Well, there are limits to that idea, obviously. It would be like applying the rules of business to art. The business bottom line is not society's bottom line. At some point quantity and quality diverge, and that is for the people to decide, in a democracy.
So far, anyway, we tend to strive for a democratic form of capitalism, where public matters are decided on a principle of one person, one vote; not one dollar one vote.
But in the UK, the government hired a very successful business person to have a look at how government conducts its business. And I think it is a very good idea to see how the other half does things where that can lead to improvements. But not all efficiencies are necessarily improvements, in different contexts. Which is not to say that inefficiency is a valuable goal of either government or business.
See, Is the economy of scale tipped against policy of competition?
And, government and big business are different contexts, let us not forget.
Philip Green: Govt procurement 'wasteful'
Sir Philip Green, the billionaire owner of Topshop and other clothing chains, was commissioned by prime minister David Cameron to carry out a review of spending to establish how better value for money can be obtained for taxpayers.
In his report, he claims that the government is not making the most of its size and credit rating to get the best deals from suppliers.
"The conclusion of this review is clear - credit rating and scale in virtually every department has not been used to make government spending efficient.
"There is no reason why government should not be as efficient as any good business."
Piles of waste in the minefield of public procurement
The UK has a tradition of doing everything strictly by the EU’s rules which means that the time from announcing a tender to awarding the contract can be rather long. It can also lead to complaints from those bidding for government work. They say there’s been a trend to “salami slicing” the contracts into far too small and thus wasteful portions.
As evidence of the government’s poor procurement, the document claims to have found an unnamed IT contract which still has six years left to run with no option to amend or end it. In Green’s eyes, the whole method of buying both hardware and software is of poor quality “with no provision in the contract to reduce the annual amount payable should the work not be required”.
Certainly, the figures Sir Philip found make interesting reading. His report points out that taxpayers paid out £38 million for a remarkable 400,000 hotel nights in London last year. He suggests that Government departments look at video conferencing instead, at least for some of their work.
He also says it’s been hard to get basic information. He says he was first told that transport cost £2 billion. When he queried this, a second estimate put it at £500 million and then a third came out at £768 million. The actual figure was £551 million.
He’s questioned the government’s management of property, currently costing £25 billion a year. The report describes how one agency had located from London to the Midlands. The agency has now been abolished but the contract left the state with a decades-long financial legacy. It had agreed a 20-year lease guaranteed for 15 years, leaving £18 million to pay in rent with no opt-out clause.
There are also clear signs of uncoordinated spending. Printing costs for instance varied wildly, with one department spending £1.31 a leaflet, compared with a market price of 26p. He found examples of departments paying anything between £8 and £73 for a box of paper and between £86 and £396 for printer cartridges. The prices paid for laptops varied from £353 to £2,000.
So he wants to see a centralised body to take responsibility for procurement of all kinds. He particularly wants much better control over the more expensive contracts, recommending an audit of everything with more than £100m of remaining value.
His report says that inefficiencies within government are there because “there is no process for setting and challenging detailed departmental budgets.” adding that: “Government acts as a series of independent departments rather than as one organisation.”
Telecommunications come in for particular criticism. He says that departments purchase telecoms separately from a range of different suppliers. A recent estimate claims that total government spending on phones is more than £2bn per annum, a figures he says “could be 30-40 percent cheaper” if the government bought its own capacity.
The report suggests that there is no standard specification across departments, adding that the government does not “leverage its buying power, nor does it follow best practices”. Amongst his recommendations include setting up a team of three to four individuals with financial and commercial expertise to review departmental spending “with an emphasis on efficiency and accountability”.
Personally, I think most of the observations made are quite valid issues, deserving of betterment. I simply caution against a blinkered profit motive business model for the delivery of government services. Democracy is a cumbersome process, and democratic capitalism an expensive one. It is a question of balance and fine tuning to get the proportions about right.
One of the debates that is consistent with and reflective of this concern is the one concerning which functions of the government are "core" or "inherent" or "governmental", as often discussed in this blawg. (See/click the Label, "governmental function".)
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