Leading article: Reform will not be a quick financial fix

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Last week we had the Big Society relaunch. Now we have the Big Society rebrand. David Cameron has been embarrassed in recent months by loud complaints from leaders of the charity and voluntary sectors (which the Prime Minister had previously lauded as the beating heart of the Big Society) that the pace and scale of government cuts risked bankrupting them.

His attempts to regain the initiative have been faltering. Last week, Mr Cameron gave an address to leaders of voluntary groups in which he proclaimed how passionate he was about encouraging them. Yet he failed to provide a coherent response to the criticism that his Government was jeopardising the future of such groups by withdrawing funding. This week, Mr Cameron has shifted his approach by altering the entire focus of the Big Society. The Prime Minister now argues that the "more significant" aspect of the concept is public-service reform.

Leaving aside the rather desperate redefinition, does this latest argument have any merit? There is a perfectly respectable case for giving the private sector a greater role in the delivery of public services. The previous Labour government recognised this and was committed to a similar programme of opening up the provision of services – from medical operations, to welfare-to-work schemes – to private-sector providers. There is huge inefficiency and waste in the public sector which the enhanceed involvement of private firms ought to be able to reduce over time. By sounding the alarm at any mention of increased private-sector involvement in public services, the unions do their members no favours.

Yet there is a danger that these reforms will be enacted rashly and in a spirit of ideological zeal rather than pragmatism. One of the most extensive attempts to utilise private-sector know-how for public-sector projects has been the Private Finance Initiative. These complex financial arrangements have turned out to be a very bad deal for taxpayers. And as George Osborne discovered (when he was told by the company managing the Treasury refurbishment PFI that ordering a Christmas tree would cost £900), the malign repercussions are still being felt. Contracts should be carefully drawn to prevent private firms, lawyers and financiers enriching themselves at public expense.

There need to be strong safeguards over the quality of services, too. Most departmental budgets are under extreme pressure thanks to the Government's determination to wipe out the structural deficit over the course of a single Parliament. The danger is that reform, combined with severe spending cuts, will end up delivering sub-standard services and discrediting the principle of reform in the public mind.

There is good reason to believe that bringing in private-sector expertise to the public sector would deliver better value for taxpayers eventually. But ministers should not regard it as a quick financial fix. History suggests that there will be upfront costs. One of the purposes of the PFI was to remove the cost of public investment projects from the official borrowing figures; hastily-drafted and short-sighted deals tend to be false economies.

Public-service reform is necessary. But if it is done without appropriate attention to detail, the results will most likely be disastrous. And if ministers regard it as a way of saving money in the immediate term they are heading for a fall. We await the details of the White Paper on public-service reform, expected in the coming weeks. But the fact that Mr Cameron has seized the banner of reform and presented it as a panacea, rather than a practical method of delivering better public services over time, does not bode well.

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