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New Labour and the neo-liberal ascendancy: the case of public service reform

Par Eric Shaw : Senior lecturer - University of Stirling
Publié par Clifford Armion le 18/01/2010

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A much debated topic has been the fundamental thrust of the New Labour project. Was it about the modernisation of social democracy or its abandonment? Did it adapt itself to the settlement bequeathed by Thatcherism and the neo-liberal paradigm it entrenched or seek it transcend it? This article discusses these contending interpretations focusing on the issue of public service reform, which lay at the heart of New Labour's domestic programme. It then explores the effects of New Labour's market-oriented 'modernisation' strategy on what social democrats have traditionally regarded as the normative underpinning of the public services, the 'public service ethos'.


A much debated topic has been the fundamental thrust of the New Labour project. Was it about the modernisation of social democracy or its abandonment? Did it adapt itself to the settlement bequeathed by Thatcherism and the  neo-liberal paradigm it entrenched  or seek to transcend  it? This has been an object of heated academic and political controversy. On the one hand Giddens has argued  that whilst New Labour has accommodated itself to a greater degree than the party previously regarded as acceptable to a market economy it nonetheless "is a distinctively left of centre project - it is about the modernisation of social democracy" (Giddens, 2003: 2). Bevir agrees that it firmly lies in the social democratic tradition defined by "the ideals of social justice, citizenship, and community" (Bevir, 2005: 63). Its  steadfast allegiance to "the principle of redistribution", Buckler and Dolowitz contend, has been made manifest by its  determination to extend equality of opportunity and thereby ensure that "those with similar abilities and skills" were given "similar life chances regardless of social background" (Buckler and Dolowitz, 2000: 308-9).

In contrast, Levitas contends that "far from being a centre-left project New Labour could more accurately be characterised as centre-right, combining a neo-liberal commitment to the market with notions of "community" replacing the role of the state in Thatcherism" (Levitas, 2005: ii). According to Jessop New Labour: "has largely followed in the tracks of the neo-liberal regime shift it inherited.... It has maintained the broad strategic line embodied in ....neoliberal economic strategy... . Indeed, it has willingly committed itself to further liberalization and de-regulation in many areas, old and new.... and to the extension of direct or proxy market forces into what remains of the public and social services '  (Jessop, 2003). The eminent journalist and writer Simon Jenkins has been even more emphatic. The consequence of New Labour project has been "to render Thatcherism irreversible" (Jenkins, 2006: 5). Tony Blair was "Thatcher's most devoted follower, progenitor of what deserves to be called Blatcherism". "While Thatcher came to Thatcherism by degrees, Blair seemed to have it buried in his genes." (Jenkins, 2006: 5, 4,). Indeed, "Thatcherism's greatest achievement was to have won over not her allies but her enemies. Of these, none had been more implacable than Brown. He was Thatcherism's most coveted St Paul, a convert and soldier of the faith" (Jenkins, 2006: 272).

There are, however, broad areas of agreement amongst commentators. Most would concur that a defining characteristic of the new Labour project - the so-called third way' - was the removal of much of the ambivalence which had previously defined Labour's approach to the market. Keynesian social democracy, which emerged as the dominant strand in the Labour party in the 1950s, had accepted that there was no feasible alternative to a market economy. However, it believed that there was a sphere of social life - the public domain - where market forces should be held firmly at bay. There was an "emphasis on community and morality" and an aversion to markets and the "cash nexus"".  (Cronin, 2004: 56).  For New Labour such attitudes, whatever merit they may once have had, were now outdated.  The whole question of the balance between the market and the state had to be thought-through anew. As Brown declared in 2003 the question of "where markets have an enhanced role and where market failure has to be addressed' was absolutely central to the next stage of our project." (Brown, 2003).

