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Public Services

Volume 690: debated on Thursday 22 March 2007

rose to call attention to the monitoring by Parliament and Government of the quality, value for money and transparency of public services commissioned from the private sector; and to move for Papers.

The noble Baroness said: My Lords, all of us in your Lordships’ House pay our taxes and, like our fellow citizens, we are very keen to ensure that the money is spent by national and local government wisely and carefully. We want to see value for money, services delivered by people who are expert in their field and fairness in any competition to gain contracts for the work.

There is one overarching principle underpinning what I want to say today: transparency in the way public money is spent forms the democratic link between those being taxed and those spending the taxes on their behalf. In a free and democratic society, monitoring and transparency in the funding of public services are essential.

None of us on these Benches wants to tax the British public overall any more than they are already taxed. We may want to tax things differently, such as the environmental taxes that we have long proposed, but we certainly do not want to tax more. That is why I feel it is vital to scrutinise very carefully how public money—our money—is spent. Historically, public services were mostly delivered by the ranks of employees of government departments and their agents. That was a long time ago. Nowadays, there are actually fewer real public services than there used to be, following the series of privatisations of the past three decades. The supply of water, telephone services, electricity and gas are now private services. The consumer can choose their provider of these domestic services. The provision of train and bus journeys is now a private service, and there are many more examples. There are even plans to privatise social services, about which I am extremely cautious, since people’s lives are at stake.

Some public services are still controlled by local and national government, although nowadays they are hardly delivered by them at all. The ranks of civil servants and local authority employees have been drastically reduced. Instead, many workers delivering public services are employees of private companies and charitable organisations which compete with others to deliver public services. That is a very good thing. We have seen major improvements in the delivery of some services because of that competition. People earn a good living from it, and companies make fair profits. That is absolutely fine. We see some excellent examples where two organisations can pool their expertise to deliver a public service. I cite for example the partnership between an arm of Serco, a private company, and the voluntary organisation I CAN. They combine their expertise to promote speaking and listening skills in schools. The children’s services provided by the NSPCC and other charities are excellent and delivered by experts on the basis of evidence of what works.

Yet I was most concerned to read recently in the Charity Commission report Stand and Deliver that only 12 per cent of voluntary organisations undertaking public service contracts are paid in full, which undermines the whole concept of contestability. How can the Minister, on behalf of the Government, justify such a thing?

The role of government departments, non-departmental government bodies and local authorities has changed. They are now strategic service commissioners rather than having the provider role of the past. In these circumstances, the quality of the commissioning guarantees the taxpayer value for money. The quality of the monitoring ensures that the taxpayer continues to get value over the years of the contract.

There are now two giants in the delivery of public services: Serco and Capita. Serco was described by the Guardian as,

“the biggest company you have never heard of”.

This is where I come to the transparency part of my question. These two companies run enormous quantities of our public services. Last year, Serco’s net income was £79.5 million and Capita’s profit before tax is quoted on its website as £193.2 million. Yet Capita is known only for the London congestion charge and Serco is hardly known at all to the man in the street.

Serco manages transport systems, facilities for the Atomic Energy Authority, air-traffic control systems, both civilian and for the RAF, provides electronic tagging for offenders and runs prisons, young offender institutions and an immigration removal centre. It provides health services and is approved to bid for the operation and turnaround of failing NHS trusts. It runs education support and information services for schools and it operates leisure centres. It is a British-based, international company, but most of its turnover comes from the UK.

Capita is another British company; it has been part of the FTSE 100 since 2004. It has grown from a £100 million company in 1997, when Labour came to power, to a £4 billion FTSE company by 2006. No wonder its former executive chairman felt able to loan the Labour Party £1 million. The company’s public service contracts range through education—it runs all teachers’ pensions and is the leading provider of IT support and software to schools and local authorities—to health services, the London congestion charge, the criminal records disclosure system, National Rail, BBC information and TV licensing, the operation of benefits such as the education maintenance allowance and an enormous number of business management and IT services to central and local government. There is much more, too.

So widespread are the services provided by these companies that we have no idea whether there are any conflicts of interests within the spectrum of what they do. How can any one person outside the company know that? So enormous are they that the whole of life as we know it in this country would collapse if they withdrew their services, fell by the wayside commercially in some way or were taken over by a foreign company.

In any other sector the competition commissioner would have something to say about this. If they controlled such a large proportion of the media, some regulator would have something to say. If they controlled such a large percentage of any other industry, there would be concern. Yet nobody seems concerned. Do the Government have any plans to limit the proportion of public services that can be delivered by any one company?

It behoves us all to ensure that profitable public service contracts are awarded fairly, after fair competition. Much is at stake. Those who rely most on public services are the most vulnerable members of society. For their sake, we must achieve value for money and ensure that the relevant information is in the public domain. Sadly, there is evidence that that is not always the case.

I quote one example given to me this week by my noble friend Lady Hamwee, the deputy chairman of the London Assembly, whose role is to scrutinise the office of the Mayor of London on behalf of the citizens of the capital. She is unable to be in her place today, but she told me that when the London congestion charge scheme was introduced, the contract between Transport for London, chaired by the mayor, and Capita, which runs the congestion charge scheme, was not put into the public domain. She and a Labour Member of the Assembly requested it on a number of occasions. They were told that it contained a confidentiality clause that precluded both parties from publishing it, so the mayor and Transport for London could not provide it for her. Capita came up with the converse reason. Eventually, the mayor agreed to ask Capita to agree to its release. It consisted of 600 pages, and it crashed the GLA computer.

On a general point, it is inevitable that private companies will want to keep the detail of their relationship with their customers to themselves. Theirs is a very different culture from that of the public services. It is therefore all the more necessary for the public sector to be alert to that and to so arrange things from the start that there is maximum openness about contracts for public services.

That becomes all the more important because of the scale of the matter. Recent estimates by Kable, an organisation that provides technology research and analysis on UK government and public services, suggest that almost one fifth of public sector services— £60 billion—could be delivered through outsourcing to private and voluntary bodies. The principal sectors targeted are health and education, much of it IT services and management tools, but a lot of it is local government services too. It estimates that the market for public sector outsourcing for 2005-06 reached £49.4 billion and will grow by 30 per cent over the next three years, to reach an annual spend of £64.3 billion, a growth rate of over 9 per cent.

With public spending reaching £550 billion in 2005-06, the pressure to contain costs and improve service delivery is stronger than ever. It is a great challenge to the private companies and voluntary organisations in the field. It is also a great challenge to the commissioners of services to ensure that they are wise commissioners, that the contracts are right, that they deliver value, that monitoring will expose failure that can be rooted out wherever it is found and that the public are not bound to contracts for 30 years from which they cannot be extricated. I fear that many PFI contracts will turn out to be of that nature. They are short-term solutions to long-term problems, and they put the country in hock for decades.

In my field, education, schools now have control over the vast majority of their own budget. That is a good thing in the main, although there is enormous pressure on local authorities to find the money for the support services for which they are still responsible. They have to pick up the pieces when individual schools fail children, and that can be very hard. It makes schools vulnerable to the clever sales pitches of companies that sell them the latest whizz-bang techie idea or snake oil that will solve all their problems. I think that rather ironic description applies to the military equipment companies that have persuaded about 3,500 schools to buy equipment to fingerprint their pupils for purposes as trivial as borrowing library books or paying for their lunch.

I will not go into the detail of the practice here, since the Minister replying today will not be in a position to answer me. Suffice it to say that the DfES has really no idea what is going on out there. It does not know how many schools are doing this or how many children are affected. The noble Lord, Lord Adonis, in answer to a question from me earlier this week, revealed that his department is unaware that most of those schools are flouting good practice by not getting the parents’ permission for this infringement of their children’s rights. That is the sort of thing that can happen when services to the public sector are not properly monitored. The Government are walking blindfolded into a future identity fraud crisis, and the parents and children do not even know about it or realise the implications of the practice.

