EU procurement rules could herald a significant change to public services
The Information Daily, By Dan Gregory
The public services industry affects all UK citizens, employs millions of people and moves billions of pounds around the economy.
At Social Enterprise UK, we have been watching how the drive to outsource public services is gathering speed and a ‘shadow state’ is emerging.
Now, a small number of companies – or oligopolies – have gained large stakes in critically important public service markets, together with astonishing influence over how these markets work.
Transparency and genuine accountability are often lacking and contracts can be heavily weighted in favour of a handful of private providers and their shareholders, often to the detriment of the taxpayer and service users.
A few of these private providers have even become ‘too big to fail’ – when they do, they simply go on to win more business, or taxpayers pick up the pieces.
Even for those with a firm belief in the role of markets in public services, these are a long way from the markets we might hope to see, distributing services efficiently and effectively.
In fact, many of the markets where public services are traded are widely agreed to be rigged, or even broken.
Estimates suggest that the current market for outsourced public services is now worth over £100 billion.
This is at odds with research we conducted last year, which reported a widely held view among citizens that it is unacceptable for shareholders to make a profit from running many public services.
But new laws emerging could reverse this dangerous trend.
Some remarkable policy changes are lighting the way for public services to move out of the shadows, taking us beyond a tired 20th Century argument between public and private.
The introduction of the Social Value Act and significant forthcoming changes to EU rules look set to favour a greater role for organisations with a social purpose.
Changes to EU law directly reflect the recommendations made by Social Enterprise UK in our report The Shadow State published almost a year ago.
The law stipulates that the social and environmental value a service provider creates can be taken into account in procurement and how poor performance under previous contracts can count against bidders.
Most intriguingly, the new rules also enable public bodies to reserve the award of health, social and cultural services contracts exclusively to social enterprises.
The new rules could also help social enterprises that have struggled with the sheer size of some contracts and the costly tendering process involved – commissioners will be encouraged to create smaller contracts and introduce higher thresholds with less red tape.
The new rules could herald a significant change to how public services are procured and delivered.
Social Enterprise UK is proud to have influenced these emerging rules, arguing that they should only apply to organisations which have a public service mission, reinvest profits in pursuit of that objective, and are either employee, user or stakeholder owned or managed.
We think that these are vitally important conditions to protect the taxpayer and service users, as well as for potentially giving staff a more engaged role in the management of their services.
Whether this really revolutionises our public services will depend on local action across the country. It will be up to council leaders, commissioners and local budget-holders to seize this opportunity.
The encouraging sign is that we are already seeing real commitment and progress emerging in areas that have embraced the Social Value Act, such as Liverpool, Birmingham, East Sussex, Torbay, Croydon, Durham, and York.
We believe that the stars are aligning to shine a light on a model which goes beyond the traditional debate between public and private, enabling greater innovation and entrepreneurial approaches while retaining a public service ethos.
This new law is a real opportunity to move beyond ‘peak profiteering’ and put social value at the heart of our public services.