Privatization in Four European Countries

Comparative Studies in Government - Third Sector Relationships

Ralph M. Kramer

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781315485713
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

This book has a dual focus: on how four countries use voluntary non-profit organizations to provide services to the physically, mentally, and sensorially handicapped; and on the changing role of the voluntary, or "third, " sector in welfare states. At the same time, it is also a comparative study of privatization in the special sense of using nongovernmental organizations to implement public policy. Most comparative studies of the welfare state have neglected this form of "indirect public administration" because researchers have usually conceived of government as monolithic and consequently overlook the frequent separation of financing from the delivery of public services.

Part I

Four National Case Studies

1

England: Statutory Alternative

Introduction

The decade of the 1980s may well be regarded in retrospect as the beginning of a new era for VNPOs in England. More likely, however, it will be remembered as the period during which Margaret Thatcher served as prime minister of a Conservative government that promised to “roll back the frontiers of the state” by reducing statutory responsibility, promoting privatization, and expanding the role of the market, voluntarism, and the informal sector (Gamble 1988). As a revival of nineteenth-century liberalism and a Victorian ethos, this New Right ideology represented a reversal of the historical process in Britain whereby many social services pioneered by voluntary organizations were eventually taken over and provided by government. Conservatives regarded this policy as having contributed to the fiscal crisis of the overloaded welfare state, and consequently, they sought the divestiture of many public functions and their privatization (Ware 1989a).

The new conservative paradigm of the British welfare state implied a considerably expanded role for VNPOs, which, however, was viewed by many of their leaders with considerable anxiety. Only a few years before, during the 1970s, there was much concern about the declining role of VNPOs as Local Authority Social Service Departments (LASSDs) began implementing the Seebohm Report, which sought to strengthen the local statutory services; the most that VNPOs could expect then was to continue as “the junior partner in the welfare firm” (Owen 1964:528). The public image of British charities changed gradually, and they were less likely to be regarded as a marginal appendage to the welfare state, or fillers of gaps in the statutory services (Ware 1989b:26). From their traditional role as a supplementer to the statutory services, they came to be viewed in the Thatcher era as an alternative if not a substitute for the Local Authority.

Within a few years, there had occurred one of those “shifting involvements between public and private” (Hirschman 1982; Paci 1987) that has characterized the changing relationship between the state and the voluntary sector. The concept of the Fabian State of Lord Beveridge was to be replaced by the Enabling State with its separation of the financing and production of public services and a partnership with the market, voluntary organizations, and the family. There is a remarkable continuity in British history of statutory-voluntary relationships beginning in 1601 with passage of the Statute of Charitable Uses. Representing “the starting point of the modern British Law of Charities, it was adopted in the same year as the Elizabethan Poor Law. From that time, the pattern of development of the British welfare state can be viewed as two parallel streams of governmental and voluntary effort, occasionally intersecting and generally affecting each other’s course” (Rooff 1957). In reviewing this history, it was concluded that “for centuries, charities in Britain have been used as agents of public policy” (Ware 1989b: 15).

Although parishes were empowered by the Poor Law to provide a modicum of education and to care for the disabled if their families were unable to do so, relatively little was done, and for the next three hundred years, religious and philanthropic organizations were almost alone in the social services (Owen 1964).

The nineteenth century was marked by the expansion of private philanthropy and the founding of numerous charities that pioneered in the care of the handicapped, the poor, and the sick. The tradition of voluntarism, which is deeply embedded in the British and American civic culture, was also expressed in the Victorian movements for social reform, mutual aid, and friendly societies, as well as in campaigns to improve public education, prisons, and hospitals.

Around the turn of the century, statutory responsibility began to be assumed for pensions, school meals and medical services, and unemployment and health insurance for selected portions of the population, but voluntary organizations continued to provide most of the personal social services, particularly for children and the handicapped. Both sectors had developed sufficiently by 1912 for the Webbs to propose a set of principles for a functional division of responsibility that is still widely regarded as valid. They rejected the “Parallel Bars” theory of 1869 of two mutually exclusive sectors in which private charity was more highly valued. Instead, they advocated the “Extension Ladder” theory in which VNPOs supplement the basic statutory services that provide a minimum standard of living for all. This was the origin of what later became known as the “partnership” concept of statutory-voluntary relationships (Kramer 1981:39).

In the period between the two world wars, the state gradually took responsibility for additional welfare services, but because of the prior existence of VNPOs, it reimbursed them for services rendered to various handicapped groups both in and out of institutions. This practice continued until the postwar period beginning with 1946, which marked the start of the rapid growth and consolidation of the welfare state. While the social philosophy behind the implementation of the Beveridge Report was Fabian in its commitment to the superiority of governmental responsibility and provision over charity, Beveridge (1948) himself was opposed to a state monopoly of welfare and stressed the vital role of voluntary action.

Although there was considerable anxiety that private philanthropy and voluntary organizations would be displaced by the cradle-to-the-grave legislation, VNPOs not only flourished, but new types were established, such as those concerned with a single disability whose constituency consisted of the victims themselves and their families. These peer self-help groups, rooted in the tradition of mutual aid, also became articulate pressure groups for persons suffering from a specific disability.

During the “takeoff’ of the welfare state in the 1960s, VNPOs continued to increase in number and importance, often because of the gap between statutory responsibility and resources. For example, almost three-fourths of the Local Authorities used VNPOs for some services to the disabled, mainly because their rates of reimbursement were considerably below the costs. This era was also characterized by a rapid increase in community-based organizations providing information, advice, and advocacy, as well as other forms of citizen and consumer participation.