Most commentators, then, would concur that New Labour in government has been, as Stuart Hall puts it, a "hybrid regime, composed of two strands, social democratic and neo-liberal." (Hall, 2003:19). Where commentators disagree is in the nature of the hybrid, the ways its component parts intersect and the balance between them. This paper will seek to elucidate these issues by addressing  the question of the extent to which and the manner in which New Labour thinking has been permeated by market liberal values. This is, of course, a massive topic and much has altered since the advent of the financial crisis and the credit crunch. To render the topic manageable this paper will focus on one strategic policy area, albeit one at the core of the New Labour project, the reform of the public services. As Hesmondhalgh has pointed out, "a fundamental theme in discussions of the effects of neo-liberalism has been its reconfiguration of the relationships between public and private" (Hesmondhalgh, 2005: 98).

The paper will proceed as follows. The first section explores the thesis that, far from succumbing to neo- (or market) liberalism, notions of community derived from the ethical socialist tradition lay at the heart of the New Labour creed, The second section examines the rather different (and more compelling) argument that in the key area (for social policy) of the assumptions it makes about understanding human motivation, New Labour has in fact moved much closer to the ethos of market liberalism. The third section takes this argument forward by investigating the way in which this change in its views of human motivation has impacted on the New Labour programme of public service reform. The fourth section explores the effects of the growing penetration - inspired by New Labour policies - of market-oriented competitive individualism on what social democrats have traditionally regarded as the communal or solidaristic underpinning of the public services, the public service ethos'. The paper ends with some concluding reflections.

1. Community and New Labour

Community rooted firmly in solidarity, Blair insisted, "is the governing idea of modern social democracy" (Blair, 2002a: 9-10). For Giddens it was "fundamental to the new politics" of the Third Way (Giddens 1998: 79). For Nuttall New Labour's communitarianism "is in part a reassertion of traditional co-operative values, and often in stronger terms than were articulated by the left in earlier decades" (Nuttall, 2006: 157). Indeed, New Labour stands for "an ethical socialism which draws on the ideas of Tawney and Ruskin" (Mandelson and Liddle, 1996: 4). In the past, Brown avers, Labour helped create the situation where "the sense of community was... underdeveloped [and] there was an assumption that state and community interests were synonymous." (quoted in Buckler and  Dolowitz, 2009:21). New Labour has sought to revive this older communitarian tradition drawing upon ethical socialist thinkers to supply a "counterweight to the "statist" character of previous British socialism" (Buckler and Dolowitz, 2009:21).

The market liberal view of the relationship between individuals and society envisaged society as composed of separate, self-seeking individuals whose disposition to co-operate was confined to matters of personal gain. As Marquand has explained, the central premise on which the whole market-liberal system is built is that the choices which  the market registers are made by separate, sovereign, atomistic individuals of the reductionist mode, and that these individuals pursue their own private goods for themselves' (Marquand, 1988:225). New Labour, in contrast, (so the argument runs) "follows the tradition of social democracy in asserting a social concept of the individual against what it regards as the excessive individualism of neoliberals" (Bevir, 2005: 84. See also Carter, 2003: 189-90). It sees people as – by nature, social beings who could only fully express themselves in social relationships. "People", Blair declared, "are not separate economic actors competing in the marketplace of life....We are social beings, nurtured in families and communities and human only because we develop the moral power of personal responsibility for ourselves and each other" (Blair, 1996: 299-300).

However, it is a modern view of community, which recognizes the desire for individual autonomy and freedom. For New Labour citizens shared common interests in a community where the capacity of all  to fulfill themselves relied on a recognition of mutual rights and duties but "who otherwise are encouraged to compete in order to advance themselves in their own ways and by their own merits" (Bevir, 2005: 71). Labour had to adapt to the fact that older collectivist and class-based values and beliefs were being replaced by a new spirit of individual aspiration embodied in the concept of the confident, discriminating consumer. Consumerism, for New Labour, furnished the dominant frame of reference in which people defined and enacted their social roles. In the words of the PM's Strategy Unit, "in light of their private sector experiences, the public want greater choice over the services provided to them by the state. ...The public now expect services to be specifically appropriate to them" (PMSU, 2007:18). Hence New Labour embraced what Blair called "a modern idea of community... which applauds and nurtures individual choice and personal autonomy and which recognises the irreducible pluralism of modern society" (quoted in Buckler, 2007: 46).

