Employee Relations in the Public Services

Themes and Issues

Susan Corby, Geoff White

• Publisher: Routledge
• Year: 2002
• Print ISBN: 9780415174459
• eBook ISBN: 9781134687015
• Topic: Business
• Subtopic: Business General
• Index: Business

Almost a fifth of all employees work in the public sector. Employees working in the civil service, NHS, local government, education, the police and fire services also represent a large and growing body of students taking degree courses at universities. Exploring this important and rapidly changing area, this book outlines the main developments in the public sector since 1979, including topical issues such as the rise of new public management, decentralisation and contracting out. Themes which currently affect public sector employees are examined, including:

* decentralization
* contracting out
* fragmentation and the growth of individualism in the employment contract.

This stimulating, up-to-date and intellectually rigorous text is thematic, rather than sector specific, and reflects the way this subject is taught in a range of courses. It will complement alternative texts in this area and will be a valuable resource for students of public policy, public sector management, human resource management, employee and industrial relations.

Part I
Introduction

1 From the New Right to New Labour

Susan Corby and Geoff White

The public services are those public sector organisations providing public goods to citizens, excluding the public corporations. The main UK public services are central and local government, health care, education, the police, fire services and the armed forces and their employee relations have always differed from those in the private sector. This difference does not relate primarily to the absence of profit, a characteristic the public service sector shares with the private ‘not for profit’ sector, although clearly this limits the resources and strategies of both types of organisations. Nor does it relate to the greater strength of trade unions and collective bargaining in most of the public services compared with the private sector, because this has not always been the case and in some public services, i.e. the police and the armed forces, trade unions are outlawed. The difference is that, unlike the private sector, the fabric of public service employee relations is shot through with the all-important dimension of political power. As Storey has commented, the dilemmas for public sector managers ‘derive … from the inherently political nature of the values and objectives which must inescapably govern the direction taken’ (Storey 1992a: 55).

We start from Storey’s proposition. Public service employee relations are different from those in the private sector because of the overarching importance of the political dimension and hence require separate detailed description and analysis. We begin by considering in depth the distinguishing characteristics of the employment relationship in the public services but, because today’s public services do not exist in a vacuum, we then examine the context. Accordingly, we trace the historical development of employee relations in the public services and show how they have been affected from the 1980s by neo-classical economics and new public management. This has led to major changes in organisational structures and occupational composition. Next we discuss the issues posed in the book and the themes and trends common to many of the aspects of the employment relationship in the public services: the public/private sector boundary; decentralisation; flexibility; the erosion of collectivism and the decline of the public service ethos. Finally, we consider the implications of the election of a new Labour government in 1997.

A distinct approach

Public service employment relationships are unique in the degree of political control to which they are subject, as we have emphasised. Admittedly the private sector is also subject to the outcomes of political power through the employment policies and legislation of government and its economic and social programmes. In the final analysis, however, private sector employers remain free to regulate the employment relationship as they choose. In contrast, public service managers are governed by the political objectives of their elected masters, who – in a democracy – will normally change from time to time.

Five main features have been identified in the role of the state as an employer (Fredman and Morris 1989: 6). First, the state has the powers to initiate legislation and to govern. Second, it is not dependent on the output of its employees for its income, which it gathers through taxation. Third, it claims to represent the ‘national’ interest in order to justify its actions, which gives moral authority to its employment decisions. Fourth, constitutional constraints apply, at least in theory, to many public service employers which do not apply to others. For example, employment decisions in the public services may be subjected to judicial review (as in the case of the withdrawal of trade union recognition at GCHQ – the intelligence-gathering centre – without consultation), whereas similar decisions in the private sector would not be reviewable in the courts (Fredman and Morris 1989: 9). Fifth, public service employers operate through bureaucratic structures; a system of power relationships built on hierarchy rather than ownership of capital. This bureaucracy is designed to ensure that there are clear chains of command leading ultimately to ministerial accountability to Parliament and that there is consistency, equity and impartiality in the delivery of services to the public, even if on occasions bureaucracy may appear to impede such delivery. The public services have also been noteworthy for the power of professional interests over general management objectives. All these features have important implications for the employment relationship.

Nevertheless, the degree of political control varies. Civil servants are directly subject to the wishes of the government. There are no mediating forces and so employee relations changes in the civil service may be accomplished by ministerial decree, such as the introduction of contracting-out and the ending of national collective bargaining. In other public services there are mediating forces which may limit the authority of central government. They range from the relatively powerful, as in local government, where the controlling political party may differ from that of central government, to the relatively weak, such as the courts of governors of universities or the directors of NHS trusts. Whether there are mediating forces or not, however, the government controls the purse strings. Even local government, which has powers to raise revenue, derives half its funding from central government and other public services, such as the NHS or the police, are almost completely dependent on government funds.

