Much Noise, Little Progress: The UK Experience of Privatization

Abstract

Since the 1970s, UK governments in common with those of other welfare states have faced a dilemma: pressure on social spending due to population aging and a changing labor market, and at the same time, strong pressures to contain taxation as international competition intensifies, capital becomes more mobile and electorates resist a greater tax-take. The United Kingdom stands out in its use of the private sector and introduction of market forces. Under the Thatcher (1979–1990) and Major (1990–1997) governments, the “marketization” of welfare involved two strands. One was encouraging individuals to finance their own welfare, for example, by saving for their own pension or taking out private health insurance. The other concerned the promotion of “quasi-markets” linking “public” and “private” in the welfare field (Deakin and Walsh 1996). This involved a new form of welfare state organization: private commercial or voluntary providers alongside public providers. The assumption was that this process would use competitive pressure to promote greater efficiency and responsiveness to the needs of those using the services, most notably in the area of health (Le Grand 1990; Le Grand and Bartlett 1993). Services from social housing to refuse collection, from social care to running prisons were contracted out to private and voluntary sector agencies (Vincent-Jones 2006). When Tony Blair became Labour leader he rejected both right-wing promarket approaches and traditional left support for public ownership of state services in favor of a Third Way, between the state and the market (Blair 1998).