In this month’s Executive Soapbox, Jonathan Garnett, chief executive of Tribal’s education business, looks at the role of the private sector in delivering public services for education and skills and calls for a level playing field.

No serious commentator now expects anything other than a prolonged period of rapidly rising public debt. Using the latest Treasury forecasts, public sector net debt will rise from 36.5% of GDP in 2007-08 to 76.2% in 2013-14. Without an early and sustained improvement in economic performance, that position will become materially worse. It is therefore inevitable that, as a society, we will be facing years of fiscal austerity.

Whatever its political hue, any new government will face pressure to increase revenue from taxation and to reduce spending on public services. After long periods of real increases in spending under both Conservative and Labour administrations, many public sector organisations will have to navigate an environment where reductions in budgets become the norm.

Given this economic backdrop, there has never been a more pressing time for an informed debate about the role of private companies, and charities and social enterprises (the third-sector), in the delivery of public services.

Last year, the Public Services Industry Review by Dr DeAnne Julius concluded that, when public sector organisations competitively tender large contracts, they can achieve savings of between 10% and 30%. Crucially, the report noted that this had no adverse effect on service quality.

Through Tribal’s work in education, we believe that we are ideally placed to demonstrate the reality of the Review’s findings in this sector. We are developing a new outsourced recruitment service for teachers and support staff for the DCSF, which is being introduced across England and could save up to £30m a year. The point is that savings are being made at the same time that the service is being improved; value for money and improved efficiency by any measure.

However, if this principle is going to work effectively, we believe that genuine competition and the commissioning of services must become an increasingly important element of future public policy. A key element of that policy must be clear guidance and audit and procurement frameworks that do not give pricing advantage either unfairly or inaccurately towards public sector (or related) organisations.  

Applying this to education, the government’s clear intention is to empower the frontline and give local authorities greater powers to tailor services for their areas. This direction is not likely to change under a Conservative government, although the means to achieve it might.

But what does this mean for local authorities? They need to effectively muster the right skills and expertise to deliver and continue improving education and skills services during an economic downturn which requires costs to be kept to a minimum. Furthermore, these skills and competencies need to be consistent and avoid ‘postcode lotteries’.

To meet this challenge, these organisations should play to their strengths and focus on their role as commissioners of services, outsourcing delivery to those organisations that are best placed to provide the relevant service cost-effectively and at the required level of quality. Critically, this does allow them a freedom to manage that quality in a way that is more difficult for a service that is self-delivered.

In our experience, the public sector is not instinctively hostile to support from the private sector. A public-private partnership in Manchester to raise attainment in under-performing schools has seen demand for support more than triple in its first year of operation. Organisations like the National Centre for Excellence in the Teaching of Mathematics (NCETM), which is run by Tribal, can bring coherence and consistency in delivering the skills agenda across the UK, while still working with and supporting local authorities to fulfil their increasing list of responsibilities.   Concern at commercial involvement tends to be selective and focused on the delivery of frontline teaching provision; schools are, of course, entirely built by, equipped through and often supported by the private sector.

So, if the private (and voluntary) sectors are to have a greater role, a number of important factors will need to be addressed. Firstly, any future government will need to give an unequivocal commitment to opening up public service provision to effective competition.

Secondly, public sector organisations should invest in strengthening the capability of their commissioning function, enhancing both the effectiveness of the initial procurement process and the monitoring of the subsequent service delivery.

Thirdly, there needs to be a ‘level playing field’ between public, private and third-sector bidders for contracts. For example, it can be neither right nor financially sound that in transferring pension liabilities to a new provider, private sector organisations are often forced to assume future funding contributions at twice the level required of competing public sector bodies.

Service providers will also need to respond to the new economic environment by developing new ways of working with their public sector customers, fostering innovation and displaying a willingness to share risk on an equitable basis.

Competitive tendering has a very successful history of delivering both savings in costs and improvements in quality. In an environment where many public sector organisations will be facing increasing responsibilities alongside their financial pressures, its use should be accelerated so that it becomes a fundamental cornerstone of public policy.

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