Proper monitoring of outsourced public services is essential. Having opened up the market and allowed schools to spend their own money, the Government must introduce statutory guidance to regulate schools that use those systems. It is simply bad practice for schools to keep a record of children's precious and unique biometric information, sometimes on insecure computers that can be hacked into, without parents’ informed consent. The Government should do something about it before it is too late.

The other most contentious involvement of private sector companies and voluntary organisations in education is in the takeover of city academies, in exchange for a fairly paltry sum of money, some of which is never even paid. We on these Benches have always welcomed the injection of money and ideas from successful business people into our schools but not at the cost of relinquishing public accountability and democratic control. When we talk about state provision of compulsory school-age education, we must have local democratic accountability, and that is missing from these schools.

Some academies have awarded valuable contracts for services to companies owned by their sponsors without the proper competitive tendering process that they are supposed to operate. According to an article in the Guardian last week, that has happened in the Grace Academy in Solihull, the King’s Academy in Middlesbrough and the West London Academy. In some cases, the DfES was persuaded to waive the usually strict rules about tendering to allow that to happen. The DfES has refused to answer questions about whether these are one-off situations or whether the practice is widespread.

In these matters, as in all the other situations I have mentioned, the confidence of the public will be gained only if transparency and fairness are the watchwords. Examples such as these undermine the confidence of the public in these public/private arrangements and make them suspicious that someone is lining his pocket at the expense of taxpayers. I accept that, in most cases, that is not so. Most companies and voluntary organisations give good value and a fair deal, but we need to be convinced that the monitoring of this brave new world of private delivery of services is rigorous and that the levers available to correct poor delivery are powerful. I beg to move for Papers.

My Lords, I am sure that we are all grateful to the noble Baroness, Lady Walmsley, for giving us this opportunity to discuss the important issue of how we monitor our public services. However, the issues that she raised in her speech and that are implicit in her Motion on the private provision of public services are, I suggest, equally important to all providers of public services, whether public, private or third sector.

There is something slightly quaint about singling out private sector providers for special attention. As the noble Baroness said, in many parts of public services, such as health, adult social care, children’s services and criminal justice, a mixed economy of providers has been the reality for some time. As someone who has, in a variety of roles, spent over two decades promoting such a mixed economy, I believe that if it is done properly, the public can only benefit.

I want to concentrate on this wider context and the arrangements necessary to ensure quality, value for money and transparency among all types of public service providers. I shall deal briefly with a great myth that continues to be aired noisily by those who regard private provision of public services as, to coin a phrase, the Great Satan. Good and bad public and private providers of services exist; they have always existed and, no doubt, they will continue to exist. The trick is to weed them out or not to appoint them in the first place.

My experience as a long-standing public servant is that there is not much to choose from between a public and a private monopoly for giving the public a raw deal. I have seen and contracted for private providers in health, adult social care and custodial services that match and exceed their public service counterparts. I have also seen the reverse. The evidence on private and hospital-cleaning contractors, for example, is that they are both as good and as bad as their public counterparts. Very often, it is more a matter of the quality of the contract and its management than anything else.

Let us never forget that group of small business men with profit-and-loss accounts—we call them GPs—who have been providing our primary care in the NHS for nearly 60 years. More recently, in the field of elective surgery we have seen the introduction of independent sector treatment centres, which has finally convinced some sceptics in the NHS that you can separate emergency and planned surgery lists and that that leads to fewer cancelled operations and increased adoption of day surgery. In all these examples and many others, fair and well drawn contracts, issued on a competitive basis and properly enforced, are critical to success. No one is arguing with that, but even-handedness is the key.

The ISTC example illustrates the benefits of competition in improving value for money in public services, but we have seen the same results in other areas. My experience as a Minister, as a director of social services and as the first chairman of the Youth Justice Board leaves me in no doubt that a degree of contestability is critical in most of our public services if we are to foster innovation and improve productivity.

As public expectations of our public services rightly grow, the biggest challenge is to respond more effectively and productively than has sometimes been the case. That is why a twin-track approach of investment and reform in areas as diverse as health and probation is important in improving these services. Both services have had a lot of extra money, but they still have some way to go in delivering the productivity improvements that need to accompany that investment. Probation is a good example of where more properly commissioned and contracted private and voluntary sector services, as envisaged in the Offender Management Bill, might also help to reduce the use of custody.

We have a long and honourable tradition of voluntary organisations providing public services, which the noble Baroness rightly alluded to. Among the best things that I did as a director of social services in Kent was to contract out to Age Concern many day centres for elderly people and to hand over family support work to voluntary organisations. The result was services that were more responsive to the users than the previous public service provider had been.

Of course, not every voluntary organisation is an excellent service provider. I have terminated contracts with voluntary organisations, just as I have terminated contracts with public providers. It comes down to the processes by which you monitor, contract and collect information. To make things more complex, we are now in an era of joint ventures between the different sectors, and we have an emerging social enterprise sector. There is no point in concentrating on the private sector alone. We are moving into a period when a far more complex range of people, in joint ventures in some cases, will provide our public services under contract. This means that we need approaches and arrangements for guaranteeing quality and value for money that operate even-handedly across all providers of public services, irrespective of their governance systems. That is particularly crucial now that the public are largely indifferent about who provides those public services—and they are still public services, commissioned by public bodies that are accountable for spending the money that they use to award those contracts.

In the NHS, for example, people across the social classes want more say on where and when they are treated. We are moving towards a situation where people want more choice. That is why the Government are right to promote choice across the public services. This is a means of improving user experience. There is nothing that so interests people as getting a good deal. Leaving them to make some of those choices and to report on their experience is a good way of driving up the quality of our public services. Choice for users is a mechanism by which we can often make improvements. This approach is also generating more and better information for service users. I cite, for example, a pioneering website called “Patient Opinion”, set up by a Sheffield GP, which allows patients to post their own hospital experiences and encourages hospital improvements. We need more of those improvements. We can trust the service users to drive the quality and VFM agendas.

Choice and contestability are two key drivers for improved public services, but they cannot do the job on their own. We also need better commissioning and contracting, good and open performance measurement, and more effective and even-handed regulation. The Government have been working hard to improve those arrangements and I am glad to have had the opportunity to play my part in bringing about those improvements.

Local government has done much good work in improving public sector commissioning and contracting, and we all have a lot to learn from its experience in that area under successive Governments—I am not making a party-political point. Other public services could well learn from that experience, too. However, we have to recognise that outsourcing is not a dirty word; it is a way of getting a job done more effectively than often a particular public corporation can do. Done properly, outsourcing is a sensible way of using public money. Saving up our pennies to buy a massively expensive piece of capital equipment that can quickly become out of date is poor value for money; that approach is often better replaced by leasing arrangements, where the lease requires the provider of that expensive kit to train the staff, maintain it and keep it up to date.

These approaches that involve the private sector can bring huge benefits to the public sector and achieve better value for money. However, none of these changes in any way diminishes the public accountability of the public body that accounts for the expenditure of that money. Nothing in any way removes Parliament’s ability to scrutinise that way of providing public services.

I want to spend a few moments talking about targets, which has become a dirty word in public services. It is naive and disingenuous to suggest that targets have no place in this area. As an aside, I was mildly amused to hear that the Leader of the Opposition is very keen to abolish all targets in the health service but wants to introduce them for climate change. There is an interesting approach on these issues when you are in opposition, compared with when you are in government. The much dreaded targets in the NHS have actually reduced waiting times and cancer deaths and improved the quality of our A&E services. We must be selective in the way that targets are used, but they are a way of driving up improvements in our services.

We need good performance, assessment and measurement in our public services and we need to make sure that that work is often done on an independent basis by independent bodies, such as Ofsted and the Healthcare Commission. They have a responsibility to put their findings into the public arena and to make that information available to the public, which also feeds into helping the public themselves to improve the choices that they make in the use of public services.

