Public Services Need Purpose, Not More Regulation, to Succeed

Andy Burnham pledged to “rewire” the economy, yet his administration has largely deferred substantive reforms until the 2030s. Local government restructuring and a long-overdue overhaul of the water industry have been placed on hold, while social care and significant welfare changes have been kicked to the next parliament.

Such caution is understandable when policy challenges are complex and factional pressures threaten to replace “rewire” with “renationalise,” inviting comparisons to the 1970s. However, delay is unnecessary when the knowledge required to rebuild public trust before the 2029 election is already available. Success demands an oblique approach, with customer satisfaction as the true measure of progress; without this focus, the promise of reform evaporates.

The economist Sir John Kay, a fellow of St John’s College, Oxford and former director of the Institute for Fiscal Studies, has long championed organisations that remember who they serve. He argues that the primary aim of any entity—public or private—should be customer satisfaction. In the private sector, profits follow naturally; in the public sector, efficiency and savings result.

In his book Obliquity, Kay demonstrates that companies fixated on shareholder value as a primary objective ultimately failed, while those dedicated to producing the best product secured long-term dominance. Just as the pursuit of shareholder value—a financial metric detached from operational reality—proved a dead end for countless corporations, the public sector’s reliance on rigid protocols as a substitute for genuine understanding leads to failed outcomes and wasted resources.

This dynamic is visible in the NHS today. Patient satisfaction is rising regarding GP and hospital visits; a new appointment system, despite its flaws, has made doctors available more quickly, particularly for primary care and outpatient services. Conversely, catastrophic failures persist, such as the cover-ups of rising mortality rates by maternity unit managers. Neither the improvements nor the disasters can be credited to regulation. Regulation adds a costly layer that consistently undermines productive behaviour, either because providers learn to game the metrics or because innovation is stifled.

Consider two unrelated government agencies. Recently, the Environment Agency announced funding to plant half a million trees, distributing grants to councils and mayors to execute the work. On the surface, this appears constructive.

Yet a parallel failure at National Highways—England’s primary road builder—tells a different story. In 2020, the agency planted 850,000 saplings along a widened section of the A14 north of Cambridge. An internal review three years later revealed that three-quarters had perished. These failures stem from how public departments execute their work. Regulation merely reinforces a tick-box culture that asks: “Was the protocol followed? If yes, all is well.”

Prominent Whitehall figures, from former senior mandarin and Bank of England deputy governor Sir Jon Cunliffe to the House of Lords Industry and Regulators Committee, argue the solution is more intensive oversight. They are mistaken.

Kay offers numerous examples of companies that thrived because their leadership was obsessed with delivering the best service or product, not maximising shareholder returns. Profit and market share were byproducts, not targets. Boeing soared before it lost its way chasing quarterly earnings. ICI, once Britain’s industrial titan, disintegrated after prioritising stock market valuation.

Management consultant John Seddon, whose Vanguard firm adapts the Toyota Production System, provides practical weight to Kay’s analysis. Seddon’s systems approach helped Portsmouth City Council’s housing department win international awards for its repairs service. He has witnessed countless public sector initiatives—from grand strategies to benchmarking schemes against the private sector—fail to improve services.

Seddon does not advocate abolishing regulation entirely. He argues that regulation based on how well an organisation achieves its purpose avoids the perennial problem of regulators “shutting the stable door after the horse has bolted.” A clear statement of purpose, he says, would allow regulators to sanction immediately any organisation undermining its core mission. “It is time to liberate public servants from the prison of suspicion and distrust that our current method of regulation locks them in,” Seddon writes, “demeaning their professionalism and casting them as part of the problem rather than as active creators of solutions.”

Burnham’s team must resist letting the ownership debate—public versus private—dominate the agenda. They should focus instead on how public organisations actually achieve better outcomes. The evidence is clear and close at hand.

Source link