Southern Cross exposes flaws in the choice agenda

Ministers imagine that by hiving-off services they can disentangle the state and leave failing outfits to go to the wall. But their transformation plan is plain impractical

Neoliberal ideas cling doggedly to the "neo" tag. From avowedly "radical" Thatcherite tendering, to "bold" Blairite private treatment centres, and on to the coalition's "progressive" schools policy, every assault on the bastions of public service is presented as a breath of fresh intellectual air. Whatever its merits, the first thing that ought to be said about this government's open public services white paper is that it goes with the drift of this familiar ideological tide.

What is new is the extraordinary sweep of the blueprint. The headline is that ? save for the judges, soldiers and spooks ? the assumption will henceforth be that everything could be hived off. Were it not for the phone-hacking saga, this is the sort of proposition that could have dominated the summer's politics, and probably not in a happy way.

The marketopian tide has been flowing less certainly since the financial meltdown, and this summer is an unfortunate moment for the government to try to advance it. The health secretary, Andrew Lansley, has only recently been forced into an extraordinary legislative pause and then partial retreat on his NHS plans, after Liberal Democrats insisted on limiting privatisation. Before coalition divisions over Rupert Murdoch, the public services paper was shaping up to be the next great splitter.

But there was another, more particular, problem with the timing of the white paper when it appeared last month. Residential care was one of the first state services to be provided by a "range of diverse providers", which the paper envisages right across the waterfront, and on the very day the white paper emerged, the biggest of these care providers, Southern Cross, announced it was shutting down. The 31,000 frail people who inhabit its homes are left facing uncertain times and the rhetoric of choice, in which every privatisation plan comes wrapped, is left ringing hollow.

Likewise, the white paper's language about entrepreneurs as "drivers of change" sounds less seductive in the context of the Southern Cross case. Private equity barons first sold and leased back care homes and then profitably flogged the business just a few years before it went bust. The recent Care Quality Commission report detailing shortcomings at many homes run by Castlebeck will redouble the unease.

The truth, however, is that public as well as private facilities can be callously run. And there can be particular problems with services run on top-down lines. Monolithic management can flatten creative thinking about doing things differently. Inflexible pay scales can inhibit the recruitment of, for example, excellent teachers into those places where they are most sorely needed. Like academy schools and NHS foundation trusts before them, the white paper's agenda, in part, reflects a real desire to grapple with these shortcomings.

The weakness in the remedy, however, concerns the greatest failure of traditional state-run services. Public bureaucracies struggle to root out bad practitioners and force bad institutions to close. Ministers imagine that by hiving-off services they can disentangle the state and leave failing outfits to go to the wall. In practice, it rarely works out that way. It is simply not practical to allow crucial services to shut down like unprofitable shops, as was seen with Southern Cross. Whitehall was forced to promise elderly residents that they would not be shunted out on to the streets, even before it had figured out how it could guarantee this.

Then there is the politics. Politicians can outsource managerial, financial and legal functions, but they cannot outsource responsibilty: if the voters want to blame Whitehall for closing a hospital, Whitehall cannot stop them. For all Lansley's talk of foundation trusts being islands of independence, within months of coming to power he felt obliged to sanction an �18m loan to a struggling trust in Berkshire.

The white paper promises "serious consequences" for managers who run poor services, but gives precious little detail. For all the seeming vigour ? and danger ? of the reforms, my hunch is that they will not live up to the transformative hype. We will still have to live with fuzziness about failure.

? Tom Clark is the Guardian's social affairs leader writer.

Tom Clark

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