Improving Public Policy Delivery Through Market Mechanisms or Abandoning Marketization

Assignment title: Does the route to improving public policy delivery lie in greater use of market mechanisms or abandoning marketization as a failed experiment?

This essay will ultimately show that the route to improving public policy delivery does lie in abandoning marketization as a failed experiment. Marketization is the process by which private sector forces are introduced to a public market with the intention of improving the service by creating competition.  Quasi-markets introduced by the Thatcher Government in the late 1970’s and early 80’s aimed to shift away from the Bureaucratic system in order to free up government resources.  This neo-liberal ideology has been sustained over the last 30 years. By focusing on the key areas of health, education and housing and accessing their success, this essay will highlight weather or not marketization has been a ‘failed experiment’. 

The first area this essay will address is housing. Housing policy since the 1970’s especially 1979 has been dominated by the need to reduce public expenditure and increase private ownership (Brown & Sessions, 1997).   The introduction of the Right to Buy scheme gave the opportunity for tenants of social housing to buy their property at a discounted rate.  Thatcher’s government aimed to marketize the housing market and reduce people’s dependency on the welfare state. Private housing in this period increased from 180,000 homes in 1986 to 216,000 in 1988 (P.Malpass and A.Murie, 1982).   The government also offered rent rebates, aids of renting private property, in order to give incentive for those to rent outside of social housing. This incentivized private sector ownership of social housing and prompted this shift away from social housing.   Peter Malpass & Ceri Victory (2010) make the distinction between these policies being consumption based policies and go onto list several policies aimed to ‘modernize’ the housing sector on a supply side bases.  Some of these are; the Housing Act 1974, local authorities being enables not providers, housing associations being able to raise private loans, competitive tendering of housing contracts, the transfer of social housing to housing associations and the opening of the social housing grant in 2004. What we see is this great shift for private ownership of social housing.  The aim of these policies was to incentivize lower rent rates for social housing by generating competition between the landlords through lower regulation (Le Grand, 1991).  

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After addressing the housing policies implemented and the intentions of the policy, we can determine weather or not we should abandon marketization as a failed experiment.  From an economic perspective this policy has been largely successful. As housing prices rise more people are incentivized to enter the market and the housing market grows.  As addressed by Grand (1993), this structure is more efficient. From an economic perspective this policy is a good policy. However, when we look from a social policy perspective, there is a need to address how the government is meeting human needs.  A major theme running through the last 30 years has been inequality. Aled Davies highlights the main problem with policies like the right to buy scheme,

“Supporters cheer its success in providing the opportunity of home ownership to millions of council tenants; yet opponents argue that the policy has resulted in a chronic shortage of affordable housing, increased the burden of household debt, and cemented council housing as a residual form of tenure for the poorest members of society” (Davies, 2013)

Two main issues have emerged from the marketization of the housing sector. The standard of social housing is falling and those who haven’t benefited from the scheme have been further marginalized from society creating larger inequality.  Due to the fact that private sector firms are now attempting to provide the most affordable housing in order to be competitive and also generate the most profit there is a detrimental effect on the standard of housing. The main form of social housing has been a council towers.  The economist article “slums in the sky” (Economist, 2005) address how these poorly built flats are not only inadequate to live in but the brutalist architecture associated with cheap buildings act as a symbol of poverty further cementing class divisions.  Whilst council towers have existed pre-marketization the route to improving this situation does not lie within marketization.  A key case study of this is the Grenfell tower disaster. There were cut corners in the construction of the buildings to generate larger profits.  It is clear to see marketization does improve public policy delivery but furthers problems associated.  Whilst there have been policies such as “The Decent Homes Programme which aimed to ensure that social sector homes and private rented homes for vulnerable households met quality standards” (Keohane & Broughton, 2013) implemented by the New-labor government programs such as these are underfunded and majorly hit during times of economic uncertainty and crisis.  Furthermore, the policies implemented over the last 30 years favor the skilled working class and go onto marginalize a large proportion of working class who where unable to benefit from the right to buy scheme.   Malpass & Victory (1982) address this by showing that in 1962 only 11% of social housing tenants had no income (Holmans, 2005; found in Malpass & Victory, 1982) whereas by 2003 the figure was 65 per cent (Social Exclusion Unit, 2004; found in Malpass & Victory (1982). This drastic rise in no income households shows how at the lower ends of society there has been a rise in inequality. From this we can deduce that marketization has failed at achieving it’s social aims of providing better quality and more affordable housing.  Whilst this may appear to be a good economical structure, the route to improving public housing policy does not lie in the greater use of market mechanisms as it is clearly failing those at the lower ends of society.

The NHS is seen as one of the UK’s greatest success stories and when we compare it to systems like the US.  In the past 30 years  ‘free-market’ mechanisms has have been introduced into the NHS in order to save government resources and create efficiency within the healthcare sector.  The first way in which the government attempted to improve the service was through outsourcing of services not directly related to providing healthcare such as; cleaning, catering and maintenance. By creating a private sector bidding war on the contracts the government would be paying less for these outsourced services.  However, as addressed in the housing section, when people want to provide a cheaper service the quality of the service may be inadequate (McKee, M. et al, 2017).   This is seen in the outsourcing of cleaning staff, where hospitals where understaffed and there where higher rates of infections like MRSA (Patients4NHS, 2018). This in turn actually has lead to higher cost to this public service because hospital funding is now going to curing those affected by the increase in infections due to the lower standard of the cleaning service.  The NHS has further gone to outsource the majority of services not related to the provision of healthcare such as IT services and catering services.  This neo-liberal economic principle in theory should have led to the best service being provided at the best price but the reality is the best quality service is not being provided. 

