No 10's new policy chief on how markets can save the public services

Paul Kirby has been chosen, as the new policy director, the man to help No 10 reach the sunny uplands "amid fears at senior levels in No 10 that the government is suffering severe damage as voters hear daily stories of cutbacks" where ""Everything has been overwhelmed by cuts, everything has been seen through the prism of cuts" as insiders tell The Guardian.

Kirby will work with strategy director Andrew Cooper, the modernising pollster, and with Steve Hilton who both the Spectator and Telegraph now have rebranding himself as a "proper Tory" (No doubt recognising that Hiltonism itself needs detoxifying with the Tory backbenches).

So public service reform is going to be front and centre for the new "policy and implementation unit", beginning with a new white paper: "This is about opening up public services to more providers and is a key part of the big society," one senior source said.

Those looking for new clues as to the direction of travel will turn to Kirby's KPMG report "Payment for success - how to shift power from Whitehall to public service customers" (PDF file) has a mountaineer enjoying the view from the summit on its cover. The report was co-authored by Kirby with fellow KPMG partners Alan Downey and Neil Sherlock,(who is an influential LibDem, who has had good links with Nick Clegg and previous LibDem leaders).

(Hat tip to centre-left thinker and tweeter Anthony Painter who describes it as "a blueprint for total marketisation of public sector ... Lots there for a short report. Unrestrained articulation of the public service market model (with outcomes as measure)".

The "more for a lot less" aim of the report is to achieve the same quantity and quality of public services for £60 billion less a year.

"Public services across Europe face enormous challenges: how to deliver more for a lot less ... The presenting issue is about levels of spending, but the real issues are about shifting control from providers to their customers and from bureaucrats to enterprising professionals"

How? The "payment by results" approach has three principles, which must be rigorously applied, apparently without exception.

(a) Three distinct customer roles should be created for each of the different types of service – personal, local and national – with these customers radically empowered to decide what they want and from whom

(b) Payment by results should be implemented across the public sector without exception – where it exists already, it should be made more forceful and sophisticated, where it does not exist, it should be introduced with very limited transitional periods.

(c) Public service providers should be given almost total freedom to respond effectively to their customers and the PBR regime, supported by the active divestment of public sector staff into independent providers in control of their own future”.

There is a good short summary, with some critical comment, from the health policy insight blog, which notes that there are areas of public services (citing critical care, A&E, vaccination) where central planning and no markets must be appropriate.

The problem is that while market mechanisms may be starting to work in the NHS, they are effective in services that are ‘highly contestable and highly measurable’, to draw on Simon Stevens’ taxonomy.

It is simply unrealistic to suggest, for example, that the three proposed ‘customer roles’ do not in fact overlap. A personal public service is delivered in the context of a local social, public and private economy.

Kirby was also profiled in the Guardian back in 2002, as head of the audit commission's best value inspection service.