The most important policy issue of the age (and nobody's talking about it)

"They must feel the thrill of totting up a balance book,

A thousand cyphers neatly in a row. 

When gazing at a graph that shows the profits up, 

Their little cup of joy should overflow."

Not me, of course, but Bert the Chimney Sweep’s satirical take on Mr George Banks’ view of what life is all about.

Mary Poppins was the first film I ever saw. My father took me there at the Odeon Haymarket in 1965 and I have only recently seen it again, and the satire was a bit more obvious to me now than it was before.

But Bert wasn’t pouring scorn on business. He was pouring scorn on the reduction of business to numbers, which then as now is the province of the City of London. Or that is how I put it in my book The Tyranny of Numbers.

Now, the news emerged today that Justice Secretary Chris Grayling is intending to privatise the courts system (though not the judges, thank goodness for small mercies). That means many underlings in the City are now letting their cup of joy overflow at the prospect.  Probably not terribly excited at the prospect of running the courts, but the prospect of the loans they can raise on the back of all that property is certainly a joy-overflowing business.

Now I have no ideological objections to privatisation. In fact, I think the obsessive argument around public-versus-private has held UK politics back for a generation. But, as I said recently in a blog post, the stated purpose of privatisation has subtly shifted, and debate doesn’t seem to have caught up with it.

In the heady says of selling off BT, the promoters could reasonably claim that privatisation was about getting a better service. That is certainly what happened.  But nobody claims or believes these days that privatisation will make services better, for example of the post office. Still less the court system.

Privatisation is now about ‘efficiency’. All across public services, systems are being retooled to suit this particular notion of ‘rationalised’ efficiency, which means wielding the IT systems to create economies of scale, borrowing from the assembly line to create faster throughput. It is about creating efficiencies by narrowing the objectives to a handful of numerical outputs.

The real issue is whether this style of efficiency is actually very efficient, and here we have the central policy issue of our age – which hardly anyone is talking about. It is this: are economies of scale possible in public services? (remember: you heard it here first!)

I’m not claiming that economies of scale are somehow out of the question. They are obviously available. The question is how quickly they are overtaken by dis-economies of scale because narrowing the objectives impoverishes the services and creates costs elsewhere.

This is such an important issue because the whole future of our public sphere depends on the answer – and despite what you hear, there is actually very little evidence.

Coming up with a resolution to this means being able to look at two or three dimensions to a problem at once, yet so much policy assessment is still stuck in the days when people could only look at one dimension at any one time - cost-benefit analysis that only looks at the benefits, GDP that never subtracts, everyone will recognise the kind of stone age policy-making tools that are still used.

My side of the argument would suggest that the diseconomies very rapidly overtake the economies, because public services badly need an approach that is flexible and human enough to make a difference, once and for all.  The alternative is services New Labour-style - which maintain people in their need with constant, repeated rationalised interventions which make no real difference, and do so at huge expense.

That is the real issue before us.  Not public versus private, but big versus small, and rationalised efficiency versus effectiveness.

It explains why privatisation is actually on the way out, and for two inter-related reasons.  The only way profit-making companies can profit is by using these assembly line techniques, and they are not very effective - and therefore hugely expensive.  Yet if they don't use them, the profits are no longer available.

That is why so many private sector contracts are unravelling (see Serco for example).  There isn't enough money for them.

Privatisation is being squeezed between the horns of this dilemma - the available profit shrinking and the costs rising because their systems are so much less effective than they need to be.

That is the world that will face us by the next general election, and then what?  Certainly, it is Privatisation RIP, but what will replace it?