Does Choice of Provider Improve Services?
By Dan Corry
Recent government policies, political debate and speeches by the Prime Minister and the Leader of the Opposition show that choice is going to play an increasingly important part in the design and delivery of all our public services.
It is important to be clear about what we mean by ‘choice’. People often mean different things. For some people, for example, choice means tailoring services to individuals. For others (and very often this is what citizens mean when talking about choice), it is used interchangeably with ‘quality’. When, for instance, parents talk about wanting a choice of schools for their child what they really mean is ‘I want the best that is available’.
Tailoring Services to Individuals
The first of these factors – tailoring services to individuals – means improving public services by personalizing them, so that they fit individual preferences. Moving away from the ‘one-size-fits-all’ approach should improve services by designing them around specific needs, rather than the so-called ‘average’ consumer. We need public services to evolve in ways that mean that the things that they provide are determined by the users and consumers, rather than by what professionals and providers think the users want, or by what they want to provide. If we get this right, there will be major allocative efficiency gains: we will be spending public money on the things that people really want.
Tailoring services to the individual does not necessarily mean that multiple providers are needed. In many cases, a single provider, private or public, can deliver a whole set of options. For example:
• Educational establishments offering a range of courses and delivery modes for students to choose from.
• Care workers tailoring personal care to the individual.
• Councils offering local residents a choice of ways in which to communicate with and receive information from them.
Multiplicity of Providers
But there are limitations to the single provider model. Individual consumers can try to influence the design of services, but they do not have the ultimate sanction of taking their custom (and the funding that accompanies it) elsewhere. Some of the market dynamics that reflect consumer choice cannot work in the same way that they do in the commercial world. Unpopular, or under-used, services may survive longer than they would where a multiplicity of providers exists. Conversely, new services may be not being introduced or tested as quickly as they ought where one provider holds a monopoly. If we have one monolithic provider, it will tend to be risk averse and this applies to both the private and the public sectors. Finally, it is hard to increase capacity quickly where there is only one provider. This is reflected, for example, in the Government’s decision to bring private sector suppliers into the NHS to increase capacity quickly and help bring down waiting lists.
So, while it is clearly possible to offer choice, and there is a lot happening to make choice possible without multiple or more diverse providers, there is a limit to how much can be achieved without extending the number or range of providers.
There are a number of ways in which diversity of providers can be achieved and, again, it is important to be clear about what is meant when suggesting that multiple providers are needed to help increase choice.
At one end of the spectrum one can imagine competing public sector institutions – rather like an internal market. It could be, as Nick Raynsford suggests in a recent NLGN pamphlet on choice, that if one council is providing very good services in a particular field then citizens from neighbouring councils might be able to buy into them rather than using their own council (Raynsford et al., 2004).
Next, there is the competition that exists – and choice offered – between state schools and state hospitals and their private counterparts. Then, of course, there is the private sector as sole deliverer. Experience has shown that when things are properly set up with appropriate contracts, and when issues like the public service ethos have been satisfactorily dealt with, the private sector can – and does – play an important role in delivering public services.
Finally, there is the voluntary sector which is already providing a range of public services in various sectors, particularly in social care.
Choice as Contestability
The idea that you have to have a choice of provider confuses the idea of choice with the concept of contestability. Choice is not always about tailoring services to the individual – it is also a mechanism for driving productive efficiency, which is the typical use of contestability.
Often, what is meant by choice is allowing the purchaser (and this is usually a public organization such as a council), to choose the provider of a specified service, i.e. a classic outsourcing issue. Clearly, in this context we are not dealing with continuous choice, but with offering choice at certain moments, for example when a contract is up for renewal. It is similar for individuals; often choice is a one-off thing (for example choosing a child’s school), rather than something that is ongoing and easily changed.
The theory is that the pressure contestability puts on providers makes them behave more efficiently. When it works, it should create dynamism in the system to create incentives for improvement and innovation and the evidence tends to support this.
From the users’ perspective, choice as contestability may not have changed the set of choices open to them. The fact that a council, for example, can choose between providers doesn’t extend much, if any, choice directly to the consumer.
This reinforces the point that while there is a strong link between these two ideas they are often confused. It explains, at least in part, why people can get so very animated or excited when talking about choice – particularly those who are hostile to the concept of contestability and to the use of the private sector in delivering public services.
Problems with Choice
For all the potential benefits, there are genuine problems with the use of choice: if there were not, we might have introduced it sooner. These problems can be addressed, but need to be brought out into the open rather than ignored.
The key one, and this is what worries centre-left people most, is equity. There is a risk that choice will result in an unequal, two-tiered, world because better informed and more articulate people are considered to be more likely to understand and take advantage of the choices available and thus more likely to do better.
Linked with this is the concern that where the choice centres around the use of an institution (for example a school or hospital), it will create a mix of top-quality institutions and second-class ones, rather than raising standards overall. Indeed, if choice is really working then some institutions will be forced to close: fine in theory but less good if it was your local hospital or school. Once choice is a reality, it is inevitable that different people will make different choices in different places and this will end the concept of uniformity, i.e. that everyone receives the same service wherever they live, whoever they are.
The second major concern, and this applies particularly where there is a choice of providers, is that quality may suffer. There could be a race to the bottom. Certainly, particular care is required in drafting contracts and service standards and in performance management if this is to be avoided.