Let me finally say a few words about regulation. In this country, too much public inspection and regulation has been allowed to become over-bureaucratic and, in some bodies, has delivered a degree of mission creep. The Government are right to have tried to tackle this problem. They should be commended for the Better Regulation Task Force and its work and for trying to integrate and focus many of our public inspectorates. In health and social care, there will be a new combined regulator, which will have to behave even-handedly with service providers, whether they come from the public, private or voluntary sectors.

This is an issue for debate and I am sure that we will debate it further, because the Government will need to legislate in this area. My critical point is that, in regulation, we need to adopt an even-handed approach to providers. There need to be the same rules for entry to the market for providers, whoever they are and wherever they come from. There need to be the same rules for removal from the market for failing bodies. This needs to be even-handed and we should not perpetuate the myth that somehow one particular type of provider is supremely better than another type of provider because they come from either the public sector or the voluntary sector. That is simply not true; there is no historical evidenceto support it. This is all about good contractingand commissioning of services, good performance measurement and assessment, and good regulation on an even-handed basis.

My Lords, my noble friend Lady Walmsley raised a number of important issues in an excellent opening speech to a very important debate. The fact that the noble Lord, Lord Warner, called the issues that she raised quaint smacks of enormous complacency in a number of areas, two of which I will explore in my speech. I want to concentrate on the lack of transparency in two areas.

First, the line between the public and the private has become so blurred that it is very hard for the public to follow lines of accountability; that is not acceptable. It is clear to the public that they pay for such services, especially at this time of year when council tax bills land on their doormats and their tax returns have just been filed. A blurring of that line undermines the very reason behind a democratic structure at national and local level. The problem for the public is that the line between the public and private sectors in the provision of what are traditionally known as public services used to be defined by who delivered the service. The noble Lord, Lord Warner, is right that the model where the public sector both commissioned and delivered the service is very old-fashioned. I am not commending a return to the days when DLOs delivered everything without question. However, the public are not aware of who is delivering the service beyond the fact that they are on the receiving end. They see the lorries of the waste collector or the vans of the sub-contractor and that is the nearest that they come to knowing who is delivering the service. The niceties of who has commissioned the service and of the contract are not something that they are privy to.

Does that matter if the service is excellent? Do the public want to know who is delivering the service? The noble Lord, Lord Warner, said that the public are indifferent. In the short term it is true; they only want to know if something goes wrong. In the long term the blurring of the line, if it is not replaced with anything else, has enormous implications for the important connection between the public and their services, and for democracy itself. Of course, we have moved on from the days when DLOs delivered everything, and the days under the Conservative Government when compulsory competitive tendering ruled the day and the work went to the lowest-price bidder, no matter that the lowest price often represented the worst value. Authorities were unable to question that.

There are advantages in the public and private sectors working together; for example, in the management skills and financial acumen of the business community and by bringing better value for taxpayers. In the long term, however, we have a long way to go to get the model right. I do not believe that times have moved on significantly. In 2002, the Institute for Public Policy Research looked into some of the 378 PFI projects completed by central and local government and found that only 23 had been completed on time and had had an independent value-for-money examination by independent audit bodies. In 2003, the Audit Commission looked at the operation of the early PFI school contracts. It reached some important conclusions, such as:

“The synergies expected to come from the PFI process had failed to materialise. That type of auditing exercise must now be urgently repeated across other policy areas, particularly in the NHS and the prison sector”.

Both those examples are from some years ago and I expect that the Minister will be able to say that matters have improved substantially in those bodies. However, in 2006, in its strategic plan, the Audit Commission recognised that there was a real problem with transparency. It said:

“If local public bodies are to improve services in ways that people recognise and value, they need to engage better with local people. The governance frameworks that underpin accountability for public money and improving services are evolving”.

“Evolving” is a rather nice euphemism for saying that they are virtually non-existent and there is a very long way to go.

At the moment, one reason why the public often choose litigation, encouraged by certain solicitors, is that it is the clear and obvious route. I do not think that any of us believes that litigation offers the most desirable way forward in public services. The accountability model would mean that the public were involved and understood how to break into the difficult cycle of drawing up contracts. When does anyone go to their local authority and say, “We would be interested in the contract being delivered differently”? It is hard enough for local authority members let alone normal people to know when to break into the cycle of a PCT and say, “What we are receiving is unsatisfactory. We would like it to be delivered differently”. Matters such as the contract cycle, who draws them up and how to make a difference are extremely opaque. That other line of accountability, the ballot box, also becomes undermined if the system is opaque as people will become apathetic, depressed and unable to address the issues. There is an enormous need for these matters to be much more clearly outlined.

I turn to another issue that my noble friend highlighted in her Motion: parliamentary accountability. I was struck by comments of Sir Peter Gershon, in November 2006, when he was talking about the public sector of environmental services. He said:

“In some areas I believe there has to be greater collaboration. I look at environmental services, I could not find a single person in the public sector, who could tell me what the structure of the supply market looked like for environmental services. How many companies there were, were they increasing or reducing, or was business equally spread?

So I went to one of the suppliers in the market and asked them, and they said would you like me to email it to you or send it through the post and you can have it tomorrow morning. It actually told me that over a five-year period the number of suppliers was reducing. How can the public sector procure efficiently without that information? It is just about smart procurement”.

That is a worrying situation, but I am sure the Minister will have an answer for it. It is on the public procurement side of a fairly centralised system, but I deal with Defra, which has an extensive list of quangos—over 60—many of which are very large; for example, the Environment Agency, which is busy outsourcing. To have any idea of what is being purchased, by whom and to what effect becomes very complicated.

In not giving quangos complete independence, the Government remain able to keep a handle on them. However, they often choose that as an excuse to slope shoulders and claim that the Government are not responsible for what that particular body does. I give the Minister a couple of examples. One is the Food Standards Agency, which does a valuable job. The Government claim that it is independent—it is at arm’s length—yet it clearly is responsible to the Department of Health. How do the public concentrate on getting the Food Standards Agency, for example, to address the issues in which they are interested? The FSA has a better record than most in holding public meetings and making the records of them publicly available. Even within Defra there are several bodies which do not meet in public and do not have publicly available records. The picture is very complicated.

I refer the Minister to a debate in which I was involved last year about accountability to Parliament of a public body. The Minister will recall there was a considerable debate around the cuts in funding to the Centre for Ecology and Hydrology. Its parent body—NERC—was created by royal charter, and NERC's website says it is accountable to Parliament. Yet it seemed that it was not that accountable. I accept that it needs to be responsible for commissioning scientific research without political interference, but we were talking about decisions of cutting public funding that had united both the scientific and the political establishments, and still the Science Minister, the noble Lord, Lord Sainsbury, was able to say:

“As for parliamentary accountability, it has always been clear that the council is accountable for its performance”,—[Official Report, 20/3/06; col. 10.]

but not for anything else. That means that even though a body may have a charter making it responsible to Parliament, Ministers can decide that where it is inconvenient it is not accountable to Parliament. In reply to a similar question from me, the noble Lord, Lord Bach, said:

“I understand the legal position … NERC is an independent body and the decisions that it reaches are solely for its own council”.—[Official Report, 15/3/06; col. 1278.]

That draws up the fact that, if a body is stated to be accountable to Parliament, certainly it should be.

I close by re-emphasising my support for the stand of my noble friend Lady Walmsley on very large private organisations such as Capita being subject to proper scrutiny. She was completely right when she said that that is the sort of issue that the Competition Commission should be considering and that if it was in any other sector, it would be called into question. The fact that the public are not aware of who is delivering the service, except when something goes wrong, means that there is not much demand from them for such scrutiny. It is not like the supermarkets, for example, where that is very plain, which is why the Competition Commission recognised that there was public concern. If the public heard and understood the points made by my noble friend today, they too would have deep concern and would fully back her call.