Accordingly, central government can influence the way that employee relations are conducted through either the allocation of funds or legislation. An example of the first was when the government held back part of the funding for a pay increase for universities in 1992/93 until they could demonstrate that performance appraisal systems had been introduced, despite the supposed independence of higher educational institutions from central government. An example of the second was the passing of specific local government legislation aimed at introducing compulsory competitive tendering in 1980 and 1988.

At the same time, the public services are subject to other sources of power apart from central government: local democratic structures in the case of municipal government, Parliament and its committees in the case of central government, community health councils in the case of the NHS and local police authorities in the case of the police. So the political dimension encompasses a plurality of interests and the public services ‘are enveloped in a much more complex web of relationships than simple customer-provider’ (Storey 1992a: 56).

Historical background

Regularised employment in the public services can be traced back to the mid-nineteenth century and, in particular, to the social reforms which led to local government systems for towns and counties and to a growth in central government. The Northcote–Trevelyan report of 1853 introduced the concept of a meritocratic civil service with open recruitment conducted by independent boards and promotion based on performance, and led to the establishment of the Civil Service Commission in 1855, although open competition for jobs did not become obligatory on all departments until 1870.

Employee representation in the public services largely stems from the end of the nineteenth century, although there were unions organising in the public sector from as early as the 1870s. Not only did the craft unions organise their specific trades within the Royal Ordnance factories, Royal Dockyards and Stationery Office but there were also specifically public sector unions. The Post Office telegraphists held their first strike in 1870 and the National Union of Elementary Teachers was founded in 1870, partly in response to grievances over the ‘payment by results’ system for schoolteachers introduced in 1862 (Clegg et al. 1964: 31). Writing in 1920, the Webbs noted that the greatest development of trade unionism was among ‘the employees of the National and Local Government [which was] … entirely a growth of the past thirty years’ (Webb and Webb 1920: 507). These new, specifically public service, trade unions either represented a particular department (such as the Postmen’s Federation and the Tax Clerks’ Association) or a particular class of employees (such as the Second Division Clerks’ Association) (Clegg 1976: 377). The constituent unions which created Unison, the largest public service union – COHSE, NUPE and NALGO – could trace their origins back to the turn of the century. Despite this growth in public sector unions, national collective bargaining remained unsecured.

The breakthrough for employee representation came following the Whitley Committee of 1917, which recommended the establishment of collective bargaining and joint consultation throughout British industry. To give a lead, in 1919 the government adopted a Whitley system for its own employees: the national joint council for the civil service. In 1919 it also set up the Burnham Committee, based on Whitley principles, to deal with schoolteachers’ pay and conditions. In local government collective bargaining was established at the level of regional provincial councils, with a national council to deal with disputes which could not be handled locally, although national level collective bargaining along Whitley lines was not introduced until after the Second World War, with the establishment of the national employers’ body in 1948. In 1948 the creation of the National Health Service (NHS) led to new national bargaining systems for health workers based on Whitley principles.

In short, the Whitley model of joint regulation of the employment relationship predominated in the public services. Moreover, from the Second World War until the end of the 1970s, governments encouraged the development of trade unionism in the public services (apart from the police and the armed forces). As a result, union membership grew substantially, especially among white collar professionals. Unlike the private sector there was sometimes legal support for such collective organisation, as in education, where there was a statutory requirement to bargain.

The post-1945 public sector employee relations model was characterised by strong centralised and complex bargaining structures at national level; a diversity of bargaining groups and bargaining agents along sectoral and occupational lines; a commitment by both sides to conciliation and arbitration to avoid industrial conflict; and, for many public servants, a continuing emphasis upon pay comparability with the private sector. Other features (Hepple 1982) included de facto job security, pensions and sick pay for most public servants, effective grievance machinery, procedures for promotion and indeterminate boundaries of negotiation and consultation which often in practice worked to the advantage of the unions as the definition of the scope of collective bargaining was itself left open to interpretation and bargaining.

Indeed, some commentators have argued that up to the 1970s the government was a ‘good employer’ (Hepple 1982; Fredman and Morris 1989), though others have questioned this. Colling (1997: 658) comments that ‘cost contraint, and its ramifications for the management of the public sector, were more prominent features of the “golden era” than is acknowledged in conventional accounts, which tend to emphasise the quest for consensus’. Moreover, as Thornley (1994) has indicated, the ‘good employer’ model did not stop public sector employers from keeping pay levels very low for many public servants. Nevertheless, the low paid groups in the public services, e.g. NHS ancillaries or support grades in the civil service, were usually paid better than their private sector counterparts (Low Pay Commission 1998: 45).

Be that as it may, until the early 1970s, public sector employee relations were relatively quiescent. Thus the Donovan Commission (Royal Commission 1968) had little to say about the public sector, which it saw as a haven of relatively peaceful industrial relations (coal mining apart). Furthermore, the 1960s and the first half of the 1970s witnessed a burgeoning of the welfare state, for instance the establishment of new universities, the raising of the school leaving age, the introduction of statutory maternity pay and a state earnings-related pension scheme. This expansion of public services and thus of labour in the public services led to a growth in employment costs which were largely underwritten by government (Winchester 1983).

