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Margot James MP: What room does the UK have for improving the quality of public services in the present economic outlook?

James Margot

Margot James is the Member of Parliament for Stourbridge.

The Chancellor is doing all he can, given the worrying global economic picture, to apply creative thinking to find solutions that minimise the risk of unforeseen liabilities to the taxpayer in the years to come. With the possibility of the collapse of the Euro now being openly discussed in Frankfurt and Brussels no one can rule out the possibility of a second recession. From which the UK, although better placed than most countries, would not be immune. I would expect the Treasury to be drawing up contingency plans for this possibility whilst planning for modest growth in the hope that the more pessimistic voices are proved wrong.

The present crisis in the Euro and huge debt burden in the United States is shining a light on the lack of competitiveness of the West versus the developing economies. The rate of youth unemployment across Europe, the UK’s slide down the international league tables of educational attainment, and the lower rates of productivity compared with developing countries are the warning signs that, unless radical action is taken, the transfer of economic power to the developing world will gather pace.

Western economies, including our own, will have to reduce further the cost of entitlements and drive faster the improvements to productivity in public services as well as the wider economy. Therefore we need a contingency plan which embraces the possibility of substantially greater private and third sector provision of public services.

During the last week I have met representatives of Sue Ryder and the Salvation Army. Sue Ryder is a charity that provides health and social care services, under contract from the NHS in some cases. The Salvation Army is contracted by the Department of Work and Pensions (DWP) to help people who have been out of work for some time through delivery of the Work Programme.

Both these organisations provide better value and better care than their public sector counterparts. They are able to employ people at a lower cost and on more flexible terms than are the NHS and the DWP. If we want to maintain and even improve standards of care and service in the future, we are likely to have no choice but to invite charities and private companies to contract for many more services than they do at the moment.

There was a moment, six or seven years ago, when the Department of Health fell for such outrageously one sided terms in their renegotiation of the GP contract that I thought the GPs had priced themselves (and don’t forget, they are private providers to the NHS) out of the market. My own PCT in Dudley are reluctant to put out new tenders for primary care services for fear of being unable to resist a bid from a private company. And that is all under the auspices of the previous government’s legislation; however much the Opposition try to claim that it is an issue brought to the fore by the current Health and Social Care Bill.

I trust that addressing the obstacles to the further reform of public services is uppermost in contingency planning at the Treasury. Certain anomalies which prevent charities and the third sector competing on a level playing field should be removed. The NHS, for instance, is able to recover VAT on certain supplies that charities are not. Sue Ryder estimate that under one contract alone in West Berkshire the hospice service provided to the local PCT will result in a VAT exposure of £40,000. According to their calculations an NHS provider would be able to recover 55% of this sum.

But the biggest obstacle which needs tackling is the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). Both Sue Ryder and the Salvation Army told me about the additional expense and management difficulties caused by TUPE, which obliges them to take on former NHS and DWP staff as part of the contracting process.

These staff have had to move organisations under the TUPE regulations and as a consequence have higher salaries, greater holiday entitlement and other additional benefits. To say nothing of a substantial employer contribution to a final salary pension scheme that scarcely anyone in the private sector, let alone the charitable sector, enjoys. Given that NHS staffing costs rose almost threefold between 1997 and 2010 it is not surprising that their staff are very much better paid than most people who work in the charitable sector.

If charities were to undertake their own recruitment they would not be paying similar rates to those currently paid to NHS and civil servant staff. But instead the charities face increased costs and have the ongoing headache of trying to manage a group of staff all of whom are on different terms of employment, which is bound to breed resentment in the long run among those employed on normal private sector or charitable terms.

The only way the charitable sector will be able to really improve value for money as well as offer the superior quality standards, for which it is already known, is if they are permitted to recruit experienced staff on more competitive terms and conditions.

The Business, Innovation and Skills Department (BIS) are reviewing the operation of the TUPE regulations at the moment. There is no doubt that BIS need to return with radical and far reaching proposals which will enable the ethos and employment terms of charities and other third sector providers to flourish so they are not at such a huge disadvantage to public sector providers.

Only if charities and private providers are relieved of these anomalies and restrictive practices will they be able to provide improved public services at a cost affordable to the taxpayers of the future, who will already be burdened with the debts of previous generations.


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