In the area of public service reform this approach has been crystallized, as we shall see, into the notion of the "enabling state". In place of the traditional social democratic ambiguity about the market with its "fundamental preference for collective solutions over market mechanisms" (Cronin, 2004:10) this notion accepts that the central institutions of the market, consumer choice and competition, can be deployed within the socially cohesive framework of free and universal services to maximize individual benefits. Rather than insisting on its right to provide all services directly, "the enabling state" should "help to empower citizens by introducing much greater diversity of service provision" (PMSU, 2007:14). In this way, New Labour has sought to strike a new balance between the community and the individual.

2. Social Character and motivation: On Knights and Knaves

Other writers have adopted a rather different conceptual framework to shed light on the trajectory of New Labour's public service policies. Le Grand has argued persuasively that "assumptions concerning human motivation and behaviour are the key to the design of social policy. Policy-makers fashion policies on the assumption that those affected by the policies will behave in certain ways and they will do so because they have certain motivations" (Le Grand, 1997: 153). Consciously or otherwise these assumptions will influence the range of policies that policy actors regard as feasible, realistic and likely to succeed. "So, for instance, a welfare state constructed on the assumption that people are motivated primarily by their own self-interest....would be quite different from one constructed on the assumption that people are predominantly public-spirited or altruistic" (Le Grand, 1997: 154).

These assumptions are bound in some way to be simplifying. Human beings are complex, have multiple motivations and their conduct can rarely be predicted with full accuracy. However, policy-makers, to help organise their understanding of the social world and make some albeit imperfect calculations about the likely impact of particular policies do have to make some simplifying assumptions.  Le Grand suggests that judgment about social character and motivation tend to fall into two categories, one where people are regarded (broadly-speaking) as knights, the other as knaves. The former assumes that people are "motivated to engage in "other-directed" activities, that is, activities which benefit others and which do not positively affect their own material welfare"; the latter that people "are motivated to perform only those activities that are of direct benefit to their own material welfare, such as their own personal consumption of material goods"  (Le Grand, 2003: 27).

The assumptions that party politicians make about human motivation and character have been, historically, rooted in wider ideological (in the loose sense of the term) frames of reference. Thus the assumption that those working within the public services were "knights", "motivated primarily by their professional ethic and hence to be concerned only with the interests of the people they were serving"  has been closely associated with the social democratic tradition (Le Grand, 1997: 155).  This belief came to be embodied in the notion of the "public service ethos" which on the left  long "dominated thinking about the  motivation, character and moral importance of the public sector" (Plant, 2003: 561). This  belief  in turn was grounded in the belief that  human beings are by nature social beings, "homo reciprocans" in the terminology of Bowles and Gintis. "Homo reciprocans" "cares about the well-being of others." He  exhibits a willingness to engage in "strong reciprocity" that is "to cooperate and share with others similarly disposed" a world of shaped by "diffuse and generalised reciprocity" or co-operation, that is as "the action of working together for the same purpose or in the same task" (Bowles and Gintis, 1998/1999).

Market liberals, in contrast, have adhered to a radically different view of human motivation -  "homo economicus." The "homo economicus" of economic liberalism conceived man  "as an essentially isolated actor, calculating economic means to ends which are individually identified, autonomously chosen and privately consumed" (Hampshire-Monk, 1996: 201). They do of course interact with each other but these interactions primarily take the form of exchange transactions (typically contracts) where  the parties  to the exchange are  expected to care only for themselves.

