Finance: Time Whitehall got its hands dirty

How would you feel if personal details held by the NHS and the DVLA were put up for sale? With Labour's commitment to linking public and private sectors, that day may be nearer than you think.
ANYONE WHO believed that the commercialisation of the public sector would end when Labour replaced the Conservatives in government was very much mistaken. Amid all the hype over the Public Finance Initiative and Best Value, a third and perhaps equally important concept has been overlooked - joint ventures between the public and private sectors.

Moves to promote partnership enterprises between business and public bodies have been moving ahead at speed. Last month, a conference was organised jointly by the Treasury and Ernst & Young which examined how to spot joint venture opportunities, and next week there is a follow-up event from PriceCooperswaterhouse and the Treasury on how these partnership arrangements can work.

Opening the first event, Geoffrey Robinson, the Paymaster General, said that the public sector's physical and intellectual assets should be put to more productive use, to generate income for public bodies and their commercial partners. He said that it was an important element in achieving the higher productivity targets set for the public sector by the Chancellor.

"This initiative is also about changing the culture in Whitehall," added Mr Robinson. "It's about giving departments incentives to operate efficiently rather than just telling them to do so. It's about the Treasury giving guidance and support: a partnership in government, as well as between government and the private sector."

Mr Robinson raised the possibility of surprising opportunities. The idea of making more use of publicly owned buildings is hardly new, but the Government is also talking of earning income from the release of some of its databases and internal know-how. The Treasury points out that this will not involve the release of confidential private information, which is protected by the Data Protection Act. But it does want to see more public bodies look for commercial opportunities, in the way that the Meteorological Office is selling forecasts to businesses.

It is even possible that the NHS may be encouraged to sell to drug companies generic or anonymised clinical information on patients' illnesses and recovery rates, to raise revenue for the service. But highly political decisions like this have not yet been taken.

Ralph Ainsworth, a managing consultant with Ernst & Young's public and network services division, was involved in organising the conference. He says that public bodies, particularly the arm's-length executive agencies, were given direction on how to make their operations more commercial, backed by stronger incentives to do so.

"We stressed that it was important that the public sector saw assets not just as costs, but as value providers," says Mr Ainsworth. "These assets may include brands and intellectual assets, though this needs clarification."

Mr Ainsworth says that there are databases held by agencies that have a strong commercial value.

"The Drivers and Vehicle Licensing Agency has a customer list that could be used, and maybe anonymised so that there is no risk of intrusion of privacy," suggests Mr Ainsworth.

"In other areas there are different types of classification of information, where there is a judgement to be made on how far you go."

This conference was mainly aimed at the executive agencies, which now employ the majority of civil servants to deliver services on behalf of government.

"The policy will find ground to grow at the agencies," says Mr Ainsworth. "They are closer to markets and to commercial activity."

But the approach is also being promoted to local government. A few days earlier, Hilary Armstrong, Minister for Local Government and Housing, announced the go-ahead for a range of additional Best Value pilot schemes, where councils have been given exemption from compulsory competitive tendering arrangements in order to develop partnerships. Ms Armstrong said that partnerships with the private sector were an essential element in the Best Value regime. The Best Value partnership pilots include a joint venture between several councils in the South-west to outsource their payroll administration to achieve economies of scale. In another project, three Yorkshire councils are to combine their internal audit services, and will bid for contracts with new clients. A Public Sector/Plc Partnership Network has been established to promote joint ventures between local councils and businesses, to attract new capital and a more commercial outlook in a range of trading activities - several leading companies have already signed up to the project. And a franchise scheme has been approved, to be run by ICL and Barony, to run revenue collection and benefits and other administration IT projects, in which councils will be able to work together to achieve economies of scale.

Further partnership schemes between councils and the private sector may be approved, even before Best Value legislation is enacted. The Department of the Environment says that additional exemptions will be given to local authorities to opt out of CCT legislation if it helps them prepare for the Best Value regime, and assists the Government to evaluate innovative ways of working with commercial partners.

Recognising this trend towards partnering, a new guide has just been published by the Public Private Partnerships Programme (the 4Ps). This examines the experience of the London Borough of Lambeth, which externalised its blue-collar direct services organisation to the private contractors ServiceTeam. Lambeth believed that this would be the only route to attracting new capital investment into the DSO, improve the operation's efficiency and ensure that a major contractor was based in the borough, providing job opportunities for residents.

Peter Fanning, chief executive of 4Ps, says that the lessons from Lambeth's experience - where they were advised by the specialist lawyers Eversheds - was that local councils do not need to wait for Best Value legislation to adopt a partnering approach, nor do they need to worry unduly about European Union procurement laws.

"A lot of things can be done within existing rules - it doesn't need a change in primary legislation to have flexibility," says Mr Fanning. "What our guide demonstrates is that within the existing framework it is possible to procure a partner, rather than a supplier. That means that instead of working up detailed specifications under the Private Finance Initiative or whatever, you can procure a partner with a view to jointly working up the specification at an earlier stage in the procurement process.

"The private sector supplier is then involved in the innovative process, rather than just responding to a tendering advertisement where someone else is doing the innovation. This guidance should allow local authorities and private sector partners to work together co-operatively, and I hope innovatively, while working within the EU procurement rules. What the private sector doesn't want to do is to work up a scheme, and then see the local authority put the whole contract out to tender."

And what the Government does want is for the public sector to get its hands dirtier by getting stuck into commercial opportunities. To do this, as Geoffrey Robinson concedes, involves a massive change in public sector culture.

How well it is able to challenge that ingrained culture will be well worth watching.