In Defence of Competition

The public sector should not be afraid of competition. Why? Because it works.

Competition within publicly funded services such as school education and the NHS is a hard idea to sell. The idea that it might be desirable for publicly funded schools to compete with one another for pupils or NHS hospitals to compete for patients strikes many people as bizarre at best and positively evil at worst. The fear seems to be two fold: that such competition will damage the quality of service, and that the competition will come from the private sector, hence privatising or hollowing out the ‘real’ NHS or public education

The fear of about quality is misplaced, at least in health care. There is now a considerable volume of evidence that increasing competitive pressure does indeed provide the challenge that public services need if they are to improve. Zack Cooper, Carol Propper and colleagues at the London School of Economics and the University of Bristol found that, during the period when patient choice was introduced in England, hospital quality improved faster in more competitive areas. Propper and colleagues have also shown that competition had a positive impact on the quality of management with knock-on effects on hospital quality, while Richard Cookson and colleagues at the University of York have shown that the package of competitive reforms even improved the equity or fairness of service delivery – or at least did not damage it[1].

The worry over competition from the private sector seems to stem from the assumption that every one in the private sector is, in the philosopher David Hume’s terminology, a self-interested ‘knave’ out to exploit the weak and vulnerable. In contrast, all those in the public sector are assumed to be altruistic ‘knights’, whose only concern is with the care of the people they are helping, and whose jobs and institutions must be protected at all costs – even if quality suffers as a result. In fact, of course, not everyone in the public sector is a knight; nor is everyone in the private sector a knave, as GPs and consultants in private practice would attest. In fact, many potential and actual providers from the ‘private’ sector are actually social enterprises of various kinds, who are indeed generally staffed by knights: charities, other voluntary organisations and, of particular current interest from all sides of the political spectrum, ‘mutuals’ or employee-owned enterprises.

But isn’t there a danger that these innovative ‘knightly’ forms of organisation will be overwhelmed by competition from large ‘knavish’ corporations? Again the facts suggest otherwise, especially with respect to mutuals. Reviews of the evidence concerning the performance of employee-owned enterprises relative to conventional private sector competitors across countries and services that were undertaken by the Mutuals Task Force (of which I was Chair) found that, in general, mutuals were more productive, with higher user satisfaction and with better paid and happier employees. So long as the competitive playing field is level (and here there is indeed room for improvement in the relevant regulations), mutuals and other form of social enterprise can and will win the relevant contracts.

Previous pro-competition reforms did not lead to disaster or system collapse; instead, the evidence suggests that they contributed to a steady improvement in the quality of service. And, with one exception, there is no reason to suppose that things will be significantly different this time. The exception concerns the financial pressures on public services: real and ever-growing, despite the current ring-fence around health and (some) education spending. This poses much more of a threat to publicly-funded services than any organisational reforms. If anything leads to the end of the welfare state, it will be the Government’s determination – based on pre-Keynesian economics – to impose ill-conceived austerity measures on the public sector. It is within the macro-economic sphere that the Government’s competition-oriented policies are misdirected: not within the micro-sphere of public services.




[1] Cookson R, Laudicella M, Li Donni P, Dusheiko M.  Effect of the Blair/Brown health reforms on socio-economic equity in health care  Journal of Health Service Research and Policy 2012 17(supp1) 55-63.


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