Notwithstanding, such contractually-based and apparently atomistic societies sustain themselves and flourish: the selfishness of man need not, market liberals reasoned, operate to the public disadvantage. Quite the contrary. The market system contained within itself "an effective and autonomous mechanical adjustment that comes into play to produce an optimum use of resources" -  the "hidden hand" of competition  that operated to ensure  the co-incidence between  private interests and the public welfare (Greenleaf, 1983:133, 128). As Adam Smith declared in a celebrated passage from The Wealth of Nations:

He, generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it ... he intends only his own gain, and he is in this ... led by an invisible hand to promote an end which was not part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest he frequently promotes that of society more effectively than when he really intends to promote it.
(quoted in Le Grand, 2003:12)

In the private sector, then, the need to capture custom in highly competitive markets ensured a broad alignment between producer self-interest and consumer wants. But what happens in the absence of competitive markest? This, market liberals argued, is precisely the problem that arises in the delivery of public services in expansive welfare states. In such states public sector workers (and the organisations that represent them) are free to use their monopoly power to extract maximum advantage for themselves at the expense of those they are supposed to serve. "In the absence of market disciplines the state cannot deliver services efficiently, and is vulnerable to producer capture and bureaucratic empire building" (Deakin  and Walsh, 1996: 33)

This posed a problem for those who did not regard it as either politically feasible or perhaps even desirable to engage in outright privatisation of the core public services. What was required was a strategy of reform which, whilst preserving the principle of free delivery of essential public services financed by taxation, could impart some of the benefits of the competitive system.

The mechanism chosen by the Thatcher Government, consolidated and extended by John Major, was the internal or quasi-market.

As with ordinary markets, quasi-markets are supposed to display the workings of Adam Smith's Invisible Hand, whereby, simply through pursuing their own advantage, suppliers are led to contribute to socially desirable ends. Thus managers and doctors working in trust hospitals that are losing money are assumed, in their own self-interest, to become more responsive to the wishes and wants of their purchasers and the people they represent. They will also strive to be more efficient and less wasteful in their use of resources so as to ensure they stay within budget.... Schools will be more sensitive to parents, for fear that they will other-wise take their child away - or not apply in the first place - and the school budget will suffer. And they too will have an incentive to be more efficient
(Le Grand, 1997: 159)

3. New Labour's public service reform programme

Labour's initial response to the introduction of quasi- or internal markets was adamant opposition, not least because (it was claimed) they would corrode the moral basis of the welfare state, the public service ethos. It was this that, ostensibly, the New Labour government entering office in 1997 was determined to preserve. There is, Blair propounded, "something special about public service. At its best the notion of public service embodies vital qualities - loyalty, altruism, dedication, long-term relationships with users, a sense of pride" (Blair, 2002). On the surface, ministers fervently defended the traditional social democratic "knightly" view of human motivation. The values of "compassion, fairness, a belief in the strength of community, co-operation with others as the basis for individual progress," the ardently Blairite cabinet minister Alan Milburn proclaimed, lay at the heart of the Government's public sector reform programme. "It would be folly to sacrifice these values and these principles" (Milburn, 2001).

In fact, New Labour attitudes were more ambiguous. As the Public Administration Select Committee rather wryly noted, "Government in one voice suggests that the existing ethos of the public services represents a blockage to reform, while in another voice it says that this ethos represents an asset to be built on" (Public Administration Select Committee, 2002: para 37). In private, key policy actors were deeply sceptical about the disinterestedness of public sector professionals (interviews with the author), a scepticism that occasionally manifested itself in public. In a major statement of the New Labour public sector reform programme in 2004 Tony Blair lamented the effects during earlier Labour governments of "professional domination of service provision." These governments had allowed professionals "to define not just the way services were delivered but also the standards to which they were delivered. And this too often meant services where standards were too low, an unacceptable variability in delivery, which entrenched inequality and service  users....who were disempowered and demoralised" (Blair, 2004).

The presumption here was, of course, that reliance on the "knightly" sentiments motivating public sector professionals had proved short-sighted and damaging. The New Labour Government by no means discounted the importance of a "public service ethos." It acknowledged that "the public service ethos undoubtedly forms part of the motivation of professionals and others working in the public service" but - it was quick to add - "it is only a part, with more self-interested or knavish concerns also playing a significant role". Indeed, when "self-interest and public spiritedness" conflict for public sector providers "it is far from clear that public spiritedness always dominates" (Joint Ministerial Memorandum, 2005: 3.3.5). Thus, amongst key New Labour figures (notably in Downing Street) there was a growing propensity to view public sector organisations as producer cartels whose behaviour was too often driven by narrow personal and institutional interests and which exhibited only muted regard for the public good. Without the spur of competition and consumer pressure, public organisations tended to succumb to bureaucratic inertia, a wasteful use of resources, rent-seeking behaviour, weak management and organisational arrangements designed to procure a more comfortable and rewarding life for public servants rather than for  those they served (PMSU, 2006: 50). In short, the New Labour belief about human motivation, the former Prime Ministerial advisor Julian Le Grand observed, "seemed to be nearer the neo-­liberal position than the social democratic one" (Le Grand, 2003:15). Inevitably, and quite logically, this impacted upon the formulation of public policy.