My Lords, I am very grateful to the noble Baroness, Lady Walmsley, for initiating this debate and for her excellent opening remarks. Too rarely is there an opportunity to talk about a development that is profoundly affecting many areas of our lives. I will concentrate on one area only: criminal justice.

The Joint Committee on Human Rights, of which I am a member, is undertaking an inquiry into the treatment of old people in healthcare and social care settings. We have been hearing very interesting evidence and already we have heard enough to make it clear that our report will have to consider the accountability of private care homes. However, as we are at the evidence-collecting stage, I can do no more than whet your Lordships' appetites about that. We shall also shortly publish a report on the treatment of asylum seekers and there, too, we shall probably consider the accountability of the private companies that carry out forcible removals and are involved in other ways.

I turn to the situation in criminal justice and particularly the contracting out of prisons to private companies. I do not want to talk about the principle of those prisons, although I know that it is very controversial. I want to talk about quality, value for money and transparency—transparency in particular. How can we in Parliament know whether there is quality and value for money and whether we are being well served by those providers if it is difficult to find out about their performance?

Let me start in the obvious place. The annual report and accounts of Her Majesty's Prison Service, which is a report made to the House of Commons, is where one goes to find out about the performance of the Prison Service. It is packed with information on performance against key performance indicators on a range of measures: escape, serious assault, self-inflicted death, resettlement, staff sickness, health and safety, public health, drug treatment programmes and the cost of everything. However, there is something very odd about that report. As it says on the cover, it reports only on public sector prisons, which contain about 90 per cent of prison places. So 10 per cent of the operation of prisons in England and Wales is not reported on annually in a report presented to Parliament. That is not the case in Scotland, where the report covers all prisons and the information is aggregated. So I ask the Minister my first question. Am I mistaken in thinking that the annual report to Parliament of the Prison Service covers only 90 per cent of the prisons in England and Wales and there is no similar reporting mechanism to Parliament for private sector prisons?

In reply, the Minister may be hastily advised to say that there is a report, the Office for Contracted Prisons statement of performance and financial information, on the website of the National Offender Management Service. However, before he replies, I will tell him that that report will not answer my question, as it includes data on three public prisons as well which operate under service-level agreements. I should tell the House that the Government do have a performance rating system for prisons. Level 4 is the highest rating, and indicates an exceptionally high performance. Level 3 is applied to those prisons that meet most of their targets. Level 2 is for prisons with a limited regime or with significant or major problems. Level 1 is applied to prisons that are failing seriously.

The figures can be found only on the Prison Service website. Figures for the end of September 2006 showed the following: 20 per cent of public sector prisons and 9 per cent of private sector prisons were performing at level 4—the best level; 68 per cent of public sector prisons and 64 per cent of private sector prisons were performing at level 3—in other words, were quite good; and 12 per cent of public sector prisons and 27 per cent of private sector prisons were performing at level 2—in other words, were quite bad. I am afraid that I cannot give the House the latest figures for private sector prisons, as those figures have disappeared. Only figures for the public sector prisons now appear on the Prison Service website.

My second set of questions is therefore this: can the Minister say where the figures have gone, on whose authority they were removed, and what will replace them in the public domain? I accept entirely that he will not know the answers to those questions, and I do not expect him to. I do, however, assume that he will be able to write to someone who does and let me know the mystery of the disappearing figures.

We must conclude that there is no annual report to Parliament on the performance of private prisons; so where can we look for information on them? We can, for example, find out about a prison called Rye Hill, which is run by a company called GSL, if we look at the prison’s website, which is very nice. It sets out the prison’s aspirations:

“Here at HMP Rye Hill we pride ourselves on making the difference to all we come into contact with … Our prison staff are highly trained in the necessary skills required to operate a modern prison. Management are clear on leadership and direction”.

Its mission statement is,

“To be the leading provider of privately managed custodial services in the world … We have a total commitment to training our employees to know their job”.

The latest report of 2005 by Anne Owers, the Chief Inspector of Prisons, on Rye Hill, is not on that website. She concludes:

“Our 2003 report described residential staff who were relatively inexperienced and lacking in confidence”.

“In 2005”, she said,

“this situation had worsened. We had very serious concerns about safety at Rye Hill. Staff lacked experience and confidence in managing an experienced prisoner population; this was exacerbated by the absence of visible management support, very low staffing levels and high staff turnover … We found evidence of mobile phones, and we were told by prisoners of the ready availability of drugs and weapons … and there had been a number of recent serious incidents”.

There are other matters in the report which I cannot quote because of the sub judice rule.

Dovegate is another private prison, which is part of the Serco group, which the noble Baroness, Lady Walmsley, has already mentioned. Serco’s website says of its prison activities:

“In all our prisons we strive to hold our inmates safely, securely and with dignity and respect”.

The chief inspector published her report on Dovegate last week. She says:

“When we last inspected in 2003, we were concerned by the low numbers of staff and their inexperience in dealing with serious and experienced offenders … Worryingly, this unannounced full follow up inspection found that, while a few areas had improved, Dovegate was no safer or more controlled than in 2003. Senior Serco managers assured us—as they had in 2003—that they appreciated the seriousness of the situation and had appointed a new director specifically to turn matters around, but it is of concern that so little progress had been made since our last visit”.

Serco also runs Doncaster prison. At the end of 2005, the chief inspector found a prison that had slipped back since the last inspection. She said that,

“respect was seriously undermined by the physical conditions in which many prisoners lived, which in some cases were squalid. Many prisoners lacked pillows, adequate mattresses, toilet seats … notice-boards and places to store belongings”.

Only just over one in three prisoners were actually in work at any one time. She concluded her report by saying:

“Our main concern was not only that managers had failed to tackle the problems we pointed out at the last inspection, but that the prison had deteriorated in some important respects”.

My question to the Minister is this: in the absence of an annual report on these prisons, and until the chief inspector visits—not annually, but basically about every five years—all we know about these prisons comes from their websites, so would it not aid transparency if they were at least required to put a link on their websites to the chief inspector’s latest report about their prison?

I shall move on to say a word about the contracting process, and whether that could be more transparent too. I agree with the noble Lord, Lord Warner, that this is very important. There is a secure training centre, a sort of children’s prison, called Oakhill, which holds 75 very vulnerable children. The latest inspection report noted that there was only one qualified social worker on the staff. Information provided by the Minister to the Joint Committee on Human Rights has shown that over a six-month period there were occasions when the minimum staffing levels of the Youth Justice Board were not met. In a later written response to a debate in which this was raised, the noble Lord, Lord Bassam, told those who had spoken:

“The part of the country in which Oakhill is situated has very high employment levels and this may have hampered the contractors’ earlier efforts to maintain high and stable staffing levels”.

I find that baffling. When the contract was first drawn up, did not those writing it know that Oakhill was located in a high employment area? So far as I know, the contracts are not in the public domain. Indeed, I would draw to the attention of the Minister the fact that the Scottish Prison Service has all its contracts on its website without the financial information.

Finally, I want to indicate why the lack of transparency and dearth of readily available information is so damaging to our being able to monitor these prisons. During the Report stage of the Offender Management Bill in the other place, the Minister, Gerry Sutcliffe, said that,

“we would contend that the successful track record of private companies in delivering custodial services in the 14 years since the first private prison was opened already offers assurance that they can be relied on to recruit competent staff”.

He went on to say that private contractors,

“have certainly been a key driver of the improved treatment of prisoners—and under what is sometimes termed the decency agenda—of ensuring more decent prison regimes”.—[Official Report, Commons, 28/2/07; col. 1000.]

On the basis of the information available to us and in the public domain, that is an astounding statement, but since I know the Minister is a genuine and very honourable person, he must have access to information that is not in the public domain. Surely we need much more openness and objectivity in the information available so that we can do our job of holding the Government to account and ensuring that our money is well spent.

