momentum towards greater use of the private sector in the NHS, with any qualified provider and the commissioning process. The concern for UNISON is what is happening to quality at a time when there are also the austerity measures taking place. We do not see austerity as a panacea to the market and reform.

Robert Halfon

The Social Value Act was primarily meant to be about social value to look at charities and voluntary groups to offer a social benefit. Do you think that has happened in any way?

Karen Jennings

UNISON has about 1.3 million members, and 60,000 of those are working in the community, voluntary and charity sector. What we are quite clearly seeing, and we have given evidence to you on, is that charities are under severe strain—that their delivery of services is now at breaking point. They are being gagged because of fear of losing contracts, and service delivery itself is declining. We see the current developments as contrary to the Social Value Act.

Robert Halfon

Sir Merrick, has this Act been worth the candle? Is it making a difference?

Sir Merrick Cockell

It is clearly showing a move in the right direction, but what you cannot underestimate—no one can underestimate—is just how the austerity that we are going through has become the focus of frankly everything that we do in local government. For even the most innovative councils—as a former leader for many years, Kensington & Chelsea and Tri‑borough are probably some of the most innovative councils along with others that one can quote around the country—innovation will probably account for half of what they have to save. The Leader of Westminster told me a few days ago that, with all that, she still has to find another £100 million in a couple of years’ time and she does not know where that is going to come from. When you have that as your prime focus, frankly day to day, it is very difficult perhaps to take greater risk or to be able to look to the voluntary sector in innovative risk‑taking ways.

Robert Halfon

The previous speaker, I think it was from Reform, said that when you have to make cuts, it does make you think differently, because needs must.

Sir Merrick Cockell

It does make you think differently, but some of this takes a lot of time. It takes time to get the savings out. Looking to a multiple range of providers to do that, when quite often a single provider, one of those large private-sector companies, could take it out of your hands and guarantee those savings, does not encourage you to look to a multiplicity of providers. Having said that, we do spend collectively in local government, and this is with the National Council for Voluntary Organisations, about £6.6 billion with the voluntary sector broadly, so there is a lot of money being spent there and a lot of work being done, at literally community levels, to make it easier, but the system does not actually help.

John Tizard

If I could add to that, Merrick is absolutely right; the preoccupation of every local authority leader and chief executive I know is how to make cuts now and over the next two years. Innovation and doing things differently takes time and money, as well as risk. There is a real focus. We are seeing in some places almost a return to some of the worst aspects of compulsory competitive tendering, of using the market to drive down price in the short term, irrespective of quality and impact, because it is seen as the quick way. In terms of the voluntary and community sector and the wider social sector, as one of the previous witnesses said in the earlier session, there is a huge gap between policy and rhetoric and procurement practice. If we want to see a greater role for the voluntary community sector, whether it is in national schemes or local schemes, there has to be real political leadership that makes it absolutely clear that the process must lead to that outcome.

Robert Halfon

In my experience of procurement, in terms of local communities, whether it is the county council or local council, the contracts tend to go to huge massive charities or massive private-sector organisations that then subcontract them out to the smaller organisations, so it does not seem to me to really add any social value.

John Tizard

I think that is what I was saying, in a sense, Mr Halfon. It is that gap between the policy objective stated and then, when the procurement process starts, you get somewhere else.

Robert Halfon

How do you get to the right position?

John Tizard

Again, it is a cliché, but it needs leadership and you need a very firm policy. I would suggest that in the local authorities that are doing their best, and I am sure Sir Merrick would agree with me, the political leaders are very clear about what they want. They are engaging the community and voluntary sector before they go out to commission or procure, so they understand what is possible and what is available and make much more collaborative arrangements. I think the Social Value Act has enormous potential, just to pick up on your earlier question, but not in terms of an act for compliance. It has very few teeth. It can be used to change behaviour, thinking and attitude. It gives those who want to take some risks with the voluntary and community sector some comfort in doing that. It seems to me that, in a sense, those authorities and public bodies that are using the Act effectively were probably already being very close to what the Act was about. For those that were not, it has not necessarily moved them to change their behaviours.

Robert Halfon

Can I just ask the regulator how you would make the citizen more engaged and make the regulators more responsive to the consumer and to the citizen?

Clive Maxwell

To make the regulators more responsive, firstly you can introduce competition at two levels in the market. You can either have competition for that market, which is typically done through the tendering‑type process, where the state in some sense procures that service and chooses between different providers; or you can have competition in that market, where the user, the citizen, the consumer, is in a sense making the choices there. If you are going to go down that second route, the best outcome is one where you empower that citizen or consumer to make the choices and that those choices themselves are driving the improvements in that market in the future. If that is not working well, then you bring in regulation, control and other mechanisms like that, and then you clearly need to make sure that the regulator is influenced by those concerns of consumers. To make that better, you need to make sure that regulators are consulting with consumers. The discussion earlier identified the fact that it is very difficult to have that sort of interaction in lots of cases, in particular with certain groups of vulnerable consumers. We as an organisation, and I know other regulators do, will therefore tend to use representative organisations like Which? For example, we carried out work looking at the mobility scooter market. We talked to organisations representing elderly and disabled people, because they had a particular perspective on it. They are the sorts of steps you need to take.