Neo-liberals (often arguing under the guise of "public choice" or "new public management theory") had been persistently claiming for years that a basic cause of "public sector failure" was the motivation of those who worked within it'. There was, so the reasoning went, "an inevitable tendency to inefficiency....because there is a lack of market incentives." (Walsh, 1995:29). Whilst in its first two years the Labour Government had called a retreat from the internal market in healthcare (though less so in education) by 2000 it became increasingly persuaded by this doctrine of "public sector failure". In particular, ministers and their advisors were fearful that the additional funds being poured into health and education would not be used efficiently because of the effects of excessive producer control. How could this be combated?

In the past (so the new reasoning ran)  social democrats had not only regarded the public sector producers as "knights" but the user of public goods as "pawns" - the passive and grateful recipients of  professionally-determined and delivered services. The most effective way of challenging producer control, it followed, was by empowering the service user. The Government played with the idea of achieving this by strengthening user "voice" but decided that by far the most effective mechanism was by extending choice. In Le Grand's terminology "pawns" had to be converted into "queens", the informed and diligent consumer with the right to choose  between competing providers Giving the service user this right would  help "to ensure that public services respond more promptly and precisely to their needs" (PMSU, 2006:65).

Choice implies product differentiation. In education the move away from standardised comprehensive education instigated by the Tories was accelerated. There was an expanding range of diverse providers - specialist schools, trust schools, faith schools, City Academies and so forth. But how, in the absence of price signals, could the consumer make informed choices without exhaustive and time-consuming investigation? The answer was via the compilation of league tables, derived from examination results (generated by a proliferating number of tests) and the reports of monitoring and auditing agencies. As in the private sector so in the public, only when coupled with competition could choice "provide powerful and continuing incentives for service providers to improve efficiency and raise service quality for all" (PMSU, 2006: 66).  Further, arrangements were put in place to ensure that schools with the heaviest demand benefited financially by linking funding settlements to enrolment size. The underlying assumption was that "a quasi-market of increasingly differentiated and autonomous schools would.... foster competition and improvement of performance, while services would become more accountable when they were made to respond directly to the choices of individual consumers" (Ranson, 2003: 465).

In the NHS successive measures were introduced to increase the choice of hospitals (including private and even overseas ones) and treatments available to patients. By 2008 it was planned that all patients would be able to choose between any healthcare provider provided the price was reasonable and the quality met NHS standards (Department of Health 2006: Ev 3. For a more detailed discussion, see Shaw, 2007: 100-103). The Healthcare Commission's use of Star Ratings supplied service users with summary details about the relative performance of hospitals to facilitate informed choice. The introduction of a system of Payment by Results ensured that money followed the patient. Under Payment by Results (PbR), introduced in stages from 2002, hospitals were reimbursed for the activity they actually carried out, using a tariff of fixed prices that reflected national average costs. (Maybin, 2007: 1) ((As critics pointed out, the system was in fact payment by activities rather than by results.)) "By encouraging competition between providers hospitals will face incentives to make services more attractive to patients" (Smith and Babbington, 2006:24).

