Penny Bochum PUBLIC PRIVATE PARTNERSHIPS: THE UK DEBATE Wirtschaftspolitik The political dilemma “We are the only Government anywhere in the Western world that this year, next year, the year after, is increasing both health and education public spending as a percentage of national income. The only one. That is our commitment to public services. We said schools and hospitals first. We’re building them. Lots of them. And I am not going to go to parents and children and patients in my constituency and say, I’m sorry, because there is an argument going on about PFI we’re going to put these projects on hold. They don’t care who builds them. So long as they’re built.... Come on: this isn’t the betrayal of public services. It’s their renewal” Tony Blair’s speech to Labour Party conference 1 October 2002 Tony Blair, like leaders throughout Europe, is facing the political dilemma of how to deliver better public services while maintaining fiscal prudence. The British public, proud of its welfare state, proud of its national health service, proud of the principle of a universal service free at the point of use, has in the recent past proved itself remarkably unwilling to pay for these things: For 18 years, from 1979 – 1997, it elected a tax-cutting Conservative Government with a shaky commitment to the public sector, a Government which left public services run-down and in severe need of new investment. The new Labour Government elected in 1997, which as a party in opposition had fought hard to overcome public fears about Labour’s leftist tendencies, had to marry its promise to invest more in public services with strict self-imposed budgetary rules. How could this be achieved? The answer lay with the private sector: Not in privatisation, the selling off public assets to the private sector, as the previous Conservative Government had done. Instead, Tony Blair’s new Labour looked to a partnership with the private sector through a range of Public Private Partnerships(PPP), the most significant form of which is the Private Finance Initiative(PFI). To date, there have been over 500 PFI projects signed in the UK, with a value of over£22 billion, making it a significant form of investment. But the road has not been smooth. Some difficult projects, plus questions about value for money in PFI, and a vociferous trade union campaign against‘privatisation’ are causing headaches for Tony Blair’s Government. How important are these problems compared to the overall opportunities offered by PPP/PFI? Could the Labour Government have avoided any of the problems they have encountered and what are the lessons to be learned by Germany, as it too sets off down the PFI road? Blair’s battle against the strange and unholy alliance A common criticism of‘New Labour’ today is that it has drifted too far to the right in its quest for electoral dominance, that it has lost touch with its roots, and that it is no longer listening to people’s concerns on key issues. The debate on public service reform is an important part of this. This criticism of New Labour has to be seen in the light of Labour’s recent history and the changes the leadership had to make in the 1980s and 1990s in order to become electable. After devastating defeats in the general elections of 1979, 1983 and 1987 it seemed that Labour had lost the ability to be popular, with a reputation for“loony left” members(most notably the far-left Militant Tendency) and out-of-touch policies(including re-nationalisation and nuclear disarmament). The leadership warned the membership that if it did not re-connect with the electorate, Labour would never win again. Winning again entailed beating the left wing within the party on important issues such as reform of Clause 4 of the party constitution(on nationalisation), the trade unions, and defence. During some painful years in opposition, the party re-made itself, dumping a lot of political baggage on the way. By 1997 Labour had come to be seen as a moderate, fiscally prudent party which was committed to greater opportunity for all and better public services. The tone of the new party was modern, open-minded, non-dogmatic; the idea of partnership with the private sector to deliver the quality public services expected by a ever-more demanding public fitted in well, and was one of the policies that symbolised the death of old Labour. The Labour victory of 1997 was a landslide, and Tony Blair received an incredible 93% approval rate in the polls in his first few months as Prime Minister. Moreover, he sustained his popularity far longer than any other British Prime Minister has in the past 100 years. His Government is the first to be ahead of the opposition in the polls every month(except for a brief interruption during a crisis over petrol prices in September 2000), with up to 45% approval ratings, compared to a Conservative average of around 30%. Tony Blair was given the nickname‘Teflon Tony’ because no dirt ever stuck to him, even when the Government had problems. But Blair also earned the nickname‘Phoney Tony’; one of the accusations made against the Labour Government in its first years was that it was all‘spin’ and no policy, and that Government policy was decided by focus groups, opinion polls and spin doctors. This cannot be said to be true any longer. Today Tony Blair is seen rather as a conviction politician, pushing forward policies he believes in without much attention to public feeling, or even to opposition within his own party. Although the Government still has a clear lead over the opposition, today this lead has as much to do with the lack of an effective parliamentary opposition as support for government policies. It has had serious problems over key issues such as policy on war with Iraq, public service reform and reform of the House of Lords. The Government’s poll ratings have fallen in last few months of 2002 and the beginning of 2003 and Tony Blair’s personal rating has fallen into negative territory for the first time since the petrol crisis. Delivery of public services is one of the main problem areas in what can be politely described as a deteriorating relationship between the government and the unions. Two of the major unions representing public service workers, the GMB and Unison, are running a high profile campaign on public services, which cites all PPP/PFI as‘privatisation’ and which accuses the government of“replacing the public service ethos” with the rule of markets and competition. Against this, Tony Blair insists that “creative ideas for public sector reform should not be mistaken for privatisation”. In a speech to Labour’s spring conference in February 2002, he branded his union critics as“small c conservatives”, akin to those who had been unwilling to abandon Clause 4 or reject the far left militants in the 1980s. He urged his party to accept that it had won two election landslides by challenging political orthodoxy. He argued that it was right to provide more choice for the consumer and offer alternative providers using the private sector, so long as“it makes sense and gives value for money, and with guarantees that staff are