Marketization policies have been implemented within the NHS with the intention of increasing efficiency.  Policy has progressed from the introduction of the ‘internal market’ to the policy of ‘Any willing provider’ culminating in the 2012 Health and Social care Act (Patients4NHS, 2018). These policies aimed to make hospitals act more competitively by giving patients choice between Hospital they use and granting them to use private hospitals with NHS cover.  As addressed by Patients4NHS (2018), the Health and Social care act; specifically article 75 has shifted the NHS from a social activity to an economic activity.   The first major implication of this is the ever-rising administrative cost. ‘In 2010 the Health Select Committee found that running the NHS as a ‘market’ cost the NHS 14% of its budget a year’  (Molloy, 2018). What clearly highlights the fact that marketization of the NHS is a failed experiment is that the fact that pre-1980, before the introduction of markets into this sector, administrative cost where 5%.  There is growing evidence that this policy has created limited or no completion (Lord Darzi, 2018) and that this structure has lead to greater uncertainty leading to lower staff morale and retention (Patients4NHS).  Evidence, has shown that the introduction of market mechanism through the creating bidding on contracts has been a failed experiment and should be discontinued.

Furthermore, in order to create competition between hospitals as well as alter the managing structure targeting was introduced.   Whilst they didn’t introduce targets to the NHS the Labor government can be attributed to the major rise in targets within the NHS. By creating a ‘naming and shaming’ culture utilising a star rating of one to three, this created an incentive for hospitals to perform better (Bevan & Hood, 2006). This policy gave placed greater responsibility on hospital managers to perform as their jobs where now at risk. Moreover, hospitals with three stars rating where entitled to benefits and access to greater funding.  A major issue in the NHS at the time was waiting times and this policy intended to drastically change that.  The introduction of targets has been successful at achieving its aims of reducing waiting times (Kings Fund, 2010).  Whilst on the surface the introduction of targeting has been successful, when we look at the route to the success we further understand the problems of marketization. Targets have been accused of distorting clinical priorities (Kings Fund, 2010).  In order to achieve the target of lower waiting times, emergency patients are being held in trolley waiting areas and media reports claim that patients are being held in ambulances to avoid starting the clock. Furthermore evidence suggests that target setting has come at the detriment to the provision of the best quality service (Colin-Thomé, 2009). Target setting whilst appearing successful, may be at the detriment to the quality and provision of other aspects of the NHS.  Whilst this aspect of the marketization is not a ‘failed experiment’ it does not adequately provide evidence for the case of more marketization of the public service, in that the dangers of targeting hinder the notion that there should be greater marketization. 

In summary, the marketization of the NHS through; outsourcing, the generation of external and internal markets and the introduction of targeting support the notion that the marketization of public services is a ‘failed experiment’.  Whilst these polices have in some cases generated beneficial economic outcomes, the social impact of these policies is inadequate in that the best standard of healthcare is not being achieved.

The final area this essay will address is education. The Education act of 1988 was the first policy introduced by the Conservative government that paved the way for market mechanisms to enter the education sector.  The introduction of league tables and funding formulas introduced competition between schools.  By providing greater funding to those schools with the larger number of students schools where given incentive to improve, in order to attract more students to attract greater funding. Published league tables comparing the results of external testing of the ages of 16-18, now known as GCSE’s, gives an indicator to parents where the best place to send their children is.  Over the past thirty years we have seen more changes and a shift towards greater marketization of the education system. For instance the introduction of academies whereby schools can operate outside the national curriculum and allocate their funding how they please has also generated competition within the Education market.  

Like with health and housing, the policy in theory should work.  With schools being incentivized to do better and push up the league tables in order to gain access to more funding the quality of education should rise (Adnett, N. et al, 2002).  Adnett (2002) goes onto argue however it is not necessarily the standard of teaching, yet the standard of pupil. Under performing schools with high ability students will have no incentive to improve whilst good schools with poorer students will not be able to ‘signal’ their abilities as it is not being reflected in the league tables.  Lauder (2006) goes onto demonstrate that this system is also furthering the class divide.  More successful schools are appearing in richer areas with richer parents also being able to send their children to schools further away.  He makes the case that wealthier students are able to gain greater access to better standards of schooling and as the system rewards the schools that are doing better the gap is ever increasing.  Furthermore, the introduction of academies is increasing ‘social segregation’ (Machin & Vernoit, 2011).  Machin & Vernoit (2011) demonstrate whilst there was initial success of academies, as they where performing better than local state schools, and by 2018, “poorer children in 38 of the 58 academy chains performed below the national average” (Busby, E. 2018).  Free market mechanisms are clearly failing at providing the best service for society.  Whilst the service may be improving on the whole the social cost of increased class segmentation shows that this policy is failed experiment.

To summarize, the implications of the introduction of market mechanisms into the education sector can be mirrored to some of the effects on the NHS.  On the surface education standards are improving however, the cost in doing so show the weakness of the strategy.  As schools and teachers are now driven by results the notion of ‘self development’ is being replaced with students being taught ‘marketable-skills’ (Lauder, 2006).  Furthermore, the increasing social divide this policy is causing is a clear indicator that the route to improving public policy does not lie in greater marketization as in doing so would only worsen public policy it does not meet the needs of society.

Marketization, as shown through the failures in the NHS, education and housing sectors should be abandoned as a failed experiment.   The introduction of ‘quasi-markets’ and public sector management styles can be seen to be benefiting a describable economic outcome whilst not serving the best social outcome. When addressing the policy implementation process we have to see if it serves society in the best way. The decline in availability and standards of social housing, the decline in standards of healthcare and the inequality implications of the marketization of education clearly undermine the relative economic successes of the marketization approach.  When looking from a social policy perspective at these policies it is clear different approaches should have and should be implemented in order to fit the needs of society.

References

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