My Lords, I too am grateful to my noble friend Lady Walmsley for tabling this Motion because it gives the House an unusual opportunity to look at an issue that is cross-cutting and not driven along departmental boundaries, but is of increasing importance to Parliament, to the Government and to the public. My experience is in local government. I was a councillor for 14 years, a senior member of the Local Government Association, served on the board of the Audit Commission, and since 2000 have spoken on local government affairs in this House. In recent years I have also worked with two private companies, Anite and Atkins, to develop their thinking on the relationship between the public and the private sectors.

It is of course a matter of interest to Parliament and to the Government how local authorities determine their relationship with the private sector, partly because of the lessons which central government can learn from local government and because, from compulsory competitive tendering through to the more recent Gershon requirements on local government to make efficiency savings, the Government have made local government’s relationship with the private sector their business.

It used to be very simple. The public sector employed people who provided services. The compulsory competitive tendering drive of the 1980s led to a quiet revolution. What we now have is a patchwork of arrangements between the public and the private sectors, and I can say at the outset that I have absolutely no problem with that. I can see many ways in which great synergies can be created when the public and private sectors work together properly. The voluntary sector has also changed enormously during this time. Large organisations such as Help the Aged and WRVS are providing services which are commissioned by local authorities and managed by contracts.

However, I want to use my time today to reflect on a few lessons that have been learnt by local government over the years. First, I shall say a few words about markets. We talk blithely about market forces, but they are complex and change constantly. I am not confident that either local or central government fully understand how certain markets operate when it comes to the detail, or how markets will change as a response to certain interventions by the Government. I shall give an example. Compulsory competitive tendering certainly caused a massive shake-up of provision and often enabled huge cost savings to be made. It was heralded as a triumph for the private sector, but subsequent academic studies have never really established whether it was because the private sector was inherently cheaper or whether it was the tendering and contracting processes which actually made the difference. However, what was really never thought through was this: once an in-house bid had been lost by a local council, the in-house body had nowhere else to go. It could not bid for work anywhere else and therefore it would close down. That meant that the second time around, there was no in-house bid and competition was reduced. So the cost savings tended to be made only on the first round of bids. But local authorities are always under pressure to make more savings. What happened then was that councils would often work together. It sounds as though it makes sense to have bigger contracts and create economies of scale, but in many sectors the smaller companies simply could not provide on that sort of scale and so they did not tender. Twenty years on, the result of this process is that in certain sectors—I cite particularly the waste and the bus industries—there are on the whole relatively few very large operators. Once the market is concentrated in the hands of a few providers, the benefits of competition are much reduced. Councils are now struggling to continue to reduce the costs of contracts.

The process is continuing today. Evidence from the residential care sector shows that contracts are now being constructed in such a way as to deter smaller providers. Earlier this year the CBI produced a report on the commissioning of local public services which emphasised the need for a diverse range of providers in order to increase value for money and improve service quality. Many councils stimulate local markets through the provision of information about future work flows and by advertising contracts more widely, but it would be useful if central government could commission more research in this area. Perhaps they need to understand a little more the implications when they insist on blunt efficiency saving targets from local authorities.

It has become clear that intelligent commissioning requires a number of components. The nature and variety of the services to be commissioned, and the range of service users, have to be well understood in order to enable the council to determine the correct range of organisations which can deliver them at an affordable price. Huge skill is needed in constructing a tendering process which ensures that a variety of organisations are indeed able to bid. Recent academic research suggests that for markets to work in a more positive way, there needs to be a clear and non-doctrinaire attitude to commissioning, a genuine understanding of the market, good procurement practice and that the commissioning organisation must have the right capacities and skills. Here again there may be a role for central government, particularly in assisting smaller councils in this area where they may not have the relevant skills.

I want to turn next to monitoring. The original Nicholas Ridley view was that councils would meet just once a year and set the contracts. Indeed, in the 1980s and 1990s, some Conservative councils outsourced pretty much all of their services and reduced staff to a minimum, which resulted in much heralded savings to the taxpayer. Unfortunately it became clear over time that they simply had not left themselves enough capacity to monitor the contracts thoroughly, ensure that there was proper compliance and deal with problems when they arose. We then saw a recreation of a corporate centre in many councils. There are limits to the paring down of central staff that can be done. As the noble Lord, Lord Warner, said, it does not really matter what sector the providers come from; they need to be properly monitored, and that requires skilled staff.

There is also a point about responsiveness. It is quite difficult sometimes for councils to ensure that private sector partners really understand the wider requirements of organisations that are ultimately accountable to citizens. For example, if road maintenance is outsourced on a conventional contract, the company repairs the roads on a term agreed with the council, usually on a technical basis. But what happens when the public start to complain about potholes? Should the company respond to the citizen, or should it just stick to the agreed work plan? The challenge is how we create contracts which enable private companies to be responsive to the citizen.

Another example of that is the vexed question of parking enforcement. If you compare two services that are routinely outsourced, waste collection and parking enforcement, you see two very different things. With waste collection you simply want the bins emptied—the council wants them emptied, as do the public, and you establish contracts that penalise companies that do not do so efficiently. It is all rather more difficult with parking enforcement. How do you build judgment into contracts so that the contractors do not go out and create some of the more ludicrous examples of parking tickets while ensuring that real parking enforcement takes place? That is not really a question for public satisfaction surveys, but the public need to be sure, whatever and whoever is doing the parking enforcement, that they are treated fairly and that the system is transparent. It is not impossible to create relationships with private contractors that do that, but it is difficult.

Another conundrum emerges here. In the social care sector, for example, the Commission for Social Care Inspectorate has shown that, although private and voluntary providers have demonstrated that they are better at reaching national minimum standards than the public sector, users are expressing more satisfaction with the public sector. The same holds true of satisfaction levels recorded by tenants of social housing. They seem to be happier with the local authority, even when other providers are performing better. I am not sure the noble Lord, Lord Warner, is correct when he says people do not care about who provides it—I think they do.

The dilemma for local government—indeed, this is in the Local Government and Public Involvement in Health Bill that will be coming to this House in the summer—is that increasingly local authorities will be required to be more responsive to their local communities. Quite what they will do when the communities say, “We want residential care or housing provided by the council but the Government are making that almost impossible”, I do not know. It is an interesting dilemma for the local council.

One of the conclusions from all this is that contracts and contractual frameworks have to be drawn up in a way that reflects the desired outcomes, not just performance management of outputs—in other words, a move away from bean counting. In order to do that, it is necessary to work with providers in a transparent and mature way in developing final specifications and contracts. The relationships between the private, voluntary and public sectors are evolving and maturing. Councils are learning that the private sector has a valuable role in providing expertise, technology and finance, often on a scale which is difficult for councils to achieve themselves. The private sector has been slower to learn to recognise that local authorities are subject to processes such as statutory frameworks, transparency and even democracy, which have to be respected.

There is a lot to learn, and it is essential that local authorities learn from each other. It is even more essential that Parliament and Government monitor, in a strategic way, what is happening. This is not a field where we can afford to allow prejudice and dogma to determine public policy. It must be evidence-based.

My Lords, I only regret that there are not more people taking part in this useful and important debate. This is a large area and we all need to discuss across the parties the experience that we have now gained about the contracting-out of public services and the relationship between private public-service providers and the local and central state. We have, as the noble Lord, Lord Warner, remarked, discovered that the private sector is not uniformly better than the public sector, as Nicholas Ridley and others always believed. We are also clear that it is not uniformly worse than the public sector, as many in the old Labour Party used to believe. So we now move on to a different set of issues about what is best under what circumstances, how we set the rules for contracting carefully enough and what we think the public really want. We are, after all, talking about a very large sector. I note from one of the briefing papers that the total value of PFI contracts to date is some £46 billion.