Robert Halfon

As you know, we battled on the petrol issue—very courteously, I should add. If you are a member of the public who is one of the many hundreds of thousands who have signed petitions or whatever it may be and believes there should be a full inquiry, not semi‑inquiry, into the price of petrol and diesel—let us not get into the issue itself, because I understand the decision you made—that member of the public feels that they have no power. These very important decisions are made by a few people like you on something that affects millions of people in this country—to look at the competitiveness of the petrol and oil sector. Do you not agree that is a problem and needs to be looked at? The consumer needs to have more say over perhaps some of the decisions that you would make or other regulators would make.

Clive Maxwell

Regulators generally need to have credibility and legitimacy with the public. That involves and includes being seen to respond to public concerns and have an answer to them. I would perhaps divide it into two areas. The first role of many regulators is around enforcing the law. When you look at all sorts of law enforcement agencies, whether it is the police or regulators, a core bit of their decision-making process has to be the evidence, and their legitimacy comes from running well-run enforcement investigations, which use the evidence and bring the right people to book. They need to be able to look at that evidence and make decisions themselves, I believe. In terms of other sorts of work regulators do, that can involve having broader views about how markets are working. It can involve having a view about designing the rules themselves for how a market operates. I think it is important that regulators are out there talking to the public in the ways that they can to see what the priorities should be.

Robert Halfon

Would you give citizens any direct engagement into the role of regulators and, if so, how?

Clive Maxwell

If I look across the regulatory community, there are some ways you can do that. You can, of course, consult. I have to say I think you only get a very partial set of views through consultations very often. For example, the OFT consults on its annual plan each year. Most of the responses we get come from trade organisations and the like. You could also consult on very individual bits of work you can do and you can do consumer surveys, for example, so that when you are proposing a set of new rules in a particular market, you can talk to people who use that market and you can go off and get very detailed answers from them. That can be very useful. As I say, you can find representative organisations, which I have found often to be the most effective way of getting some views on the difficulties.

Robert Halfon

Do you think there could be an appeal mechanism, whereby, if a group of citizens felt that the OFT or whatever it may be had not done what they thought it should do, they would have an appeal system?

Clive Maxwell

In terms of the enforcement work, I do not think that will work. If a regulator is taking enforcement action, which is a prosecution or akin to a prosecution, they have to be driven by the evidence, like a police force would be. Consulting on that is not the right thing to do. We in the OFT do have a mechanism already that gives those powers to representative bodies. For example, Which? can make super‑complaints to the OFT and we have to respond to those. They are done fairly sparingly, but we do respond to those. That is the sort of recommendation that would achieve what you are interested in.

Chair

Moving on, in passing may I just thank the OFT for taking up our recommendation that you should conduct an inquiry into what some have described as the cartel of IT systems integrators? It was a recommendation we made some time ago and we are grateful that you have taken that up.

Alun Cairns

Mr Tizard, can I come back to a comment that you made earlier about financial constraints on authorities limiting the opportunity for innovation? Can I suggest to you that financial constraints effectively will drive innovation, unless there is of course pioneering leadership? In a time of plenty, the easiest thing to do is to carry on the way we always have. Therefore, I would assume that few organisations have got pioneering leaders—and that is not a criticism—and therefore financial constraint is the driver from the other direction for innovation.

John Tizard

Inevitably, financial constraint and other pressures, demographic pressures in particular, are encouraging and incentivising public bodies, local authorities in particular, to innovate and do things differently. If you are facing 43% budget reduction, as Sir Merrick spoke about, you have very little space or time to consider innovation or major change, if you have not already initiated it. You are getting into a position of making traditional cuts and, in some cases, still salami‑slicing, which has never been a strategic or sensible approach, and stopping doing things. The speed and the depth of the cuts have left many public bodies unable to use innovation as a way through. Some are, and those are the ones with pioneering leaders, which actually were anticipating this and had started the process some time ago.

Karen Jennings

May I come in on this one? It is just to say that the evidence is demonstrating that there is truly a race to the bottom in some areas of care, particularly if you look at homecare provision, because of the cuts. Far from innovation, what we are starting to see is a very limited amount of time provided to individuals in their home—15‑minute visits. The carer going in is very poorly trained, although may be a longstanding loyal employee. Very often there are breaches of the minimum wage happening. This is happening right across the country. There is no payment for travel between clients. Some of the innovation that we are starting to see you may be referring to might be in Lancashire, for example, where they are starting to develop what is called an ethical care charter. Rather than having a plethora of providers crossing over one another in terms of providing the care, they are fine‑tuning that down to a small number of providers, where they are acting much more as a team. That is not about increasing the level of competition; that is about reducing it down.