Crucially, it was agreed that services need not be delivered by public organisations. "Widening the market to create more suppliers of public services" - greater "contestability" in the jargon - would, the Office for Public Service Reform asserted, "drive up performance, improve  the quality of management and secure more value for money." (OPSR, 2002: 24) ((The most contentious example of this policy was the introduction of private providers into the delivery of NHS healthcare. Under ISTC agreements private providers were contracted to carry out relatively simple, high-volume surgical procedures, initially in the fields of ophthalmics and orthopaedics. The intention was that the private sector would provide up to 15 per cent of all affected procedures by 2008 (Health Select Committee, 2006: 7). In education the key initiative here was the expansion of the City Academy' programme. In return for providing up  10% of the capital costs, capped at a contribution of £2 million, external sponsors'  from the business sector, voluntary  organisations and other public sector institutions (e.g. universities) were given a considerable say over how a City Academy was run (Shaw, 2007:  68-70). Under the Brown Government enthusiasm for the ISTC programme faded but (despite earlier reservations intimated by Brown) it pressed ahead enthusiastically with the City Academy Programme.)). As long as key services (such as schooling and healthcare) were provided free at the point of consumption the question of who exactly supplied them - whether public, private or voluntary organizations, or some combination of them - was a secondary concern.  Indeed a crucial distinction was now made between two functions of the state, as direct provider and as commissioner (and regulator) of services - or the state as enabler. Thus in the NHS the state "moved from  being the dominant purchaser and employer in healthcare to being the purchaser of services, but not necessarily the employer, with care increasingly being purchased from private and not-for-profit providers as well as public organizations" (Greener and Powell, 2008: 622).

Underpinning all this was the increasing acceptance of the efficacy of the "knavish" mode of motivation - "incentivisation" as it was often called. As the Prime Minister's Strategy Unit commented, there was in governing circles a waning confidence "in the reliability of the public sector ethos as a motivational drive and a growing conviction that self-interest was the principal force motivating those involved in public services" (PMSU, 2006: 59). This reflected a general shift in New Labour attitudes. The importance of rewarding risk takers, valuing entrepreneurial talent and celebrating successful wealth creators as role models' became a constantly-reiterated axiom of New Labour thought (Brown, 2005) Greater efficiency, better quality and more responsive service delivery were seen to need stronger institutional incentives, in which remuneration was better linked to performance, to evoke the required motivation and commitment - or some form of "incentivisation."  "Incentivisation" can be defined as the linkage of "incentives to performance in order to foster greater entrepreneurialism and closer attention to cost cutting and organisational efficiency" (Doig and Wilson, 1999: 28). "Incentivisation" has typically taken the form of sharper differentiation of rewards at individual level with much higher salaries for top managers (not least university vice-chancellors), the boosting of pay by the provision of performance-related bonuses and the installation of quantitative methods for appraising performance  linked to the widespread use of targets to measure organizational effectiveness  (Doig and Wilson, 1999: 28).

4. Competitive individualism and the Moral community

The need to strengthen social cohesion and ensure that all have the right to participate fully in the life of the community are constantly recurring motifs in New Labour discourse and the universal entitlement to key public services (notably healthcare and education) free at the point of consumption and supplied according to need have figured prominently as means to achieve these goals. But - in a sharp break with traditional Labour thinking - the Government was convinced that the techniques and norms of the private sector and, in some cases, the use of commercial providers, should be harnessed to improve the delivery of public services. In essence the assumption is that public organisations would function more efficiently, produce a higher standard of service and develop more sensitivity to user needs to the extent that they emulated "the enterprise culture" of the private sector.

But it does not follow (as some commentators have claimed) that New Labour has embraced neo-liberalism. Neoliberalism has been defined as in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices.... State interventions in markets (once created) must be kept to a bare minimum' (Harvey, 2005: 5).

New Labour has not rigorously followed the programmatic trajectory such precepts entailed. It did not espouse - even before the financial crash - unfettered free markets. It did not retrench the welfare state, curb big government and keep state intervention to a minimum. In fact there is a strong case to be made that many of the policies pursued by the New Labour Government represented determined efforts to advance the social democratic agenda. It massively raised public spending, especially on healthcare, education, and introduced a range of tax credits geared to helping the low paid. It has made concerted efforts to reduce poverty amongst the very young and the elderly. It has instituted a wide range of measures to help the disadvantaged including such programmes as the national minimum wage, Sure Start, the National Childcare Strategy, the various employment New Deals and  a plethora of urban improvement schemes and community action programmes (Social Exclusion Unit , 2004:29-30). Even its accent on economic competitiveness and the development of "human capital" has been used to relegitimate large-scale investment in goods under-provided by the market but functional to higher productivity, such as education and training.