As an academic, I naturally start by trying to find the underlying principles on which this whole area has developed and the studies in which they are applied. I have to say that I was rather shaken to discover, working not only with the Lords Library but with academics at my own institution and elsewhere and with planners at some of the big private public-service providers, that the detailed studies are thin and that the underlying principles are not entirely agreed. There is a lot to learn from the experience of other countries—the Nordic states, Australia, New Zealand, Germany and North America—as well as from the experience that we have accumulated in the past 10 to 20 years. This is, however, a highly technical field with limited transparency, deluged with opaque language and management-speak. I looked at the declared objectives of the Office of Government Commerce, and at the end of it I was not at all sure what most of them meant.

The whole question of how we get Members of Parliament and the wider public to understand this field is therefore important. Do we now have broad agreed principles across this field and, if so, where are they? Where are the Government now setting them out? Do we now accept that the same principles work across differing sectors, or that the principles that operate in the health sector, for example, do not really apply in the prison and probation sector? We have learnt from bitter experience that management and contracting principles that operated in the offshore energy sector, when applied to the railway sector, led to very unfortunate relationships between principals and agents and to a breakdown in the necessary mechanisms of trust that were required to maintain rail systems on a proper basis.

Are we clear about how far risk should be shared? There has been a whole range of problems about how far risk is offloaded from the public on to the private sector, and what happens when the private service provider fails to continue to provide those services. I note that the Government are accumulating experience about how to monitor the selling on of PFI contracts. I understand from what I have been reading that the Government’s attitude to that is still developing. We do not yet have clear agreement.

The noble Lord, Lord Warner, talked about the different categories of private public-service providers: the for-profit companies, the public-interest companies and what he described as the emerging social enterprise sector. That in turn raises a number of questions about which is more appropriate under what circumstances and how government should appropriately deal with the social enterprise sector. That sector is not primarily driven by economic gain but has a range of other motivations and objectives in mind that occasionally cut across the objectives of public policy, as indeed we argued about at considerable length yesterday with regard to the social enterprise sector’s provision of services to the Government on adoption.

Reading the new public management literature, I have had some concerns. As a social scientist, I followed the development of public choice economics, recognising that it was a right-wing, libertarian theory masquerading as mathematical economics; it is based on a deep mistrust of government and a desire to shrink the state and public services and to pursue a libertarian agenda. I was even more concerned when I came across the conclusion of one of the most useful volumes surveying experience of new public management in five different countries. It says:

“The supermarket state model is a central feature of NPM … The supermarket model presumes that the government and the state in general have a service-providing role, with an emphasis on efficiency and good quality, and conceives the people as consumers, users or clients”—

not citizens. It goes on to state that,

“instead of the state controlling society on the basis of a democratic mandate from the people, society more directly controls the state through market mechanisms. The public are viewed as sovereign consumers or clients”.

That cuts exactly across the Government’s citizenship agenda, and I suspect that it is one of the reasons why that agenda is in so much trouble.

We need to question a number of the underlying principles in which we are engaged. Public choice theory is based essentially on mistrust; it is based on the idea that you can never trust a government servant or bureaucrat, that contractual relations are the only basis on which to operate, and that those with whom you deal are motivated primarily by economic gain. However, trust is essential in long-term partnerships of the kind that involve the provision of public services. Most people are motivated by a mixture of economic gain, job satisfaction, a sense of personal and social responsibility, and altruism. We need to recognise that.

For example, prison management that is motivated purely by economic gain is the last thing that we want. In talking to a number of people within Serco, I was relieved and happy to discover that they are much concerned with other quality issues in the management of private prisons, as they should be. But how does one then write the contracts in such a way as to ensure that one does not simply go for the cheapest model and so as not to set a whole range of standards because one does not entirely trust one’s private contractor? As we have seen with GP contracts and the rising salaries of top civil servants, if one assumes that only economic gain motivates people, one slips very easily into a model in which one gives higher salaries to those at the top and squeezes the wages of those at the bottom.

The evidence of opinion polls is not that citizens want maximum choice; it is that they want available pubic services in their local communities. That is very much the case in the public’s attitude to schools. A range of other values is involved.

The quality of contracting, and of monitoring the contracts, has so far been highly variable. As a social scientist, I am familiar with the development of principal/agent theory, in which the Government are the principal and the private contractors are the agents, but I doubt whether principals always understand how to control the agent, and I suspect that the vast expansion of consultants’ advice to government during the past 10 years has partly been a matter of government trying to catch up with private public-service providers in terms of monitoring what has to be done.

Contestability, as the noble Lord, Lord Warner, remarked, was an important part of the model that, I think most of us will agree, was well worth introducing into a Prison Service that was stuck in a range of old-fashioned attitudes, but the problems that public and private prisons now recognise are not to do with the quality of the Prison Officers’ Association or of public or private provision; they are a matter of overcrowding, which comes from other aspects of public policy.

How long term do contracts need to be? If we have short-term contracts, the building of the trust relationships that we require breaks down. I do not want to rehearse the arguments that we will have after the Easter Recess on the Offender Management Bill, to which the noble Lord, Lord Warner, referred, but an effective offender management system, in which relationships between those in the courts, within local government and inside and outside the prisons require to be maintained over a long period, is not easily compatible with short-term contracting and contestability of public services.

The target mentality is worth introducing, but we have also been made aware by our economist friends and acquaintances that the imposition of targets and the measurement of particular statistics and indicators affect behaviour in ways that may not be entirely intended. I heard at a meeting of the Royal Society of Arts last night that one of the reasons why the number of students who are continuing the study of history through to GCSE and A-level is going down is that schools discourage children from going on with history when it becomes optional, because they are afraid that some of the students might not get the A to C grades that the schools need for their league tables. They therefore push them off into subjects that they regard as being easier for them.

Some real issues are at stake, one of which is accountability. When we discuss the Offender Management Bill, we shall come to the question of how far private prisons are allowed to exert state authority over the prisoners for whom they are responsible and, similarly, over community punishment. The British Medical Association notes in its briefing, which we have received today:

“Evidence is not currently available to compare clinical standards, such as complication rates, in NHS Treatment Centres and ISTCs”.

It goes on to state that there is,

“a lack of robust audit data on outcomes and productivity”.

Another issue is equity. A study on introducing the theory of new public management in public housing notes that one of the problems is that it does not necessarily include social inclusion and social justice, which are important in the provision of social housing. A further issue is whether provision will be local or central. When we discuss the Offender Management Bill, one of the issues with which we on these Benches will be concerned is the extent to which contracting will remove authority from local government and take it up to a regional and central level.

An underlying question is whose satisfaction we are talking about. Is it that of the consumer, the Treasury—in terms of efficiency—or the citizen? Are these interchangeable or distinctive? The economist’s model is of the well informed customer seeking the widest possible choice of services, but, for the many who are not well informed, this may not be the ideal model. What is our shared responsibility for them?

My Lords, the noble Baroness, Lady Walmsley, has selected an intriguing subject for today’s debate. It is a multi-layered topic which has provoked some diverse perspectives in our debate. I do not normally have much sympathy for the Minister, but I do so today because in his winding-up speech he must produce some form of synthesis of the varying points that have been made.

In preparing for the debate, I asked the Library to find out how much the Government spend on the private sector each year to deliver public services, but, having carried out its research—extremely diligently, I am sure—it came back with no answer at all. We have therefore to debate the noble Baroness’s interesting Motion in an information void, which, as an accountant, I find disturbing.

According to the Budget Book released yesterday, the public sector will spend around £340 billion on goods and services, including capital, next year. Can the Minister say how much of that will be spent via the private sector, and if not why not?

The noble Baroness, Lady Walmsley, asked whether the public sector gets quality and value for money in its dealings with the private sector. When we talk about transactions with the private sector, we are often drawn to think about the private finance initiative. The PFI was invented by my party and by 1997 we had overseen a relatively small number of contracts, testing out the parameters of risk transfer which was the heart of our approach. Since 1997 the Chancellor has enthusiastically driven the use of PFI as a source of public sector investment and overseen contracts for well over £50 billion. The noble Lord, Lord Wallace of Saltaire, referred to £46 billion but every day more contracts are signed and the figure rises ever higher. The annual cost is currently around £7 billion, due to go over £9 billion in 10 years’ time. So we are talking large sums of money involved in PFI.