Sir Merrick Cockell

Local government’s view is not just simply that the Government cuts a grant and looks at local services to innovate. I have explained the position that we are in now. We are not saying that the end of the world is nigh. We are saying to Government, “The system is bust. We have to change the way that we provide public services.” It is as much Government having to innovate, pass power down and take risk, and look to accountability more at a local level, as it is looking to us and saying, “We’ve cut your grants. Now, let’s see evidence that you’re innovating.” We can give you that evidence, but the change must come throughout.

Alun Cairns

I accept that, but I am making the point that financial constraint is a driver of innovation.

Sir Merrick Cockell

I would agree with you.

Lindsay Roy

Good morning. The Government says it is committed to devolving power out of Whitehall into communities. To what extent is that really happening?

Sir Merrick Cockell

The Government is committed, through the Localism Bill and other legislation. It is the direction of travel. It is patchy so, in some Departments of State, clearly passing those powers down is happening more effectively and quickly than in others. We think the time has now come for a major shift, and part of that is driven by people, by the data that we have, the polling that we do, the evidence and satisfaction ratings that we see, which are clearly showing a very interesting trend that is not uniform throughout all the services we provide. It is showing that, in the last five years, people are broadly as happy or even happier with the local public services that they receive. Whatever the political party is or whatever the Government is, that is saying—and the evidence asked the question, “Who do you trust to take decisions: the centre or areas close to you?”—they trust the areas closest to them. We think that is the mood, but not only is it the mood of people in the country; we can show clearly that we can save money, provide those services better and make them more accountable, at a local level, than the one‑size‑fits‑all government department model.

Karen Jennings

In health it is a different story. I would suggest that there is quite a bit of interference from government locally. For example, the Torbay Trust, which is a Care Trust, has been in existence for 10 years, working incredibly well as an integrated service. It is looking to merge elsewhere and is being told it cannot; it has to go out to competition. There is a whole range of other examples. For example, Monitor obviously wants to encourage local competition in the market, whereas we know that there are clinical commissioning bodies that have known providers they would like to work with and, yet, this rub exists, because of what central government wants.

John Tizard

I think Sir Merrick is absolutely right. If we are going to have greater localism, and I would certainly support that—all the evidence is you get efficiencies and greater effectiveness—Whitehall across Departments has to have a common agenda and a common approach. That was not the case when the last Labour Government introduced Total Place and it still is not with the current Government’s Community Budgets. Both Total Place and Community Budgets demonstrated that, if you have a greater opportunity to use the total public resource in a locality, you can get much better outcomes; citizens can be more engaged, there can be greater local accountability, and you reduce expenditure for the same level and quality of outcome. We do not have that in place currently. It seems to me that there is a real opportunity to move towards the logical position to which Community Budgets and Total Place would have taken us, which is a much greater level of devolution, both of resources and local democratic control of the use of those resources.

Lindsay Roy

In summary then, what needs to be done to make this big breakthrough?

Sir Merrick Cockell

I talked to all the political parties, as we look to manifestos in the next general election, and I do not see any of them saying we are going to follow what I have just been saying, which is to let go and to trust people to take a greater risk. Actually, it is to follow what everybody agrees. To the Government, with the Labour Party’s support, the integration of adult care and the NHS makes good sense, with £3.8 billion going into it so far. If we have something that we have proved and we know works, let’s stop trialling it and let’s get on with it. I would say, dealing with the public health argument, make Health and Wellbeing Boards at the local area truly accountable. Make sure that they fully represent the whole of the health economy in those areas, and then give them far more decision‑making power over the integrated health and care budgets.

Clive Maxwell

This is probably a slightly broader answer than you are after, but I want to talk about the four things we see as being necessary to open up markets and make choice and competition more effective. The first is about getting the market design right. The second is about tackling barriers to entry, to expansion and to exit of existing providers. The third problem in some markets is concentration and the fourth is making sure there is adequate information there for the people who are making the choices and the decisions about those markets.

Lindsay Roy

To what extent are you impeded by the silo mentality in central government and local government?

Sir Merrick Cockell

We are, and our report Rewiring public services tells you all about it. Where silos have been broken down and are beginning to be seriously broken down, like health and adult care, again you can see the evidence of how it works. We could point to Jobcentre Plus work and others where, when you begin to break it down, the opportunities are there and you get much better outcomes.

Lindsay Roy

Sir Merrick, you have called for a new framework. Can you tell us a bit about what kind of framework and how it would work more effectively? That is the LGA.

