The winner takes it all…?

Last week I attended an event hosted by Reform, where Clive Maxwell, Chief Executive of the Office of Fair Trading, was talking about competition in public services.

I found it surprising that there was no debate about whether competition in public services is the right thing or not – there was a lot of consensus about this being the way forward for the public sector. This may have been because several members of the audience were from the health sector where competition and choice are more established and accepted concepts than in local government, but interesting nonetheless.

Another question that gave me food for thought in relation to competition in local government is the driver for competition. Competition may well lead to higher quality and lower prices in industries such as energy and telecoms (two of the examples that Clive Maxwell used in his speech), but the key driver here (as in health) has been about consumer choice – can the same be applied to local government? Choice is important to health patients but do local residents really care which provider they get their planning service from as long as the application is processed fairly and quickly? So competition might well be appropriate and effective, but it can’t masquerade as ‘consumer choice’ as it might do in other sectors.

Even if choice might not be appropriate for some local government services, we are certainly seeing competitive tendering being used much more frequently to reduce costs. In those situations the experience of increasing competition in areas such as energy, telecoms and health can be useful, as this has shown that just increasing the number of providers of a service doesn’t in itself guarantee competition and its associated benefits – you need to remove/reduce barriers to exit and entry to really stimulate competition. So this is another reason why doing things like making procurement processes simpler and reducing the requirement for so much previous experience (to encourage new providers to come to the table) are so important in public sector procurement. Barriers such as high TUPE costs and different tax regimes for private/public/third sector providers are tougher barriers to overcome however, and Mr Maxwell (probably unsurprisingly) didn’t have any simple answers to this challenge.

Finally, Mr Maxwell emphasised that organisations seeking to develop new markets for services should ensure they really invest time and effort in market design. They need to articulate clear objectives whilst also allowing innovation and flexibility. Often the newest providers from other sectors (i.e. not the ‘usual suspects’) are the ones that will often bring the greatest innovation, so commissioners need to find ways of encouraging these organisations to be involved.

We’re looking forward to exploring these interesting (and potentially controversial) questions, and their implications for local government, at our event with SOLACE on market making in June. We’ll be sure to post the key themes from that event on this blog.

OC

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