Government, trade unions and the reform of public services

Since the re-election of the UK's Labour government in June 2001, its plans for greater private sector involvement in the management and delivery of public services have been strongly criticised by trade unions. This feature reviews the arguments.

The re-election of the Labour Party government with a large parliamentary majority on 7 June 2001 was welcomed by its traditional allies in the trade union movement, but the celebration was brief and low key. During the election campaign, public sector trade union leaders had criticised the limited progress made in improving their members' pay and conditions of employment and the quality of public services over the previous four years (UK0103120F). Subsequently, an acrimonious and highly publicised argument between trade union leaders and government ministers has focused on the part to be played by the private sector in the planned reform of public services (UK0107137N).

TUC position

On 25 July 2001, the general council of the Trades Union Congress (TUC) issued a statement on the future of public services. This endorsed the government's view that significant improvements in the quality of education, health and transport will be the test by which it will be judged at the next election. The rest of the statement, however, strongly criticised recent examples of private sector involvement in the funding and management of public services, and noted 'a sense of heightened apprehension that the government intends a progressive increase in the private delivery of public services'. The statement committed the TUC 'to campaign for better public services run by public servants' and to develop with government 'a clear understanding, sector by sector, on the way forward'. In identifying the need to establish a 'grown up dialogue with the government ... and to breathe reality into the partnership approach advocated by the Prime minister', the TUC highlighted its disappointment with both the process and the content of planned public service reforms.

Public sector trade unions submitted 19 resolutions critical of the government's public sector policies for debate at the annual TUC conference in September. However, the debate did not take place as the conference closed early following the 11 September terrorist attacks in the USA (UK0110104N).

Government response

The speech that Prime minister Tony Blair was due to deliver to the TUC conference was also cancelled, though the text of the speech was released. This outlined the principles and objectives of public service reform, arguing that they were shared by trade unionists and government ministers. Mr Blair argued that the limited areas in which the government had proposed a role for the private sector had been set out in detailed plans for policy reforms in health, education, and transport, adding that 'the blunt fact is that our health and education services are run by publicly accountable authorities and overwhelmingly delivered by public servants.' The Prime Minister argued that government policies had been misrepresented, and condemned 'false charges about privatising schools and hospitals' at a time when they are receiving substantially more money, and are employing more staff whose pay is rising faster than that of private sector employees for the first time in years.

Key developments

Trade union policies and public opinion on private sector involvement in the funding, management and delivery of public services have been influenced by three exceptional and contentious developments in the transport sector.

• First, the government has resisted strong and widespread opposition to its specific plans for a 'public-private partnership' (PPP) designed to produce a much-needed investment programme in the London Underground.

• Second, it created another PPP through the partial privatisation of the National Air Traffic Service; 51% of shares were sold to the major UK airlines and 5% allocated to employees. This initiative was strongly opposed by civil service trade unions, and implemented only months before the airline industry was plunged into a deep crisis that has threatened investment plans and led to trade union anxieties over job cuts (UK0110114F).

• Third, the government has had to deal with the chronic under-performance and recent financial collapse of Railtrack plc, part of the fragmented railway industry which emerged from the old-style privatisation implemented by the last Conservative government.

All three of these cases have distinctive features, but they illustrate one common problem; namely, that private sector companies cannot easily underwrite the risks of difficult-to-define projects, and public risks should not be privatised if there is an implicit public guarantee of continued service.

Private sector involvement in the funding and delivery of core public services - especially education and health - raises different issues. In the National Health Service (NHS), most new hospitals have been funded through the 'private finance initiative' (PFI). Private sector firms bid for contracts to finance, build, and usually provide hospital support services – such as catering, cleaning, laundry - in return for agreed annual payments for the duration of the contract (eg 25 years). Trade unions have viewed such public-private partnerships as another form of privatisation, threatening the pay and conditions of their members and the organisation and influence of the union. Whilst employees' rights and conditions are legally protected on transfer from the public to the private sector, trade unions have argued strongly that newly-recruited staff should have the same pay and conditions as the protected staff to avoid the creation of a 'two-tier workforce'. They have also persuaded the government that pilot schemes should be implemented in three new hospitals in which all staff would remain employed of NHS terms.

In the state education sector, the scope of private sector involvement is much less. Nonetheless, 600 schools have been refurbished via PFI schemes and 20 local education authorities have subcontracted many of their management services. Moreover, three state schools, out of a total of 778 judged to be 'failing' by inspectors, are currently managed by private sector organisations, two of which are not-for-profit companies.

Commentary

The intensity of this debate has undoubtedly been increased by a lack of clarity and consistency on the part of government ministers, and exaggeration and public posturing on the part of some trade union leaders. Both parties clearly want to influence expectations of the pace and direction of public service reform over the next four or five years.

The strong opposition of trade union leaders and activists to government plans for a greater private sector involvement in the reform of public services was not surprising. It followed their deep disappointment with the policies and achievements of the 1997-2001 Labour government. Until the fourth year of this government, the growth in public expenditure was fairly modest, exposing serious problems in the delivery and quality services. Public sector pay increases were lower on average than those in the private sector, increasing the severity of recruitment and retention problems for key groups, such as nurses and teachers, and leading to widespread evidence of increasing workloads, greater stress and declining morale.

This hostility to many aspects of government policy has not, however, discouraged trade unions from engaging actively with employers and government officials in negotiations on the reform and modernisation of pay structures and systems (UK0103120F). Alongside incremental changes designed to deal with short-term recruitment and retention problems, more ambitious negotiations have focused on the need to develop national agreements covering service-wide job evaluation schemes and core conditions of service, allowing greater discretion for local negotiations on grading, and the removal of sex discrimination in pay systems. Within this broad 'pay modernisation' programme, initiatives and proposals for performance-related pay have caused the most open conflict between government and the trade unions. It is by no means certain that trade unions, employers and government will be able to reach agreement on the more ambitious reform proposals - for example, the comprehensive Agenda for change in the NHS - but at least the critical phase in negotiations will coincide with substantial real increases in health expenditure. (David Winchester, IRRU)