Sir Merrick Cockell

It is around passing power from the centre—that accountability from the centre to local communities. It is not a sort of power grab by local government. We are saying, which goes back to the earlier discussion, that you should take decision‑making as close to people, individuals and communities as you can. It is not that the power should come from the centre and be held by local authorities. We know that we have to move it down as close to people as possible. Even though there are problems with new technologies, I think we may be moving so that people will be able to access some services in a way that suits their lives, rather than a way that suits bureaucracies.

Lindsay Roy

Any other comments on that?

John Tizard

I think that is absolutely right. I think it was the previous Local Government Minister who talked about government devolution, and it is devolution from Whitehall to town hall, town hall to communities. It is doing the right activity at the right level, but there is a real pressure, again going back to financial pressures of course, to look for economies of scale, which can, if you do not get it right, be in conflict with decentralisation and empowering communities.

Chair

Can I just ask one question? Do we think in England we have anything to learn from the devolution settlements in Wales, Scotland and Northern Ireland?

Sir Merrick Cockell

Absolutely, we do. It is what we have described, in a rather grand way, as the English question. Certainly, it is our English question. That is, how come what is seemingly perfectly acceptable in Scotland and is now being offered to Wales—the Prime Minister’s speech in Wales very recently—is not really happening in England?

Chair

What is the answer to the English question?

Sir Merrick Cockell

In our view, we have picked up no real serious support for an English parliament. We think it is trusting local communities—not every council or every small area. It would build on some of the arrangements that are already there.

Chair

That does not deal with the legislative imbalance that the United Kingdom Parliament spends most of its time discussing English things.

Sir Merrick Cockell

It is not quite my pay grade, but I do not think it does. There is an important element of accountability in this. I do not know whether you are going to question us on it, but the organisation the Centre for Public Scrutiny is promoting the idea—one that I personally am very interested in—that there could be an area public accounts committee, with details to be filled in as to who would lead that and what independents would be on it. That sort of scrutiny at an area level, of all public services—that sort of forensic following of the money at area level, be it a city, a county or whatever—could help to ensure that true accountability and that democratic accountability for public money.

Clive Maxwell

I am not going to answer the English question, but one interesting issue that comes up from having different approaches in England, Scotland, Wales and, in some cases, Northern Ireland is actually seeing that diversity of different ways of trying to tackle common problems. Certainly, if you believe in choice and in innovation taking place, having those different things going on is itself a potential source of ideas. The question then is if you can find ways of delegating responsibility within those areas and, in particular, England to make sure again that there are different approaches being taken in different places and you can get lessons learnt for the other countries, if that is acceptable to the Committee.

Karen Jennings

I do think Scotland has demonstrated inclusivity, a civil society, the trade union movement and considerable partnership in policy development within each of the public sectors and, I would suggest, in health in particular. Also, we need to think a bit more about hurtling towards policy development in this area when we know that there is evidence around failure around commissioning and procurement—huge lessons to be learned. What are we going to do about that now? If you look at what is happening in relation to police and justice, and the probation service, we are moving at a rapid pace towards outsourcing elements of that, and yet we do not have our procurement processes refined enough to be successful.

John Tizard

I am not going to answer the English question. I do think we have an opportunity to learn and share across the four nations of the United Kingdom, and I do not think we do that sufficiently. I would suggest there is an issue of scale too, in Scotland, Wales and Northern Ireland even more so, where, in a sense, there is so much closeness, England being so much bigger. That has some impact too on the relationship between local, national and central. Just to pick up Karen’s point, it is really important that we do not conflate or confuse public service reform with marketisation. The role of a market may be a means to public service reform in some cases, but it is not the same as public service reform. There is a huge amount of reform that goes on within the public sector and across the voluntary sector, and I think we should recognise that.

Lindsay Roy

Let us get this into perspective. The devolved government in Scotland is highly centralised. I do not know if you are aware of that. I want to ask one final question: why do you think there has been very little publicity about the success of the Government’s Big Society project?

Chair

Any volunteers?

John Tizard

I think it is very difficult to judge something that was not properly defined, so what are we judging it against?

Chair

Sir Merrick, I like the short answers.

Sir Merrick Cockell

The thing is how you define Big Society. When it was announced, a lot of us looked and thought, “Hold on a minute; in my council, when we let our tenants have control of housing and run the company, that sounded like Big Society to me.” It may just be that the term has dropped out of use and Government does not use it very much, but actually it is something that is quite familiar territory to a lot of us.

Lindsay Roy

It was already there.

Paul Flynn

Sir Merrick, what remedies are in place for the day when a local authority cannot perform its statutory functions and goes bust?