The 1970s saw increasing dissatisfaction with the welfare state in Britain and many other countries. Based on economic growth and relatively full employment, the postwar consensus on the welfare state was seriously weakened in the face of persistent “stagflation”—rising inflation and unemployment. There was mounting resistance to the increased taxes required by the sevenfold growth in expenditures for the personal social services from 1961 to 1976. Statutory services were criticized not only for their costs, but also for their standardization, bureaucratic insensitivity, and rigidity. It was also feared that the ever-widening scope of statutory power would overshadow and weaken the viability of the voluntary sector. In assessing the future of the voluntary sector in 1978, the Wolfenden Committee recommended a more balanced partnership with government, but also increased statutory funding.

Shortly afterward, the perception of voluntary organizations as alternatives to governmental service delivery was more widely discussed as the core of “welfare pluralism,” which was promoted as the best means of coping with the inherent deficiencies of statutory services (Gladstone 1979). This was part of the growing ideological opposition to the welfare state which, together with an economic recession, rising unemployment, and a series of crippling public sector strikes, contributed to the election of a Conservative government in 1979 (Johnson 1987).

Beginning in 1979, the Thatcher government sought to limit state responsibility for the social services and to favor more use of nongovernmental organizations as part of an effort to promote an “enterprise culture” (Humble and Walker 1990). The primary strategies to reduce statutory ownership and provision were degovernmentalization (denationalization and privatization of former state-owned industries and public utilities), permitting the “opting out” of schools and hospitals from statutory control, and requiring the contracting out of many of the functions of local government. The neoconservative ideology underlying these changes stressed the values of the competitive market, individual responsibility (“there is no such thing as society”), voluntarism, “value for money,” as well as greater consumer choice and participation (Brenton 1985; Johnson 1986; Taylor 1992).

In the course of a prolonged and dramatic struggle for power between central and local government, voluntary organizations were caught in the middle, with the larger national agencies seemingly beneficiaries, and local, community-based organizations as likely losers. Ten major initiatives affecting the social services were undertaken in rapid succession beginning in 1985; they were unprecedented in their speed and scope, and were regarded by many as the most significant changes in social policy since the end of World War II (Glennerster et al. 1991).

Despite Conservative rhetoric to the contrary, a political outcome of the Thatcher legacy, setting the stage for the next decade in the social services, was a greater concentration of power in central government, which would exercise even more control over local government taxing, spending, and operations as a result of fifty pieces of legislation restricting local government since 1979 (Pickvance 1987). LASSDs were more limited in their direct service functions because of reduced allocations from central government and the pressures to contract. Confined to an “enabling” role in which they finance, arrange, and coordinate, but do not directly provide the personal social services, they will be “purchasers of care and not monolithic providers” (Griffiths 1988:6). Originally planned for 1991, implementation of the White Paper on Community Care (HMSO 1989), in which these policy changes were proposed, was phased in over a three-year period.

Government also tried to strengthen voluntarism by stimulating charitable giving of individuals and corporations through authorization of payroll deductions, more liberal income tax deductions, and by lifting the thirty-four-year-old ban on advertising by charities on independent radio and TV. These measures have evidently had little impact on increased philanthropic giving (Saxon-Harrold 1992) despite the vastly increased attention given to the voluntary sector by the mass media. Although the government stressed the importance of voluntary contributions as the “only proper foundation for a vigorous independent voluntary movement” (Charities Aid Foundation 1982:7), it consistently refused to exempt their income from sales of goods and services from the 15 percent VAT.

Numerous government reports and white papers have appeared, signifying the growing importance of the voluntary sector. One of the most significant of these, the Efficiency Scrutiny of the Government Funding of the Voluntary Sector (Home Office 1990), acknowledged the value of the more than £2 billion allocated in 1988–1989 to upwards of 10,000 voluntary organizations by the thirty-four departments and quangos of central government. Health and the personal social services, however, received only 2.4 percent of this sum; half of the £2 billion went to housing associations, and another 25 percent to employment training. Consequently, generalizations about the size of the income of the voluntary sector in England must be tempered by the absence of any clear delineation of its boundaries, which include an exceptionally diverse array of organizations such as housing, cultural and arts associations, hospitals, schools, universities, and religious institutions that account for most of its fee income (Lee 1989). Many if not most of the latter types of organizations are included in the 170,000 registered charities whose combined income more than doubled during the 1980s, to a total of over £16 billion at current prices, which is equivalent to 3.4 percent GNP (see Table 1.1).

Table 1.1
Trends in the Income of Registered Charities, 1975–1990

Source: Posnett 1992:12.

Similarly, much attention has been given to the growth of the voluntary sector in terms of numbers of organizations (27 percent increase in the last decade at the rate of 3,000–4,000 per annum), and the almost doubling of its income from statutory fees and grants even in the face of a slowdown and cutback in government spending from 1976 to 1987 (Knapp and Saxon-Harrold 1989). Again, there is insufficient awareness that these statistics regarding the voluntary sector are at best gross “guesstimates” because of the absence of definitions and reliable, standardized accounting procedures. Consequently, there are serious limits to a macro perspective of “trends in the voluntary sector” if it is used for extrapolation to a specific field such as the personal social services, or to a particular type of voluntary organization.

The Sample of British Voluntary Agencies

As part of one of the early efforts to develop a more empirical basis for social policy decisions regarding voluntary agencies as public service providers, a group of twenty large national agencies in Britain serving the physically, mentally, and sensorially handicapped were...