From the mid-1960s to the 1970s, however, this peace was broken by a series of economic crises. In 1964 the Labour government made a prices and incomes policy central to its economic strategy, and new governments elected in 1970 and in 1974 first abandoned their predecessors’ incomes policies and then introduced their own measures of wage restraint when faced with economic difficulties, which were exacerbated by the marked rise in oil prices from 1973. In 1976, in response to intervention by the International Monetary Fund, the Treasury introduced cash limits into the civil service and the NHS, with the result that public expenditure in these areas was no longer demandled.

These government policies were increasingly opposed by the public sector unions, primarily because the government chose to set an example for all employers by strictly adhering to the prescribed pay limits for its own work force and, unlike the private sector, there was little, if any, collusion between the employer and unions to avoid the limits. Accordingly, from the early 1970s industrial action began to spread rapidly through the public sector as civil servants, local government workers, health workers and teachers began to exert their industrial power. This culminated in the ‘Winter of Discontent’ in 1978/79 which was an important factor in the fall of the Labour government.

The Conservative governments, 1979–97

In 1979 the election of a radical Conservative government under the leadership of Margaret Thatcher had profound effects on the future direction of employee relations in the public services. The slowing down of economic growth worldwide, with the less economically efficient countries such as Britain being hard hit, coincided with the new government rejecting the political consensus shared by all shades of government since the Second World War.

During the years of Conservative Party opposition in the 1970s leading right wing intellectuals and ‘think tanks’ developed radical critiques of the welfare state as ‘under- and poorly-managed … an unaccountable monopoly, … professionally dominated, and lacking in client involvement’ (Ferlie et al. 1996: 31). Building on the work of Hayek and Friedman, the New Right held that the market was the most efficient way of allocating goods and services, with contracts between suppliers and customers. Accordingly, public services should wherever possible be subjected to market disciplines or proxies for them and government services should be provided by the private sector, if that was the most cost effective form of provision.

When the Conservative party took office, although it had an overarching ideology, it proceeded cautiously and pragmatically. For instance, it adopted a step-by-step approach to competitive tendering in local government. Indeed, the government’s most pronounced changes did not begin until halfway through the period 1979–97, with major reorganisations of the civil service from 1988 and of the NHS from 1990 and the privatisation of civil service agencies from 1993. There were also sub-sectoral differences. For instance, the government imposed considerable change on the civil service but relatively little change on the police. Moreover, at times political and ideological considerations did not coincide, and the former predominated. An example is the creation of a pay review body for nurses and paramedical staff in 1983 and for teachers a decade later, rather than leaving the pay of these groups to be determined purely by market forces (see chapter 4). Bearing in mind these complexities, however, developments can be grouped analytically under four headings: involvement of the private sector in the provision of public services, proxies for market mechanisms, privatisation and producer capture.

Involving the public sector

Initially the government involved the private sector in the public services through compulsory competitive tendering (CCT), under which there are rival bids by the private sector and in-house teams, with contracts being awarded to the most cost effective. From 1980 central government required local authorities to put out to tender building repair, maintenance, highways and sewage work and then, in 1983, it required the NHS to put out to tender catering, cleaning and laundry services. The government extended CCT to other local authority services: building cleaning, refuse collection, street cleansing, catering, ground maintenance, vehicle maintenance and then sports and leisure management through the Local Government Act 1988. It also required local authorities to take cognisance of commercial criteria, for instance outlawing criteria based on gender equality. The Local Government Act 1992 marked a further step in CCT: the government required local authority white collar services such as housing management, legal, personnel and computing services to be put out to tender, as well as further manual services such as security and car parking (Escott and Whitfield 1995). To be better placed to win tenders and retain in-house services, local authorities often established direct service organisations, semi-autonomous units whose managers were given freedom to seek changes in working conditions and working practices.

Meanwhile, in the civil service, market testing, as competitive tendering was called, resulted in nearly £3 billion of activities being reviewed from April 1992 to September 1995 (Cabinet Office 1995). At the same time the government took civil service tendering further with so-called strategic contracting out, whereby parts of departments or agencies were contracted out without any in-house bid being sought.

In addition, from the early 1990s the government resorted to the Private Finance Initiative (PFI). Under the PFI the private sector is a provider of both capital and services. This means that the scope of partnership is wider than under CCT/market testing. In addition, because the private sector is investing significantly, it becomes an influential partner, especially as PFI contracts are spread over many years (twenty-plus), unlike the shorter contracts (five years or less) awarded under tendering. Initially the PFI was used for transport projects but it was extended to hospitals, information technology and property. In 1994 the government announced that henceforward the Treasury would not approve any capital projects unless private finance options had been explored (Cabinet Office 1995).

Market mechanisms

Second,...

Table of contents

• Cover Page
• Half Title page
• Title Page
• Copyright Page
• Contents
• List of figures and tables
• The editors and the contributors
• Part I Introduction
• Part II Context
• Part III Issues
• Part IV Players
• Index