Sir Merrick Cockell

Part of it is knowing early on where there are problems, and I referred to that earlier—the fact that we do a very detailed financial analysis with our members who are, bar two local authorities, every single major council in the country. Part of it is an alarm system, so that we know where there are problems and what we can do to help collectively to alleviate those. We work closely with Government; they are aware of councils that are in difficulty. In the past when Government would intervene in councils—I could quote Doncaster for instance—it would take Government intervention as the solution. Frankly, the evidence, and I do not think that anybody would disagree with it, was that has not worked. Another council that got itself into major difficulty was the Wirral. Actually, by the sector working very closely with Wirral Council, positively, it was a two‑year process from identifying the problem to sign‑off of Wirral, which is absolutely through that process. As I said, we work very closely with the Government Departments on being aware of those problems and we are talking to them about steps, work that may be done and some of the problems in district councils. Somerset, for instance, recently has been part of that ongoing work with DCLG.

Paul Flynn

As citizens are 10 times more likely to be impoverished by someone in a smart suit selling a financial product than they are likely to be robbed by a burglar or a mugger—endowment mortgages, private pensions mis‑selling, mortgage mis‑selling, PPIs, annuity swap deals, and it goes on—do you think that people feel more alienated from power over these major financial transactions than they ever were? Has any progress been made to give people any sense of empowerment on the financial market?

Chair

I am being advised this is a little off the point, but if somebody will give a brief answer to Mr Flynn, I would be very grateful.

Paul Flynn

If you lose most of your family fortune, as people did in that swap deal, it is rather more important than which refrigerator you buy.

Chair

Unfortunately our inquiry is about citizens and public services.

Paul Flynn

Equally, it is about public empowerment. I will correct you, Chairman.

Clive Maxwell

I will give you a quick answer to it, which is to acknowledge that levels of trust in financial services providers are very low and have fallen. The financial crisis was an important part of that, so has been the misbehaviour of a number of financial firms in the way that you describe. I see it primarily as the responsibility of those businesses to change their behaviours to restore public trust, but it is also the responsibility of the regulators involved to make sure that they are tackling those problems within those businesses and to make sure that the system of regulation is adequate to restore trust.

Paul Flynn

Are we in a brave new world of new regulation from where we were in the 1980s?

Clive Maxwell

I think financial regulation is changing since the financial crisis, yes. Has it changed far enough? I think we will have to wait and see.

Paul Flynn

What role do you think citizens should have in the design of services? Is it a utopian ideal, hopelessly impractical, or can it happen?

Karen Jennings

Yes, I think it can happen, and it does happen and has happened. Very often, if you look at the shaping of maternity services and hospices, there is a whole range of community developments that demonstrate that providers have listened and shaped their services to the needs of the vulnerable and so on. I am afraid I have to go back to the argument that I have been making all along: that gets lost when small providers are seen as, to use the term, bidding candy for much larger providers, which can provide services across the piece. For example, we have in local communities cleaners who work in a hospital in the morning and clean schools in the afternoon, under the same employer. I am not sure that is a particularly healthy thing to be done, but that is what these big providers can offer, and they can outbid much smaller providers in relation to providing those services.

Paul Flynn

You have given some helpful examples but, as usual in politics, between the dream and the reality falls the shadow. We have these promises, and this sumptuous Big Society does not seem to be happening as promised. Could you give us some other examples of successes? You have quoted a number.

Karen Jennings

Other than maternity and beginning‑of‑life and end‑of‑life care, you mean? There are all sorts of examples that happen in hospitals, where there are surveys of users of services that end up shaping those services, but the context at the moment is just very difficult, because staff themselves are feeling concerned about their own futures and about the direction of travel for the employer that they are working for. As I have mentioned earlier, in the community and voluntary sector, there is a real crisis emerging as a result of the mechanisms by which providers have to bid.

Paul Flynn

We seem to be doomed to live in perpetual hope and eternal disappointment. Is the Big Society healthy? Is it in a deep coma or is it stone dead?

John Tizard

There always has been a strong civil society. I do not see any evidence that civil society is diminishing, and there are very strong voluntary organisations, large, small and community organisations, with people volunteering to support, supported by local authorities and others. It seems to me that there is a strong civil society. I think we need to strengthen it and it needs to have a greater role. In terms of the role of citizens in public services, as Karen said, if the procurement process and the financial constraints are squeezing out many voluntary organisations, which are very responsive, maybe member‑led or user‑led, that is going to diminish that role. There is also the opportunity, whether the services are delivered by the public sector, business sector or third sector, for the relationship between the staff at the front line and service users. That is often where you get bespoke personalisation. Every school has a personalised approach to teaching pupils and students. The same occurs in good social care. The same occurs in the National Health Service. It seems to me that is a very good engagement where staff can respond and actually co‑produce a solution with their service user. That needs to be encouraged and staff need to be empowered. If you are delivering home care in 15‑minute slots, that becomes very difficult to achieve, I would suggest. The other is, again, we talk a lot about the citizen as if citizens were consumers of public services. We should also bear in mind, Mr Flynn, Chair, that of course public services also have a wider community benefit. Sometimes the service users are the wider community, rather then individual service users.

