We cannot rely on the market to improve our public services

'The majority of services that are government responsibility are not competitive but monopolies'
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The Independent Online

My principal task as Mayor of London is to contribute to sustainably increasing the quality of life of the people of the City and to that end to improve the services provided by the Greater London Authority. Provision of services in London has fallen below the point of tolerance for the public, and to the point where it significantly impairs the economic efficiency of the City. The emphasis in the Comprehensive Spending Review of improved services in the UK as a whole is particularly required in London.

My principal task as Mayor of London is to contribute to sustainably increasing the quality of life of the people of the City and to that end to improve the services provided by the Greater London Authority. Provision of services in London has fallen below the point of tolerance for the public, and to the point where it significantly impairs the economic efficiency of the City. The emphasis in the Comprehensive Spending Review of improved services in the UK as a whole is particularly required in London.

The first condition to deliver this is that the run-down of the resources available for the capital be reversed. On this score I am optimistic. Over a series of meetings, Minister for London Keith Hill and I reached broad agreement on the need for a long overdue increase in investment in London's transport system as part of the Comprehensive Spending Review. On this, I want to congratulate my team for putting together a strong case for London, and Keith Hill's officials, for their consistently constructive approach. However, if we achieve a reasonable settlement, the credit must go above all to London voters who have put government on notice that the City's transport and public services must be properly funded.

Adequate resources are only the first half of the equation. Improving the quality of life also requires creating a new customer- and voter-driven culture and structure within the GLA and the services it controls.

It is widely recognised that many of the organisations brought together to form the GLA had a service that was generally regarded as bad or inadequate in quality. This is dramatically shown in areas such as London Underground and the bus system, but extends far wider. Indeed it is generally understood that service delivery has become worse and less customer oriented in recent years. A decisive link is therefore creating that customer- and voter-driven culture inside the GLA and all functional bodies.

If that is the goal, its achievement requires understanding why such a customer- and electorate-driven culture did not exist in the last period, and therefore the key steps towards establishing a system that creates it. While it is obviously necessary to replace top managers who prove unable to reorient to a new customer- and electorate-driven culture, this absence was not due to individuals, but to the system in which they were placed. What was this? It was the method introduced by Mrs Thatcher from the mid-Eighties, to attempt to deal with London, by running down infrastructural resources and eliminating democratic accountability within the City. This was done by eliminating the strategic authority in London, the GLC, drastically reducing the powers of the boroughs, transferring the greatest possible number of functions to unelected quangos and privatising the maximum possible number of functions and services. It is crucial to understand why this approach, parallelling the severe reduction of resources, inevitably led to the severe worsening of services and created a non-consumer and electorate-driven culture.

The theory that underlay these steps from the mid-Eighties was that allocation of resources should not be determined by democratic decisions and priorities set by the electorate, but by unfettered operation of the market. In the case of privatisation an additional assertion was that a link between ownership and management would increase the efficiency of allocation of resources.

The political consequences of this system are well-known. The destruction of democratic government in London was rejected by the electorate and led to the establishment of the GLA. Its economic consequences, and destruction of services, and in particular the possibility of these being consumer oriented, however, should also be clearly understood.

The proximate objective of private ownership is not, nor can it be, efficiency in allocation of resources or efficiency. It is profit maximisation - in the case of publicly quoted companies, it is the maximum share price. In addition to legal requirements, any company not seeking this goal will not succeed in market competition.

In cases where competition (that is consumer choice) exists, profit-maximising performance is capable of delivering consumer-oriented behaviour - if the consumer is not satisfied their custom is transferred to other providers, and generation of profit is impossible. If the great bulk of services provided in London were competitive, the introduction of the measures embarked on by Mrs Thatcher could, therefore, have economically delivered a consumer and electorate orientation.

But the great majority of services that are the government's responsibility in London are not competitive but are formally, or in reality, monopolies. This is self-evident, and legal in the case of the Metropolitan Police, and Fire and Emergency Services, but is also de facto the case with the Underground and great majority of the bus services. Competition may exist in the case of certain inputs into the services, but delivery remains monopolised.

This makes clear why the programme embarked on by Mrs Thatcher not only could not solve the problems of the capital but inevitably led to their severe worsening. In the case of monopolies, profit maximising and shareholder-value-enhancing behaviour must necessarily seek to utilise to the full the ability to secure monopoly profits or rents. There is no mechanism delivering consumer-oriented behaviour.

While the Thatcherite programme could not succeed economically, as it is impossible for legal or economic reasons to introduce competition into the majority of services provided by London government, it did, however, destroy democratic accountability - the only other mechanism available to create a consumer- and electorate-driven culture and operation. Subject neither to competition nor to democratic accountability, monopolies created a culture whereby their objective became serving themselves.

Not merely shortage of resources but also the destruction of democratic accountability inevitably led to the destruction of any possibility of consumer- and electorate-oriented services in London.

Reversing this will require reviewing all of the services influenced by the GLA to put consumer- and voter-oriented service first. Contrary to the ideology of Thatcher, this will also require a radical re-rating of the contribution made by staff in the key services in London.

The anti-consumer structure imposed on the supply of services in London from the mid-Eighties included a profound demoralisation for the employees of these services. The latter, whether they be police, bus drivers or teachers, were frequently treated as the fundamental obstacle to the provision of adequate services, rather than the essential instrument for supplying them. This was shown in marked downgrading of their pay and conditions.

The re-establishment of democratic accountability at the top, the ability of the electorate to remove the Mayor and assembly, is the first indispensable precondition for the creation of consumer-oriented services in London. If, as I hope, the Government gives London back the necessary resources, our next challenge will be to ensure that the necessary consumer- and voter-driven cultural reorientation reaches all parts of service provision in London.

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