Circle ‘not the problem’

The Guardian, 21 January 2015

The Guardian, 21 January 2015

The outsourcing of the management of Hinchingbrooke Hospital to Circle Health was not inherent to the problems the hospital faced before the contract failed, I argue for the Guardian Public web site.

The problem was with the commissioning. Public services cannot afford to ignore the power of business to deliver results, so post-Circle they must work to produce better contracts.

The recent intense debate over public sector outsourcing has been fuelled by people’s passion for public services. We’d all agree with that. While ​it may be wrong to run a public service exactly like a business, it is also wrong to believe that public services can neither learn from nor utilise businesses and business techniques to make them better.

No one I know is calling for all public services to be run like businesses, though many businesses would benefit from being run more like public services. If the only point of having diverse suppliers for public services is to make the public sector more commercial, then it would indeed fail, and that should be avoided.

But that is not what is happening. The previous Labour government, of which I was a member, anticipated that the vast majority of NHS services should remain in-house and that is still the case.

Public services exist to provide a service – and in discharging that responsibility we need smarter and better commissioning than hitherto. Of course, if a public service fails to deliver our needs, we can hold those responsible to account, and that should also include their outsourcing decisions. If a supplier, either within the public sector, or a ‘spin out’ firm from the public sector, a charity or PLC, doesn’t deliver on its contract there must be consequences. The most urgent priority will be to avoid the collapse of any public service. Contracts must therefore be excellent in order to achieve the best outcomes – and often they are not.

The failure of Circle at Hinchingbrooke hospital, in Huntingdon, where the company very nearly managed to remove an operating loss inherited from the public sector, was due to the failure of the NHS to deliver its side of the bargain, not least the over-demand on A&E which was well above what the company was told to expect. Circle was conceived as a partnership between doctors and financiers and its record on delivering physician-led quality services in the private sector was well established long before it took charge of Hinchingbrooke.

Circle was not the problem at the hospital. The same will happen with probation services if the government cannot guarantee issues such as IT support and the client mix: many small Work Programme providers have not been able to get as many unemployed people into work as they expected because they were sent clients with a different mix of needs from those for which they were contracted to provide.

It is also not right to criticise private companies on the grounds that the primary responsibility of a business is to create a profit for its shareholders. Since the 2006 Companies Act that is not exclusively the case. Increasingly, businesses of all kinds, not just social enterprises, are adopting a social purpose in at least part of their operation. The Social Value Act, which came into effect in 2014, is designed tto discriminate in favour of businesses that generate social as well as economic value when tendering for local government contracts, and many companies have recognised the business case for real and meaningful community engagement. One example is the builders Wates’ practice of seconding managers to support local social enterprises.

There is a long way to go, but if we categorically deny that business can do good, or should be encouraged to do so, then we are really missing a trick. If turnover is any measure of capacity to deliver outcomes remember that, at a million pounds£1m a day, our fifth-biggest charity, Oxfam, is comparable in size to a single large supermarket store.

The power of business, properly focused, is too great a source of potential good to ignore. Businesses do sometimes carry losses – ask the film industry – and I’d like to see a bit more edginess, a bit more risk, in public service delivery.

I can’t yearn for the halcyon days of British Rail and I don’t believe that the public sector would have delivered broadband quicker, cheaper and better than BT has done. Partnership and co-working are the way forward. Let’s be realistic. Where would the NHS be without the private sector to deliver its medicines, equipment and, for heaven’s sake, its GPs? Most family doctors are private sector contractors, after all.