Karen Jennings

Potentially strengthening the benchmark around procurement may assist in enabling local communities, staff and providers to come together to have a discussion about shaping that service. For example, we need to strengthen the audit and the scrutiny function. We need to scope out all of those challenges around procurement decisions, and we need to strengthen the accountability and ensure best value around services. Then, we also need to build in sharing and learning the lessons of failure. From there, you can then start to consider a whole range of other elements, such as whether it is so awful to have an in‑house bid. You can look at ways, through procurement, to maximise the involvement of users and workers, in terms of shaping that service. We have to use better the mechanisms that exist and to benchmark them and set them out.

John Tizard

I want to make two very practical points, just to add very quickly, Chair, to what Karen has said. One is users and their representatives can be involved in procurement processes and ought to be involved at all stages. Secondly, if you are going to have an outsourced contract, there is no reason why some of the provider’s reward should not be contingent on user satisfaction and user feedback.

Paul Flynn

Possibly the most impressive example of people working mutually for a benefit to a community has been the trade union movement. Do you find that your value is appreciated by this Government and used to its full extent?

Karen Jennings

Certainly we were very successful in our negotiations around changes to pensions. We worked very collaboratively with the wider trade union movement, TUC and in negotiating with the Cabinet Office on that. May I just say that UNISON, as I have said, has got 1.3 million members? 1 million of them are women; 160,000 of them are retired members; all of them are working right across the community. We are unique in that we represent every element of the public service. I say public service rather than public sector, because public service is now in the community and voluntary sector and in the private sector, and there is an unfortunate definition that continues between the public sector and the private sector. We span every single occupation, other than doctors and dentists.

Chair

Sir Merrick, do you share the view that the unions are part of this network of involvement?

Paul Flynn

A successful Big Society.

Sir Merrick Cockell

I am not going to get drawn but, as far as local government is concerned, we work effectively at my level with trade union leadership, particularly around pensions and areas of mutual interest, in a perfectly sensible way. We negotiate on opposite sides very often, as we are the employers in union negotiations.

John Tizard

I would just say that the trade unions are a key element of civil society.

Mr Turner

Mr Maxwell, what do you see as the three main priorities of OFT’s public service work?

Clive Maxwell

We are there, firstly, to take enforcement action where organisations are not complying with consumer or competition law. We have done very little of that in the public service area to date, but there are some examples I can talk you through if you would like. The second area is analysing and assessing markets, and understanding how they work and, as a result of that, providing recommendations, in particular to Government in the case of public service markets, because it is often Government that has the controlling hand over the way that they operate. The third area I would mention is around looking at merger cases in the public service arena. Again, we have had relatively limited involvement in that to date, but we have some examples again. Those are the three examples I would talk about.

Mr Turner

Thank you very much. What is your response? You have told me your response. Your response is to say it is too small; we cannot really sort out something like the ferries crossing the Solent, because legislation would be required, and legislation is very difficult to get into the queue. How do you solve that problem for people living on the Isle of Wight?

Clive Maxwell

If I could generalise slightly, if I may, very often when we look at markets, firstly, we find examples of where businesses are breaking the law. If we think it is serious enough and suchlike, we can take action if the evidence stacks up. In other cases, we find markets are dysfunctional often because of the way that that market has been designed, if it is a public service market, or because you have got to a position where businesses are no longer really competing with each other. They have reached not necessarily an unlawful sort of agreement but have just fallen into a set of behaviours that rather suits them and means they are not competing with each other in practice. In those sorts of circumstances, if it is about market design, you can make recommendations, as I say, to Government or to other organisations that are involved, somehow, in the way that market works. In some highly regulated sectors like financial services, we as an organisation can make recommendations to the specific sectoral regulator to change its rules to heighten competition and the tension there. If it is about concentration in other ways, there may be opportunities to look at, in the most extreme cases, like the British Airports Authority, breaking up existing businesses to increase competition. There are certainly some markets where there may only actually be space in the market for one provider. In those sorts of markets, it is difficult to know what to do. In certain circumstances, you can look at ways of regulating prices, for example, in some monopoly situations, but they are difficult ones to solve. That is why we, very often, if we are thinking about public services, would like to get involved early in helping to assist the market design phase, because that can avoid those circumstances arising.

Mr Turner

Right, so we will see whether it is a public service if conducted by the private sector in the Isle of Wight.

Clive Maxwell

As we heard the previous panel say, there is a spectrum of definitions of what a public service is, but certainly many public services are provided by private businesses.

Mr Turner

More generally, how effective has competition been in improving public services?