One worrying feature of PFI is the way that some completed projects have been refinanced to produce significant gains for PFI consortia. The later generations of PFI contracts have ensured that the public sector captures some of those gains, but the uncomfortable truth is that the PFI industry is built not so much around service provision but around significant financial engineering and highly leveraged structures, with high rates of return often matching high risks that are often best managed in the public sector. Can the Minister explain how this delivers value to the public sector?

Another uncomfortable feature of the PFI is the fact that the public sector is tied into contracts for 25 or 30 years, burdening future generations of taxpayers with paying for, say, hospital configurations which have been designed for today’s era. The noble Baroness, Lady Walmsley, referred to this problem. Of course, the contracts allow for changes over time but only at a price which will in turn increase the burdens on future taxpayers. The problem here is that we will not know whether these contracts represent long-term value for money for some years to come but long-term value will become of increasing prominence as the contracts mature. Do the Government have any systematic way of monitoring long-term value from these contracts so that any problems that may start to emerge from PFI contracts can be anticipated and dealt with before they end up destroying value for taxpayers?

The Government have continued to make progress on the professionalism of contracting and commissioning, as has been referred to today, but some dreadful mistakes continue to be made, especially in the area of IT. The Child Support Agency has wasted many millions of pounds on two failed systems. Her Majesty's Revenue and Customs, which outsources its IT, has had its share of problems, recently with the tax credit system where IT problems were compounded by design faults which resulted in overpayments of more than £2 billion each year and misery for hundreds of thousands of taxpayers.

The Minister will be aware that transferring risk to the private sector does not automatically ensure value for money. The National Physical Laboratory PFI contract, on which the Public Accounts Committee in another place reported last week, is testimony to that. The department concerned used hope rather than rigorous analysis to guide it. The private sector contractors assumed significant risk and they duly took a financial hit but the public sector still incurred a cost over-run and lost five years in the process. Does the Minister think there are any lessons to be learnt here?

I completely agree with the noble Baroness, Lady Walmsley, that transparency is extremely important. There is a disturbing trend in public sector procurement for the details of contracts with the private sector to be concealed under the guise of commercial confidentiality. The Government liberally use the commercial confidentiality let-out clause in Section 43 of the Freedom of Information Act to refuse to answer requests for information on government contracts. And the noble Baroness, Lady Stern, referred to the particular issue of non-availability of contracts for prisons run by private sector contractors.

We have seen in the NHS IT programme that stringent confidentiality requirements have been imposed on its contractors. We will have to await the obituary on the project to find out whether that has added any value to this vast programme but we do not believe that obsessive secrecy adds value or that secrecy operates in the public interest. During the passage of the Identity Cards Bill last year, the Government refused to disclose the full costs of the programme. Even today, the Department for Work and Pensions is defying the Information Commissioner on its ID card programme. It is not surprising that so many distrust the Government on ID cards and the national identity register. Openness may be difficult, but it serves the public interest.

In general, we believe, to quote US Supreme Court Justice Brandeis, that “sunlight is the best disinfectant”. That is why I introduced the Government Spending (Website) Bill in your Lordships' House late last year which requires the Government to open up government spending by way of a publicly searchable website. I am grateful to the House for allowing my Bill to pass last week. I hope that the Minister today will commit the Government to granting it a speedy passage in another place.

The Motion of the noble Baroness, Lady Walmsley, focuses on public services commissioned from the private sector, but issues in public services are not confined to the ones delivered by the private sector, as the noble Lord, Lord Warner, reminded us. I agreed with much of what he said today, including what he said about the indifference of the public as to who provides the services. Many services are still provided by the public sector and quality, value for money and transparency are of equal or greater importance for those. Quality and value-for-money measurement in the public sector remains primitive. The Office for National Statistics, when pressed by the Government to measure quality in order to make up for the underlying loss of efficiency shown in many public services, has come up with some answers but I do not believe that these are regarded as wholly convincing by many people who have looked at them.

On efficiency, we might think that the Government had good mechanisms for measuring it, given the way that they have trumpeted the prospective £21 billion of efficiency savings identified by Sir Peter Gershon. The Chancellor has claimed that much of this has been delivered. For example, in the Pre-Budget Report last December, he said that £13.3 billion of these savings had been achieved. The National Audit Office's report on the Government's efficiency programme released a few weeks ago revealed the truth that of the £13 billion only about a quarter,

“fairly represent the efficiencies made”;

over half of the total,

“carry some measurement issues and uncertainties”;

and for the remaining £3.1 billion, in the NAO's understatement,

“there may be efficiencies taking place but the measures used either do not yet demonstrate efficiencies or the reported gains may be substantially incorrect”.

Yesterday, the word “Gershon” did not pass the Chancellor's lips. Will the Minister say whether the Government plan to restore credibility to the Gershon efficiency programme or will the programme be quietly buried in the upcoming Comprehensive Spending Review?

We are concerned that the Government do not have good processes to get value for money from their expenditure, whether with the private sector or within the public sector, and we have seen too many signs that the Government prefer secrecy to transparency. Will the Minister today commit the Government to turning over a new leaf?

My Lords, I have two immediate expressions of gratitude. The first is to the noble Baroness, Lady Walmsley, for introducing what has been a most interesting and stimulating debate. There was a contrast between real statistics, immediate problems, theoretical interest in the nature of the mix between public and private, how we measure those boundaries and how we create the correct balance between their contributions to the public good.

My second debt of gratitude is to the noble Baroness, Lady Noakes, who said that I had an impossible job and that she had some sympathy for me. Wherever I can get sympathy, I accept it with the greatest enthusiasm. I certainly need it now as I have only 20 minutes in which to cover this extremely extensive debate.

In terms of describing the principles on which the Government act and giving illustrations from decisions and policies at national and local level, my noble friend Lord Warner did the House a great service. He gave clear illustrations of the way in which these arrangements can be established effectively and to good purpose nationally and locally, and outlined the main principles on which we ought to work. I was grateful for that speech, in which he illustrated the Government’s achievements in crucial areas. That is also my task but I emphasise that I recognise the nature of the theoretical debate. The noble Lord, Lord Wallace, is right that many Bills that come before us on aspects of public expenditure will raise issues about the nature of the mix of ensuring value for money and guaranteeing effective accountability.

A theme which ran through all speeches was the extent to which relying upon certain areas of private delivery spread a danger of limited accountability. The fact that private organisations could establish that certain aspects of their operations were commercially confidential puts limitations on accountability to which local authorities and national government could present a challenge.

As my noble friend Lord Warner pointed out, these issues are determined by the nature of the contract. Of course the contract can be drawn up in terms of counting the beans. As the noble Lord, Lord Wallace, suggested, it could be a question of the relationship between costs and returns in the contract. But the plea was strongly made by the noble Baroness, Lady Scott, when she was referring to local government, and by the noble Baroness, Lady Walmsley, in her opening remarks, that the contract ought to have demands of accountability and that there should be a structure in which the organisation delivering the service was open to such accountability. That depends on the nature of the contract. As this process develops, we learn and improve.

There are very many actors involved in the contracts. The noble Baroness, Lady Noakes, expressed sympathy for the job I had to do and then asked me the nuclear question which she knew I could not answer—namely, what is the global cost of all these contracts? She knows very well that I am not in a position to quantify that. It is an impossible question to answer. However, because there are so many actors upon the scene, we need to develop a clear philosophy of how we balance costs and returns effectively and make sure that contracts insist upon accountability.