But nor can the New Labour programme be accurately defined (as other commentators have contended) as "modernised social democracy."  Not only have inequalities remained stubbornly high as incomes and wealth at the top have swollen at an astonishing pace but the Labour Government has presided over a massive extension of the role of markets and profit-making corporate activity in the public sector.  For this reason we conclude that the New Labour creed can best be understood as a hybrid, a synthesis between social democracy and market liberalism - a form of social liberalism.

The question I wish to briefly explore here is whether this constitutes a stable and coherent formula.  Nowhere is this question more clearly raised than in New Labour's project for public service modernisation, a project, according to the PM's  Strategy Unit, "central to the achievement of the Government's objectives of greater social justice and a higher quality of life for everyone"(PMSU, 2006: 13). Its viability, and ultimate success, rests on the presumption that the normative framework of the market can be transplanted on to the public sector without detrimental consequences. The problem is, as Plant has pointed together, that the values and norms embodied in the public and market sections rather than being complementary conflict in key ways. "The dominant relationship in the market is that of contract, within which self-interested individu­als bargain together to arrive at as mutually advantageous agreements as they can". (Plant, 2003:  566)  In the public sector, in contrast, the assumption is that a common good or purpose exists that operates to "either constrain or displace sec­tional interest" (Plant, 2003:562).

Does this matter? Would not the injection of entrepreneurial' norms inject a new spirit of enterprise, a new dynamism into the public sector? Such has been the New Labour belief. As we have seen, its mindset has been increasingly influenced by the belief that the prime mover, and motivator, of human conduct is self-interest. The task then becomes to construct institutional arrangements which allow "self-interest to operate in a way that simultaneously promotes the public good." (Le Grand, 1997:160). But what if this belief - that those who work in the public sector are principally self-seekers - is incorrect? What if, instead, it is the case that multiple motive-forces are at work, self-seeking and public-spirited, expediency and professionalism, egoism and altruism? "If we design institutions on the assumption that people will always act in a self-interested way," Plant contends, "this very design may well encourage it to happen even in areas where it did not do so before" (Plant, 2003:576). The consequence may  then be what might be called the commercialisation of the public services.

Hirsch explains the logic of the process. Particular forms of interaction embody expectations as to how the parties to that interaction will behave. A market (or quasi-market) transaction contains within it the expectation that all (whether service provider or service user) will seek maximum personal advantage within the terms stipulated in a contract. The more, however, a relationship is defined by the norms of economic calculation, the more they will tend to erode expectations that people will be influenced by any other norms  (such as  professional ethics or  public service). "By influencing social norms and expectations in this way," Hirsch maintains, "commercialization or its equivalent embodies its own dynamic". The restraints that non-economic norms may exercise in discouraging or qualifying the unabashed pursuit of gain (whether this is individual monetary reward, institutional competitive advantage or instant consumer satisfaction) will abate  as everyone expects everyone else  to give priority to their own interests. The weakening of such social norms, "is likely to become self-aggravating. Once such conventions can no longer be counted on as the typical basis of behavior. ...then the change in behavioral norms will feed on itself.  There will then be a tipping effect" (Hirsch, 1977: 89).

This may not happen for a while. The influence of established norms may be tenacious and cultural changes tend to be slow (though cumulative). But a point will be reached where  the benefits accruing  to acting in a "utility-maximsing" way, coupled with the risks attached to not doing so when  most others do will cause  behavior to "tip". "Commercialization, in the sense of securing fair exchange in each specific transaction, then becomes general" (Hirsch, 1977: 89).

Le Grand himself queried the effects on the culture of the public services if the neo-liberal assumption "that motivation is exogenous or external to policy change is incorrect' and that motivation is actu­ally endogenous or internal to policy?" (Le Grand, 2003: 40). What not then the likely consequences of a "modernisation" drive designed to foster a more competitive and commercial spirit within the public services be to "turn knights into knaves?" (Le Grand, 2003:  18).


