The Other Invisible Hand: Delivering Public Services through Choice and Competition

by Julian Le Grand, David Lipsey (Foreword), Alain Enthoven (Afterword)

How can we ensure high-quality public services such as health care and education? Governments spend huge amounts of public money on public services such as health, education, and social care, and yet the services that are actually delivered are often low quality, inefficiently run, unresponsive to their users, and inequitable in their distribution. In this book, Julian Le Grand argues that the best solution is to offer choice to users and to encourage competition among providers. Le Grand has just completed a period as policy advisor working within the British government at the highest levels, and from this he has gained evidence to support his earlier theoretical work and has experienced the political reality of putting public policy theory into practice. He examines four ways of delivering public services: trust; targets and performance management; "voice"; and choice and competition. He argues that, although all of these have their merits, in most situations policies that rely on extending choice and competition among providers have the most potential for delivering high-quality, efficient, responsive, and equitable services. But it is important that the relevant policies be appropriately designed, and this book provides a detailed discussion of the principal features that these policies should have in the context of health care and education. It concludes with a discussion of the politics of choice.

Genres: Economics

208 pages, Paperback

First published September 5, 2000

Reviews

[Jakub Dovcik · Rating 3 out of 5]

This book is essentially an argument for a reform philosophy of the management of public services - mostly healthcare and education, but also, to a lesser extent, social care - that tries to implement market-like forces (‘quasi-market’) within the state provision of services and to reform them through ‘choice and competition’ - essentially adapting public choice towards UK’s societal expectations about public services. Julian Le Grand is a professor at LSE’s Social Policy Department - definitely a grandee in this field - and a key figure within the intellectual movement arguing for these kinds of reform.

This book was written in 2007, at the very end of Blair’s premiership, after the work of Michael Barber’s Delivery unit, and very importantly also after the quite radical reforms on NHS Foundation Trusts and academies, which also built upon earlier changes under Thatcher and Major, like the internal market within the NHS. It was also written after Le Grand’s time in Downing Street as Blair’s policy advisor.

The book should then be read as a statement of a perspective within a specific historical period. As such, it is quite fascinating to read it, especially how extremely naive it sounds, despite being able to build on the experiences of the previous 10 years of reforms.

The four ways of managing public services Le Grand analyses are through trust, command and control (which also includes targets, goals, and some other features of Deliverology and Barberism), voice (through formal and informal means) and choice and competition. He then analyses these forms of management based on the ends they are meant to serve, the quality they achieve, their efficiency and the responsiveness and accountability they allow for their users.

Le Grand rehashes his earlier dichotomy of public servants being either ‘knights’ (doing their best, with noble motivations and a public service ethos) or ‘knaves’ (slacking off, not doing their job properly), but then he effectively discards that and says that and says that even if there might be just some knaves and many knights, one has to run a public service as if there were only knaves (omitting a chance that there would be a dynamic system). The book is essentially about how choice and competition - turning public service providers into quasi-market players, is the superior way of managing public services within the political and social constraints of the United Kingdom.

The two chapters on health and education are quite painful, especially because the choice and competition it presents is in itself imaginary. The model is not a market, but a quasi-market, meaning using public money to simulate market-like behaviour. Things like patient budgets (having a specific amount almost literally given to a patient to deal with their diagnosis as they see fit) imagine almost an absurd caricature of a human behaviour, or rather changes to it in comparison with more standard public service provision based on need (which can even be in Dutch-like public health insurance companies). The internal NHS market that was created under Major, with GPs budgets and other procedures is simply not a real market, but a fiction of it - even through this theory assumes that people will behave as if it was a real one.

What is interesting are debates about ‘Direct payments’ for social care (a pot of money that an individual in care can spend as they see fit; which however requires extensive regulation and has significant risk of creating environment susceptible to scams and poor-quality private care, which Le Grand must be aware of from the American experiences) - not that it would make too much difference in today’s debates, which are mostly about where to find money for the care.

Other interesting idea is what Le Grand calls ‘Disadvantage Premium’ - an extra payment for students from disadvantaged backgrounds. This was effectively implemented as Pupil premium during the Conservative-Liberal coalition in 2011 after it was in the Lib Dem manifesto before the election in 2010. Le Grand goes even further, arguing for premium that would balance the selection of students from various backgrounds by variable premium - meaning more money for students from richer backgrounds in schools whose body is made up of poorer students and vice versa.

Reading the book, I was really stuck on how extremely theoretical and naive about market forces the argument actually is. It assumes near-perfect information and motivation based on market indicators and disregards the human and social costs of the public service providers actually failing and going bankrupt - like schools or hospitals (which is why these kind of reforms were either not pursued fully under New Labour). Furthermore, the Lansley reforms later showed that expending the role of GP consortia and hollowing up the middle management within the NHS is not just extremely unpopular but also quite unworkable - because the societal expectations within NHS are not for a market-like, but a better quality of care.

In fact, there is very little about the quality of outcomes, especially in health and despite all the talk about avoiding cream-skimming (taking those customers who are either cheaper or most likely to help with furthering the position of the service provider, like the most able students), there is little real solution to it and Le Grand even somewhat admits that (relying on his then-novel proposal for Disadvantage Premium to fix it in education).

[April · Rating 5 out of 5]

This is the best book I've read about service delivery (both health and education) and what it takes to make it more accountable in rich and poor countries. Julian Legrand is both a respected academic, and, since his time as the main health advisor to T Blair - a seasoned practitioner. For development professionals working on health or education in developing countries - this is a "must read".

[Martin Dubéci · Rating 2 out of 5]

Kniha chce robiť argument za väčšie využívanie sútaže a výberu vo verejných službách. Autor pracoval pre New Labour, takže žiadne privatizačné šialenosti, ale regulovaný výber. Napriek tomu, neviem či preto, že chcel napísať niečo popularizačné, tak ten argument je postavený veľmi slabo a heslovite.

[Alexandro Guillen · Rating 1 out of 5]

Interesting premise and ideas but it's little more than a promotional pamphlet with little imperial or statistical support