Above all, what is the purpose—the philosophy—behind public service? Surely it is not to balance the interests between producers but to guarantee that the consumer gets the best possible public service. That is what is at stake. Of course due regard must be given to costs, but over the past decade or so there has been a clear realisation of what the public are demanding. The noble Baronesses on the Liberal Democrat Benches emphasised that there may be greater interest than might be contended in who delivers the service, but I do not think that anyone can contradict the view that the most important thing is the quality of the service that is delivered. That is inevitably the view of the public.

We should recognise how much progress has been made against this background, in which the Government have been able to use a great deal of the public/private mix. There was a huge backlog in public investment when we came to power 10 years ago. The usual areas of obvious neglect, which I shall not bore the House with, included huge school repair backlogs and enormous problems in the National Health Service, while investment in transport was clearly very necessary. Expenditure on schools had been more limited than was good for the education programme.

The Government pride themselves on having made immense progress in delivering public service. In getting the necessary resources for investment, there have been huge advantages in levering in private investment. As my noble friend Lord Warner indicated, that can be done at local level and in much bigger national programmes.

We are concerned not to engage in the debate between public ownership or the market in theoretical terms; we are concerned with what delivers best for the public interest. That is why inevitably there are different solutions to different services. The noble Baroness, Lady Walmsley, identified things that were wrong with aspects of the academies. The DfES vets sponsors of academies with regard to their responsibilities. There is a safeguard against conflict of interest. She said that those who provided the service to the school might sometimes have close relationships with the sponsors. That is a conflict of interest which we would regard as reprehensible; it needs to be identified. Given the position of the relationship between the department and Ofsted to the operation of the academies, they have to be as open about their activities as other schools and educational institutions. Should a conflict of interest such as the one the noble Baroness identified come to light, the department has the opportunity and responsibility of ensuring that something is done about it. The first responsibility belongs to the governing body, which has a public duty to act in the interests of the school, not of the sponsor. Sponsors who back and help establish academies are well aware of that basic constraint on their expectations of what happens in the academy’s transactions.

The noble Baroness asked a rather more general question about whether certain parts of the private sector could dominate public services and whether we would come to depend on them too much. I disagree. I recognise that in certain areas, as she listed in her speech, private companies have a very significant role to play. But the total managed expenditure will be well over £600 billion by the end of the next spending review period. Capita is responsible for £4 billion of that. Capita is a most successful company, whose name crops up in a public connection more often than many other companies, as she indicated. It has enjoyed conspicuous success in some areas but has shown weaknesses in one or two others. However, £4 billion out of £600 billion scarcely suggests market dominance.

The noble Baroness, Lady Noakes, emphasised IT failure in government. The vast majority of government IT projects perform excellently. They deliver key public services day in, day out, and on budget. As a Government we are managing some of the largest and most complex IT-enabled projects in the world. I am well aware of the areas that she identified where there have been weaknesses, but the vast majority work to budget and work successfully. No sharper criticism could be advanced of the Government than if they had attempted to deliver huge public service programmes without coming to terms with the opportunities vouchsafed by the development of IT while recognising the risks involved.

The noble Baroness, Lady Stern, said that she did not expect me to be able to answer one or two of her questions. Indeed, I am not able to answer them at this stage. However, I reassure her that although we are not sure that we can go much beyond January in this regard, the information on the website of the Chief Inspector of Prisons relates to both public and private services. Although there may be an issue of immediate updating, the matters which she raised on private prisons are available on that website for public analysis and scrutiny. She identified problems with certain prisons. I do not think that she would expect me to respond to those points now. However, many aspects of the prison private finance initiatives have performed well and have delivered cost savings. Prisons have been built on time and on budget. The first PFI prison comprised a 17 per cent saving as against a traditionally procured prison. That is not a negligible saving. Further, valuable external resources are levered into such projects.

The noble Baroness asked whether the relevant reports were available. I am not sure about the date of the latest report but, as she will know only too well, one could not expect fuller reports than those provided by the Chief Inspector of Prisons. We hold her and that office in high regard in providing that information.

The noble Lord, Lord Wallace, made the main theme of his speech that, whenever public provision is in issue, there is bound to be an ongoing debate about the relationship between public and private resources. We all recognise that such a debate must be based on clear principles. The Government believe that the principles are very clear. We know that we need to identify the public interest in the choice of delivery system. That is open to debate. When we bring legislation that initiates change before Parliament, we reflect the nature of that debate. A reforming Administration will bring forward a whole series of proposals about how our public services need to change to meet a reforming agenda. In this rapidly changing world a Government would not meet their obligations if they did not respond to the rapidly changing circumstances in which public provision has to be established. However, there is bound to be a debate within that framework. It is clear that there is a legitimate role for the private and third sectors in delivering and reforming public services based on a clear assessment of value for money, not dogma. It is certainly based on the fact that there must be proper accountability. That was a constant theme in speeches from all sides of the House, certainly from the Liberal Democrat Benches.

We are open to hearing all suggestions that public services are not as open as they ought to be. There is no agenda here for imposing on the previous open accountability of local government a new secretive provision because private resources and private agents are used. The concept of openness must pervade local democracy. It is up to local authorities to recognise that the contracts which they strike with these providers will, and ought to, guarantee that openness.

Where we do not think that value for money can be guaranteed through the market and private providers, we shall continue to be entirely pragmatic about public service delivery. The noble Lord, Lord Wallace, my noble friend Lord Warner and other speakers were emphatic about that. We should value the ethos of public service. Not everyone is motivated purely by economic grounds. Nor is the public good delivered by the sole consideration of cost-benefit analysis. It is clear that we do and will depend on the ethos of public service which pervades the Civil Service and the legions who work in local authorities. As we all recognise, one of the great strengths of British life is the extensive work that is done through the voluntary sector, which has very high ethical standards. It plays an increasingly important part in the delivery of certain aspects of public services.

The Government will remain pragmatic about these issues. We recognise that in whole areas the public interest can be served only through the delivery of public services that are democratically and straightforwardly answerable to public authorities or Parliament. However, during the decade in which we have been in power, we have proved that, increasingly, enormous advantages can be derived from carefully drawn-up contracts which ensure that private investment is levered in to increase the resources available to develop the public goods which we need, and that considerable efficiencies and gains can be achieved in those areas through the operation of the market.

I thank everybody who participated in this informative and, from the Government’s perspective, enormously challenging debate.

My Lords, I thank all noble Lords and especially the Minister for a thoughtful and cross-cutting debate. I hope I made it clear to the noble Lord, Lord Warner, that I do not regard private companies, either individually or as a whole, as the great Satan. I contest one point in his speech; he said we can always trust the service users to drive forward quality. We cannot, because often in the case of public services they are vulnerable people not in a position to do so, such as children, frail elderly people or prisoners.

I thank my noble friend Lady Miller, who talked about the lines of accountability being blurred, and my noble friend Lady Scott of Needham Market, who talked from her great experience in both the public and the private sectors, and of her experience of the lessons we can learn from local government. The noble Baroness, Lady Stern, has certainly whetted my appetite to read the JCHR’s upcoming reports on private care homes and asylum seekers. Her powerful speech exposed the 10 per cent information gap about prisoners. It also emphasised the importance of the achievement of the noble Lord, Lord Ramsbotham, although he is unable to be in his place today, in keeping the inspector of prisons free-standing and not part of a larger inspectorate.

My noble friend Lord Wallace, in true academic style, gave us a thoughtful analysis and exposed the lack of principles and research about these matters. One thing struck home to me; people want good local schools and hospitals. If they get them, they are not terribly bothered about choice.

I share the sympathy of the noble Baroness, Lady Noakes, for the Minister having to respond to a debate such as this. She certainly put him on the spot about the figures and highlighted a number of failures, particularly in big IT contracts. Yet I do not agree with her that members of the public are indifferent as to who delivers their public services. The Minister kept talking about consumers. Consumers are not the same thing as citizens, and when we consume public services we are citizens first and foremost.

I am most grateful to all noble Lords. It has been an enormously thoughtful and thought-provoking debate. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.