Our conclusion is that it would be inaccurate to define New Labour as neo-liberal. Mudge argues that "in all its modes, neo-liberalism is built on a single, fundamental principle: the superiority of individualized, market-based competition over other modes of organisation" (Mudge, 2008: 706-707). Clarke adds that the neo-liberal strategy's "distinctive combination of anti-welfarism and anti-statism means that it has been dissolving the public realm and has sought to dismantle welfare states, and the social, political, economic and organisational settlements that sustained them." (Clarke, 2004:31-2). In neither case could New Labour be considered neo-liberal. In fact it has exhibited a strong commitment to a large and vibrant sphere of collective activity where  public goods such as healthcare and schooling  were provided in an equitable fashion according to need, free at the point of consumption and funded by progressive taxation (PMSU, 2007:10).

But equally it would be wrong to conclude that  New Labour represents simply a modernised form of social democracy. New Labour, according to Buckler and Dolowitz, "viewed society though the lens of an ethical socialism, with a stress on mutual development within a supportive social structure" (Buckler and Dolowitz, 2009:21).  We would suggest that precisely the opposite is the case: that New Labour has abandoned virtually the whole of the ethical socialist heritage, with its accent on human co-operation, fellowship and the social nature of being - home reciprocans - in favour of a market liberal theory of human character and motivation - homo economicus.

As Taylor-Gooby explains:

The conceptual framework that underlies recent developments in welfare policy is suspicious of the motives of both providers and consumers. It assumes that the rational pursuit of self-interest replaces trust and altruism; that tax-payers are reluctant to finance services unless they think that they will benefit directly; that officials and professionals will tend to regulate the operation of services to serve their interests in a comfortable, interesting and rewarding life rather than the needs of user.... The solution is the substitution of the discipline of the market
(Taylor-Gooby,, 1998: 98)

In 2003 the current Prime Minister posed the question: where are the areas where the market is legitimate and where the areas "where to impose market transactions in human relationships is to go beyond the bounds of what is acceptable"? (Brown, 2003). Since 1997 New Labour's response has been ambiguous. On the one hand, the proportion of public resources committed to the delivery of public services (notably healthcare and education) free at the point of consumption has grown hugely. On the other hand, the role of market forces within the public sector has expanded at a pace which Mrs. Thatcher herself would have found impressive.

But perhaps most striking of all is the degree to which New Labour has absorbed the central metaphor of the market liberal creed - the model of the self-seeking individual - into its bloodstream. Tawney had castigated this model because it  fixed "men's minds, not upon the discharge of social obligations... but upon the exercise of the right to pursue their own self-interest... and therefore gives free play to one of the most powerful of human instincts" (Tawney, 1961 (1921): 32). For New Labour the single-minded and zealous pursuit of self-interest has ceased to be a matter for admonition or even concern. Referring to Le Grand's analysis of "knights" and "knaves" Simon Jenkins rather tartly  commented: "Such a caricatured account of the public's view of the welfare state might be accepted by Thatcherite neo-liberals. That le Grand's metaphor should have been espoused by a Labour government and used as the philosophical underpinning of its entire public service reform was remarkable" (Jenkins, 2006: 271) 


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Cette ressource a été publiée dans le cadre du colloque franco-britannique "The Thatcher Legacy 1979-2009", organisé par l'université de Lyon 2 et l'université de Sterling les 4 et 5 décembre 2009.


Pour citer cette ressource :

Eric Shaw, "New Labour and the neo-liberal ascendancy: the case of public service reform", La Clé des Langues [en ligne], Lyon, ENS de LYON/DGESCO (ISSN 2107-7029), janvier 2010. Consulté le 21/05/2024. URL: https://cle.ens-lyon.fr/anglais/civilisation/domaine-britannique/l-heritage-thatcherien/new-labour-and-the-neo-liberal-ascendancy-the-case-of-public-service-reform