According to the current left-liberal consensus, it’s privatisation wot’s dun it.
The specific detail of the argument varies. Mariana Mazzucato insists that if the state uses outside experts, then that means it loses the ability to do things directly. Others say that the private sector just isn’t very good at the task – the water companies are touted as an example. That Scotland’s state owned and run water company is – to be polite about it – no better than the English capitalist ones is considered a most impolite point to make. That Scotland doesn’t even measure how much worse it might be north of the border means no invites to intellectual dinner parties for you!
The worst of these critiques is the one that insists that as the private sector is going to take profits, then of course the non-profit state can do it better. Stands to reason, dunnit? That the for-profit organisation might be more efficient, even with a profit margin, isn’t one of those allowable – not in polite society – retorts.
A recent example of this:
The outsourcing of complex services, involving some of the most vulnerable people in society, such as social care or prisons, is quite another. ‘It is an astonishing indictment of the British state,’ analyst Sam Freedman has observed of privatised children’s care homes, ‘that it no longer has the ability to provide care for those who need it most, and instead allows blatantly ill-qualified people to charge exorbitant fees to provide unacceptable levels of care.’
The logical answer that then follows from this is that if only the privatisation were reversed, then all would be well with the British state. No thought need to be given to anything deeper, just excise that hateful profit, capitalism and privatisation, and all will be golden.
As political rhetoric, this has force. As a description of reality, less so. For, as we noted a year back, those private sector children’s homes do not make some vast profit. Also, there are council children’s homes and, as the Competition and Markets Authority said:
Turning to price, our evidence suggests that the cost to local authorities of providing their own children’s home placements is no lower than the cost of procuring placements from private providers, despite their profit levels.
‘No lower’ is, in my view, a politesse for considerably greater cost in council homes. But that’s just my view, of course. The cost of placements in children’s homes is not a result of outsourcing nor profit. It’s an outcome of the standards we insist upon in children’s homes. There really are places out there where a suburban villa – we cannot fit a 24/7 rotating staff into a council flat after all – is used to house the one child. That’s where the expense comes from. It might be right that we spend that much, demand that standard. It might not be. But whether it’s the council running it directly or some private company isn’t making – as per the CMA – the difference. It’s what the state is trying to do which makes it expensive.
Now, I’ve worked as a press officer for a political party so I’m fine with the value of political rhetoric. But it is necessary for those pushing a phrase, or confecting an outrage, to grasp that it’s a phrase, not the underlying reality. So too those who would build policy to correct that deemed outrage. A reasonable analysis of modern politics is that this distinction – this wholly necessary distinction – has been forgotten.
Sometimes this results in comedy. Governments for the past 15 years have been insisting that they’re cutting the state. Those opposing this have been shrieking about austerity. All good political knockabout, no doubt about that. The comedy lies in the number of incoming backbenchers – even some ministers – who actually believed it all. Who are then insistent that there’s some pot of unspent money that can be used to reverse everything awful that’s been done.
That there was no austerity – despite the successful rhetoric – is frying more than a few brains out there. That there’s no unspent pot is disappointing many more. For spending more really does mean that unhappy task of gouging more cash out of the populace – the bad bit of politics.
The reason the British state is expensive is because it does many things to varying degrees of quality. Who is employed to do them – that privatisation, outsourcing, thing – is a marginal issue. In the sense that it makes a difference at the margin to the cost of what is being done. But the cost of the British state is determined by what is being done to what standard, not the delivery mechanism. That means that reversing outsourcing – of, say, children’s homes – isn’t going to make any difference to the costs of the state.
To take two examples currently under discussion. SEND education means that a large number of children get taken to school by taxi. In some cases, this means thousands upon thousands of pounds a year – more than actually gets spent upon educating a child once in school in some cases. Whether this is done by hiring a local taxi firm or by the state employing drivers directly makes near to no difference to this cost (well, the state would be more expensive, but still). The cost is the decision to take certain children to school by taxi. Maybe it’s a good decision, maybe it isn’t, but that’s where the cost lies.
Or Motability, cars for those with a disability. Apparently the scheme accounts for one in five of all new car sales in the country. Whether that’s done directly or not, outsourced or not, makes little difference to the costs – it’s buying one in five new cars sold that costs the big money here.
How the state does things matters, of course it does. I am a firm believer that for many things – note not all – the private sector will deliver more affordably and efficiently than the state. But that is something that operates at the margin.
The British state is hugely expensive these days because it insists upon doing so many things, and many of them in a very expensive manner. It’s not the delivery method that is producing the burden – it’s what is insisted must be delivered that is.
Kenan Malik and others need to grasp this before the rhetoric becomes the error fed into public policy.
This article (Why is the British state so extortionately expensive?) was created and published by CapX and is republished here under “Fair Use” with attribution to the author Tim Worstall
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