Francis Maude on Big Society Mutuals

They are very different in ambition and range: from NHS staff wanting to launch an employee-owned social enterprise to help homeless patients, to employees from local authorities getting together to form a mutual to deliver children's services, and further education colleges coming together to see if they can set up a new awarding body.

But they do all have certain things in common. At their heart are frontline public sector entrepreneurs ready to take control of the services they run. And there's often a common focus: the desire to join up the services they know so well so that they are actually designed specifically around their communities' needs, or so they can start using potential economies of scale to generate efficiencies. In a time when we need to save money we have to be ready to explore ideas like this.

Following the mutuals or "doing a John Lewis" is very much in vogue with the Conservatives at the moment. On the surface, John Lewis looks like a model for the public sector. It doesn't make profits for capitalist owners, it works very well and it has very happy customers.

The single point that is missed, the single cog that means that the whole philosophy doesn't roll, is that John Lewis exists in a competitive market. As do Baxi, the Co-op and the people who run the health food shop near me. That means that if they have to get customers, they have to do a good job, and if they don't, like any other fat-cat owned capitalist company, they go to the wall.

I'm not even sure what the model of these mutuals is because the whole notion of a mutual that is to do with government seems to be full of contradictions. Are the owners able to sell the company, like the owners of my health food shop can? Who funds them, and if it's the taxpayer, then are they accountable, and if that's the case, what's the difference to a government department? Is there plurality of supply and if so, what happens to the ones that go to the wall?

Because if they're funded by the taxpayer, then they should be responsible to the taxpayer. If they can make private profits, then these people can put in their own cash and should be subject to private losses. If they're fully private, then making them monopolies would be bad.

I don't understand if these are supposed to replace external, contracted suppliers, or monopoly government departments. But what the government seems to think is that they can create something with all the benefits of the free-market like innovation, but without things like incentives or the downsides of people being put out of business. And that simply doesn't work. Experts left in charge to run things their own way will run them in a way that they think is important. Which might match what customers want, but if it doesn't then you're knackered.

I suspect in 5 or 10 years time, we'll see that this doesn't actually work, and something else will be tried, and eventually, we'll get to what is the only way to do government: reduce it down to what can't be delivered by markets, and deliver those things as close as possible to the consumer.

Silly Article From Peston About Business Cuts

From The BBC:-

Business leaders have been arguing passionately that the public sector needs to become more efficient. You'll recall that the equivalent of a plane-load of them publicly backed the Tories' general election campaign to make additional savings in public expenditure this year - in order to avoid that national-insurance rise they hate.

Well, it'll be interesting to see how they respond, now that their dreams have been made a reality.

Because a good proportion of the savings announced today will hit them directly.

So, for example, the Treasury has announced £1.15bn of cuts in discretionary spending by Whitehall on items like consultancy and travel.

Who receives the bulk of such largesse? Well, it's private-sector consultants and travel companies.

There'll also be £95m of IT savings - again a squeeze on monies handed over to private-sector contractors.

A further £1.7bn will be saved from delays and cancellations to contracts and projects - which is probably £1.7bn of revenue that won't be received by companies.

On top of all that, there are the reductions in funding for regional development agencies, which could have an effect on financial support received by many thousands of businesses.

In other words, the harsh reality of making government more efficient may not be quite so appealing as the theory to the many business leaders who sell goods and services to the public sector.

Is Peston an idiot, or just spinning a leftist line here about spending? We'll assume he's not doing that, seeing as how the BBC are so unbiased.

The businesses that signed that letter were the likes of Sainsburys, Diageo, Marks and Spencers, Easyjet and HMV. Their sales to the public sector are almost non-existent and is certainly outweighed by tax cuts and the resulting money being put into people's pockets.

Some other businesses are entirely agnostic about the state or the private sector. A friend of mine runs a software recruitment agency to both private and public sector. A cut in public sector means more spending in the private sector.

Then there are businesses that supply to the state that are entirely necessary. If you're in the heavy arms business, you aren't likely to see much difference as that government spending isn't going to be cut.

The types of businesses that will be affected are those who have attached themselves to the state. Either they supply something that government doesn't need and the private sector won't buy either (like contemporary art) or they are so wedded to government that they can't restructure quickly enough.

But "business" is neither in favour of less or more government. It's not about business, and being "pro business" is not better than being "pro state". It's markets that matter.

Public/Private Partnership

From John Redwood's Blog

On Wednesday at conference I attended a meeting organised by private providers of health care who work for the NHS.
Their presentation was well crafted and interesting. They stressed that they were wholly committed to the values of the NHS. They supported as fully as most voters the idea that health care should be delivered free at the point of treatment, regardless of means but based on needs. They agreed that the bills should be paid for out of taxation.

I'm not sure quite why John is telling us this, because a brief answer is "Well, yes. Of course they would". The last thing you want as a businessman is trading with millions of little customers who care about getting good value because they really want to have some money to spend on getting their car fixed.

No, the thing that any sane businessman wants is to trade with a lazy, incompetent bureaucrat who will agree to a terrible contract in your favour, and barely enforce it.

It's where people get so mixed up between business and markets. There is no incompatibility between business and big government. Business frequently likes government (especially if they're a blessed supplier). It's not pro-business we want, it's pro-market.