Thursday, December 20, 2007

The rise and fall of Carter & Carter – issues raised by private sector provision of public services

Over my 14 years working with Further Education colleges, one of my particular interests has been the spectacular collapses of some colleges. These collapses have often offered other colleges useful lessons in how not to do things, as I have noted here. (They have also led to a series of knee-jerk reactions from certain quarters with the result that colleges find themselves badly tied up in red tape.) Recently we have seen a phenomenon of a major training provider worth (at one point) £500m implode.

Carter & Carter was a fast growing training provider with plans for further expansion. Some colleges considered partnerships or actually entered joint ventures with the training provider. Then things went wrong. The founder and chief executive died in a helicopter accident. Then the share prices fell, the bankers got twitchy and the auditors got busy. The Guardian has the full story.

The rise (and fall) of Carter & Carter poses issues of private sector involvement in public services. I suspect it has delayed the day when we see the private sector taking over a failing FE college. I personally favour a mixed economy in public services (and, more importantly, so does Gordon Brown according to the Financial Times) as a way of promoting choice, competition and innovation. But how does the funder and the regulator ensure a level playing field?

Interestingly outsourced contractors might be star-rated when providing welfare services according to Public Finance. Stretching the regulatory regime for the public sector over the private sector is certainly one option. However, a lighter but smarter regulation might be a lot helpful in allowing all public service providers to focus more on outcomes than compliance.

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