Tuesday 3 December 2013

Less should be more: the mismatch emerging in public services

I get my gas from British Gas.  It isn't a perfect solution, and I will be getting £53 of their vast price increase back, I gather.  Whoopee.  I can't quite get my head around why this tweak works, but it has made me think about the way our services are currently structured.

Either way, I am not exactly celebrating.

Let me say, before anyone categorises me, that I have no problem with private companies delivering services, as long as they do so on a human-scale, and do so without so narrowing what they deliver that they spread extra costs around the system.

You might say that I am therefore against privatisation, but it isn't the principle that bothers me.  It is the current practice.

But there is a more fundamental problem about the way privatised services behave, especially when it comes to cost-saving.  It is the need they have to maximise profits.

The way this is usually tackled, at least for privatised utilities, is to impose a regulator in the situation which prevents profits from being maximised at the expense of consumers.  That is all well and good, but it covers up the fact that there is an increasingly important mismatch between the needs of the shareholders and the needs of the public as a whole.

Take energy for example.  The overwhelming need, for government and people alike, is to help people use less energy.  The overwhelming imperative for the energy utilities is to encourage them to use more.

We cover up this mismatch using profit-making financial institutions, like ESCOs, that can share in the benefits of energy-saving.  But there comes a point when it isn't enough - and it isn't enough now.

That is why I am unhappy about the responsibility for insulating poorly-build UK homes shifting from the energy companies to tax-payers.  It means that this basic mismatch is now absolutely stark.

It is equally stark in privatised healthcare.  Again, the needs of the public and the government are aligned.  They both want less demand, less ill-health.  The healthcare companies want something different.

Often the mismatch goes beyond stark, especially when contractors are paid for throughput, or paid for the number of calls they answer - never mind whether the calls are actually what the systems thinker John Seddon calls failure demand (people phoning up to find out why nothing happened last time they called).

This is a serious problem with the current public services agenda.  It is a system problem.  If it isn't solved, it will lead to rocketing costs.  Because there comes a point where privatising services is no longer a useful way of saving money, because the efficiency savings have long since been made, and all they can do is get people to burn more energy.


Simon said...

you know you could get your gas from a non profet organisation like ecotricity or equigas righy?

David Boyle said...

Well I know, and I get my electricity from Good Energy, but I couldn't see the point in going to a non-profit for gas if they were just sourcing the gas from the same place as everyone else. At least Good Energy are generating their own. But you are probably right that I should.

Simon said...

Ecotricity is at least trying to establish some sort of biogas input as part of their Green Gas offering (http://www.ecotricity.co.uk/our-green-energy/our-green-gas), but the point I was actually trying to make isn't one about climate change (equigas aren't really about that at all, they use their profits to subsides people who have to pay trhough meters, which is a worthy aim in itself). It is about the staggering fact that not for profit energy providers (including gas providers) actually exist.

I find this staggering because it is so little remarked upon given that the media narrative is so focused on the profits companies are making at our expense (and its the profit motive you yourself drew upon in this article). That at least four energy companies (Ecotricity, Good Energy, Equigas and the Coop) have some sort of non-profit / mutual model is scarecly even mentioned, but if ever there was a sollution stairing in the fact of a problem this seems to be it. My only conclusion is that people are so caught up in the idea that these companies are just about tackling climate change that they miss the wider point that they a social businesses that are actually succeeding (albeit in some small case) in a largely deregulated post privatization sector. GO THEM!!!