Blair's which and other dilemmas

The Other Invisible Hand
September 28, 2007

Anthony Giddens relishes an insider's view of public-service delivery

This book is the bee’s knees. Slender though it might be, it is one of the finest discussions of the dilemmas of and possibilities for the public services published in the past ten years. Those familiar with the author’s previous works, which are numerous, will not find many new ideas here. The book draws in particular on Julian Le Grand’s more technical study, Motivation, Agency and Public Policy , which appeared about four years ago, yet is clearer, more accessible and more compelling. It is the product of an author at the top of his field. One of the reasons it is so good, no doubt, is that it is based in some large part on practical experience as well as academic reflection. Le Grand worked in Downing Street for two years as senior adviser to then Prime Minister Tony Blair. His work had a large influence on the Government’s reform projects; but he clearly in turn learnt much from the experience.

Introducing choice and competition into public services, along with the use of commercial providers, was among the most controversial of all the domestic reforms introduced during the Blair years. The reforms were condemned by critics as privatising the public services and as driven more by ideology than by well-considered policy programmes. Le Grand artfully and compellingly shows each of these criticisms to be misconceived. The term "public" in the phrase "public services" should stand for the goals of such services, not for the means of their delivery. Especially where it acts as a monopoly, the state is not always ? certainly not inevitably ? the best agency to deliver public goods, and those who work in state-based institutions do not always represent the public interest.

Good public services, Le Grand argues, should meet several criteria. The services should be of high quality. They should be delivered in an efficient way and should be responsive to the needs of those using them. They must be accountable to those who fund them ? the taxpayers; and they should be equitable, not favouring some groups over others. These aims are not always wholly compatible with each other ? sometimes trade-offs have to be confronted.

There are basically four means of delivering these ends. One prioritises trust: the public services work best if we leave those involved to get on with it, relying on their dedication and expertise.

A second model is almost the opposite ? it is a command-and-control approach: to get things done there should be a clear management hierarchy, where policy and even detail are settled at the top. Le Grand includes the use of centrally set targets, which were widely used in the early years after 1997, within this category.

A third depends on "voice" ? achieving a well-performing service through allowing the recipients of services to make their voices heard, and strongly enough to set the framework of policy.

Finally, a fourth approach depends mainly on choice, normally in the context of competition: the quality of services is determined by the fact that clients can choose among providers. In practice, of course, the public services ? and differing sectors of them ? use combinations of several of these factors. But which should have pre-eminence is a matter of heated debate.

Taken in isolation, they all have advantages and problems. For instance, many people, especially on the Left, tend to place most stress on the trust model. A "trust the professionals" model works only if one can assume that they are motivated by altruistic devotion to the public interest. However, professionals may act as distinct interest groups, concerned with protecting their own power or material profit; they may assume that they always know better than those to whom they provide services.

Objections can also be found, Le Grand concludes, to the command-and-control and voice models. Without strong elements of choice and competition, none of them can provide the high levels of quality for which we should be aiming.

The "other invisible hand" works by applying Adam Smith’s principles to quasi-markets, where those making choices are using not their own resource but resources paid for by government. They are markets only in the sense that producers are competing for custom rather than providing it as a monopoly service. Why is choice and competition desirable? Because it empowers the individual, but perhaps even more importantly because, in the context of competition, it generates incentives for providers to improve their offerings. Many critics say that people "don’t want choice" ? all they want is a good local hospital and school. But this argument misses the point: choice and competition is a prime means of creating well-performing hospitals or schools.

It is also sometimes said that choice is a middle-class obsession. Yet it is because more affluent people can exercise choice ? for example, by moving near to a good school ? that public services become stratified. Where real choice is extended to poorer groups, it can help to reduce inequalities.

The politics of choice and competition, Le Grand freely admits, are problematic. People on the Left instinctively dislike these notions, and policies based on them, because they tend to be hostile to markets in general. The Right is more in favour, and rightwing governments have mostly pioneered their implementation. Yet conservatives still detect in quasi-markets the dead hand of the state: why not simply return services to the marketplace? For these reasons, Le Grand closes on a rather pessimistic note. I am not sure he needed to do so. Contrary to what many imagined, Prime Minister Gordon Brown does not seem to be pulling back from the reforms his predecessor introduced.

Every book has its weaknesses. What are they in this work? One problem is that Le Grand’s discussion of the three alternative models is thin compared with the space and detail allocated to choice and competition. Supporters of the other models might argue that the book is unbalanced. Moreover, I was not wholly convinced by Le Grand’s analysis of one of the major objections critics make to the choice and competition approach ? that instead of helping reduce inequalities, they will increase them. If choices are extended, won’t the more affluent be able to scoop up the best opportunities even more extensively than is the case now? Le Grand’s main proposal for reducing cream-skimming in education, for instance, is to set up a "disadvantage premium". Schools that accept children from poor areas would get an extra amount of funding for each such child. But there seem plenty of difficulties. Identifying the children in need might not be easy (as the author accepts), while the extra amount received by schools would have to be pretty high to counterbalance possible effects on educational standards.

Anthony Giddens is a member of the House of Lords and was an adviser to former Prime Minister Tony Blair.

The Other Invisible Hand: Delivering Public Services through Choice and Competition

Author - Julian Le Grand
Publisher - Princeton University Press
Pages - 208
Price - £14.95
ISBN - 9780691129365

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