Sir Merrick Cockell

If you look back to competitive tendering a very long time ago and all the various changes over the years, I think it has been a very positive effect on public services, because it has introduced that element of challenge. Whether in the end one has gone down the road of what might have been called in the past privatisation, commercialisation, bringing in commercial partners or joint ventures increasingly, nowadays the challenge is from not only the commercial sector but voluntary sectors and others to established practices, comfortable ways of doing things—things that you might be able to put a social value on and see that as actually being more important than the financial value, when really it should be a true balance, because this is public money and, when there is less of it, we certainly have to get the best value for it. As the relationships have changed from what we were talking about earlier, those large conglomerates that have taken on public services and still do—there is lots of stuff in the papers about some of them at the moment—certainly at local government level, there is the move away from giving those sorts of all‑encompassing contracts, very constrained by the legal documentation, to a far more ongoing relationship, often increasingly a joint venture relationship so that the public authority does not let go and still keeps a direct involvement and investment in it. It is the logical extension of many years of experience of how working with other providers and getting the challenge from other providers has improved, not only through working with them but, actually, when we have not worked with them and just when the public sector has continued to provide those services, it has done it much better. That forensic examination by the private sector has opened up the opportunities that are there.

Mr Turner

Very quickly from each of the three of you, perhaps the four of you, you are taking about having local arrangements rather than something like national, but how much of that localism is done with national companies rather than local companies? Could you each say very quickly?

John Tizard

Before I answer that, can I just pick up your earlier question? The evidence of the use of competition is very mixed. It is mixed across different services and in different sectors from the public sector. In a sense, it is quite difficult to generalise in the answer. We have seen over the last few years that, in moving competition into more complex services, where a whole range of agencies or organisations need to be part of the solution, it becomes much more difficult—or where the outcomes are much more difficult to define. For some transactional activities, it may apply much more effectively than it does for some of the more complex areas. Merrick is absolutely right: there is a move in many authorities, but not all of them, away from these mega‑contracts, wanting to have a more collaborative arrangement with the local voluntary community sector, maybe with local SMEs. One of the reasons you would not go for traditional outsourcing in the current state of mind is it takes time and is costly to do. If you have an inflexible contract in a period of uncertainty, that is not very clever. It seems to me, in a sense, that model is probably more historic than it is for the future. In terms of local, the NAO report that the Public Accounts Committee considered just before Christmas demonstrated that, in some markets, there has been a real concentration with a small number of conglomerate large firms that Sir Merrick referred to. Again, if the policy is to have greater competition and a greater role for both business and voluntary sector organisations, there needs to be a very firm leadership role and procurement role that actually opens up the systems to a much more diverse set of players.

Chair

Can I press Clive Maxwell on that point? It is presumably way beyond your remit to provide for that degree of competition in the provision of public services.

Clive Maxwell

At the very local level, we certainly do not provide it ourselves, but we do get interested in it.

Chair

How can we promote that kind of competition?

Clive Maxwell

Let me give an example. You referred to our work on public sector ICT, which we are currently doing a market study on.

Chair

That is very much at a global level, not the micro level.

Clive Maxwell

Yes and no. If you look at the way in which ICT is purchased by local authorities in certain cases, such as buying systems for housing benefit or running Council Tax revenue systems, you will find that there are a couple of hundred different purchasers for those systems. It is quite interesting when you look at those sorts of markets; I will not use the word “dominated”, but a high proportion of those sales are by a very small number of businesses. It is interesting to ask the question why that is happening and why you do not get those sorts of changes. I used the ICT market because that is one I happen to know more about at the moment, but I suspect there may well be other services like that as well.

Karen Jennings

In response to Andrew’s question, if I may, Chair, I think you are right. We see more and more national firms winning local contracts, and we see that in all sorts of ways, whether it is through NHS ambulance transport services.

Chair

How do we address that?

Karen Jennings

We go back to the issue of standards and benchmarks in procurement and also potentially adopting the European directive on procurement, around looking at social and environmental factors, ensuring that they have good practices in terms of employment, their history and so on.

Chair

The more regulation you provide, the more it is going to squeeze competition out of the market. Do you not accept that?

Karen Jennings

We have to look at standards. At the moment, in the absence of that, we have a race to the bottom. You just have to look at some of the most vulnerable people who are being cared for in society.

Chair

In childcare for example, there is a very strong body of opinion that we are now so over-regulated we have the highest‑cost childcare available to consumers in the European Union. That degree of regulation is actually a race to nowhere.

Sir Merrick Cockell

And we have one of the safest systems of child protection in the world.

Chair

It is a balance to be struck, is it not?

Sir Merrick Cockell

Can I just follow your question about competition and being able to do business locally with more providers? The instinct of local government is to do things locally if they can. It obviously would be the case, because it would generate local jobs and economic growth, and even a sliver of business rates and all those sorts of things.

Chair

How do you prevent your local contracts being taken over by large national providers?