Next, there are the concerns – focusing on loss of control and deskilling – that professionals have about putting users in charge of services.
There are, too, genuine questions that need to be asked about how all this fits in with the concept of democratic decisions over public services. The argument here is that we have chosen to have these things in the public sector because there is something different about them, otherwise they would be in the private sector. They are often very complex services which the private market finds difficult to deliver for all sorts of reasons. Because of this, it is argued, decisions should be taken in a democratic forum not through a consumerist version of public services.
Do all of these problems mean that we should give up on choice? In my view, no, although it would be naive to ignore them, or to dismiss them as being the views of only a disaffected or complaining few determined to defend their positions or the status quo.
The NLGN report, Making Choices (Lent and Arend, 2004), looks at how choice is being brought into local public services by local councils in particular. The report looks at what really happens when choice is introduced, what problems occur in practice rather than in people’s imagination, and to what extent – and how – they can be overcome. The report studied, for example, direct payments for people with disabilities. Previously what services would be delivered, by whom and how was determined by a local authority or health professional. Some councils now give individuals the money to spend themselves so they can choose both the service they want and who they want to provide it. There have been various uses of the money. Most people have used it to employ care workers but one, for example, chose to buy a dog. There is evidence that this was a good choice for them, but it raises interesting issues about the limits of choice. People are making different choices to those previously made for them by the professionals – this demonstrates the potential allocative efficiency gains choice can bring.
Overall, direct payment is a successful and popular scheme that receives good satisfaction ratings. It is not, however, without problems. Perhaps the most serious of these is that of capacity, particularly in rural areas. Outside major conurbations there isn’t always a market for people to buy from. The Government seems to have a mistaken view about the private sector, i.e. that if you create demand the supply will automatically and efficiently emerge. In practice, this is not always so.
The NLGN also found that people need support in making their choices. This changes the role of professionals who are now called upon to help people understand the options and make appropriate decisions. This is important work but it is time-consuming. Choice, through the direct payments scheme, is therefore not a cheap option. Set-up costs are high and, unless government is unconcerned with issues of quality, equity and helping people make informed choices, the continuing costs are likely to be similarly so.
The NLGN also looked at choice-based letting, which is spreading a lot in local government. Councils are moving away from an obscure and bureaucratic system for allocating social housing, to one which is modelled much more on how people in the private sector rent or buy their homes. The choice here isn’t about choice of provider, which is pretty much fixed, but is about opening up the system and being much clearer about the rules and how it all works. Now, families can choose their own trade off: for example going without an additional bedroom in order to get a house nearer to school or work. This choice – common throughout the private sector – has previously been unavailable to people seeking social housing. In the most up-to-date choice-based letting schemes, people can view the choices available and take virtual house tours via computer in much the same way as is common at many private sector estate agents.
On the whole, people seem to think this system is better and fairer. It cannot, of course, overcome the problems of shortage of housing stock but it has helped people understand why they are where they are in the queue. There is also some evidence that under this system people feel a bit happier about their eventual property because they have had a voice in choosing it. As a result, it seems they are more likely to become involved in the community they move into than people who are simply put there with no say in the matter at all.
Whereas most of the focus on choice has been on the individual, we would suggest that in developing choice consideration should be given to how to extend collective choice to particular groups to help shape public services. Park trusts are a good example of this -where, rather than bureaucrats at the town hall, the people who live around and/or use the area make the decisions about how it is developed and managed. There are other examples where, for example, local communities have been given pseudo-ownership of a leisure or community centre. By empowering them to make decisions about how the available funds are actually spent one can give local communities the ability to determine for themselves which services they receive and/or who delivers them. In turn, this helps to develop the communities as communities.
This brings us to the question, already alluded to, of whether choice somehow undermines representative democracy. There has, of course, been an historic tension between representative and participatory democracy and this is reflected in the debate about choice. Some councillors think that choice encourages users to bypass local democratic structures and they worry that as a result it undermines their own role and function.
There is, though, a more positive way of looking at this: it can free politicians up from worrying about and dealing with minutiae to focus on the job we elect them to do. This is to develop policies and strategies and to make the broad allocative decisions for example between health and education. So I would argue, particularly if one considers the potential for the localization of collective decision-making about choices, that rather than undermining democracy, increasing choice supports it.
So does all this mean that choice can improve public services or not? Certainly, it is a tool that can be used to help make things better without making a fetish of it. There’s a very real risk of polarizing the issue as happened with privatization in the 1980s. Then, the only positions that held sway seemed to be either that privatization was a good thing and should be universally applied or that it wasn’t and shouldn’t be applied at all. Much the same thing seems to be happening with choice.
With privatization, as we have now found, the truth was that it depended on what you were privatizing and how you did it. The same is true of choice: it has the potential to improve some services more than others and in every case the how is at least as important as the what.
Raynsford, N, Bruce-Lockhart, S, Wilson, J and Bundred, S (2004) ‘Choice Cuts’: Essays on the Improvement of Local Public Services (NLGN, London)
Lent, A and Arend, N (2004) Making Choices: how can choice improve local public services? (NLGN, London)
Dan Corry is Director of the New Local Government Network. He was previously a Special Advisor to Margaret Beckett, Peter Mandelson and Stephen Byers.