Sir Merrick Cockell

That is exactly the split that we have between an instinct and then the experience. For instance, if you look at audit, which has been controlled by the Audit Commission, that is all now provided by the private sector, but, by a single contract broken down into a regional differences, a uniform 40% cut was found in the audit bill for local government and many hundreds of millions of pounds from that. There you have the impact of working collectively. Now, you have talked about ICT and the regulator has talked about ICT as being a few providing services to hundreds of authorities. It is not alone in ICT; you could look at care—adult care and care for the vulnerable. There are one or two providers that might well have a relationship with the majority of local authorities, but each one is negotiating a different price. That is actually an area that the Local Government Association is now literally at the final stages of looking at, and whether we, representing the sector, should be having a far more overt presence to see whether, by working on behalf of and with the sector, we can drive down prices.

Chair

This all sounds rather academic. What would you say to a group of people who want to provide social services care in their own group of streets, in their own neighbourhood? How would they be involved in providing local services to their local community?

Sir Merrick Cockell

They need to talk to their local council. If they go on the website, they will find almost every council has how SMEs can provide services.

Chair

They have to go through a rather complicated bidding process with pre‑contractual qualifications.

Sir Merrick Cockell

Absolutely, which is not designed to help them.

Chair

How many pages of documents would they need to read to provide social services?

Sir Merrick Cockell

It depends. If it was a formal contract, there would be a lot of processes to go through, no doubt.

Chair

This is anti‑competitive. This is very anti‑competitive, is it not?

Sir Merrick Cockell

Certainly, it does not make it easy for small businesses or small groups.

Chair

What do we need to do about it?

Sir Merrick Cockell

We need to look at minimum levels. Local authorities need to look at risk.

Chair

Is this something that could be better devolved to local authorities rather than regulated from Whitehall?

Sir Merrick Cockell

If it was not just the responsibility devolved but actually the flexibilities, but in care you have picked a particularly difficult area.

Chair

What recommendations should we make in our report?

Sir Merrick Cockell

It depends. If you are talking about all services, then I would say that you should certainly make it easier for local authorities to be able to take, in a sense, greater risk, balanced risk, and to be able to look for much simpler tendering processes and much simpler documentation.

Chair

With a shortage of time, maybe you could write with a considered view in answer to that question.

Sir Merrick Cockell

I will, certainly. At the moment, it is involved in care. There is a crucial element in this, which is different from ICT.

Chair

That is why so many people want to be involved and they naturally wish to contribute locally, in their local community.

Karen Jennings

Chair, if I may just also ask the Committee to consider what cost the market is in relation to legal challenges, bringing in lawyers to help you do those contracts and so on.

Chair

Is that in your evidence?

Karen Jennings

It is, yes.

Clive Maxwell

In a sense, we agree about having simpler contracts, being very clear about what the procuring organisation’s objectives are and sticking to those, not changing them over time—larger firms are probably much better able to deal with that sort of risk in the way that they run a contract than a small one—and trying not to put too much weight on past experience and past records of doing business. Again, that can act as a barrier to entry to newer types of firms. It is also about trying to be open‑minded about the types of business models that are going to be used to achieve things, because again you will find new entrants are more likely to be innovative than existing ones.

John Tizard

We have said it and the previous panel said it too. It is about aligning procurement with policy. If you have clear policy objectives for a greater role for local SMEs or the local voluntary and community sector, you want certain standards, whether in diversity employment standards or equality; you are building those into your procurement process. I think we are often the victim of the procurement community, which scares us. They are risk‑adverse. I think local authorities have been quite creative and imaginative in the way that they apply those.

Chair

Do you think local authorities could put conditions in their contracts that require providers to recruit local people to provide local social services?

John Tizard

I am not an expert on European procurement law but, in reality, you can, and there are ways of achieving that. Many local authorities are doing that.

Sir Merrick Cockell

It happens in contracts, and indeed contracts can often be involved in how recruitment is done, giving local people priority, and so on and so forth.

Chair

Not just giving local people priority, but allowing the people in the vicinity to look after the people who live in their own vicinity.

Karen Jennings

With respect, that is exactly what happens right now. The local economy is based on local people working for the community and voluntary sector public services.

Chair

You talk to charities that would like to provide that kind of service and they are shut out of the market by the big providers, with people driving miles and miles around the countryside to provide services at great distance.

Karen Jennings

Yes, that is true.

Chair

How can that be prevented?

John Tizard

A good local charity and a good local authority will be in regular dialogue. There is the right to challenge, which is clearly now a legal right, that the voluntary sector has—to challenge to supply. If there is good dialogue, well before any procurement is considered, that should happen.

Chair

Good procurement practice should deliver this kind of outcome.

John Tizard

It is good commissioning and procurement practice, and good dialogue, and that not being squeezed because commissioning departments are being reduced in size. Again, it takes us full circle back to the financial constraints.

Chair

Any last thoughts?

Karen Jennings

We need an ethical approach to commissioning as well.

Chair

Any last thoughts? If you have any further thoughts as a result of this, please do send them in in writing and we will publish them as evidence. I am most grateful to you for being with us today. It has been a long session but very worthwhile. Oral evidence: Citizen and Public Services, HC 800 19