Monday, 11 February 2013

Gove is all around: exams, public services and EU competition law

Michael Jacobs

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Michael Gove’s retreat on his plan to reform GCSE examinations has provided an object lesson in the perils of political hubris. If the Secretary of State hadn’t announced the creation of a new English Baccalaureate Certificate before he was actually in a position to make a decision (ie before he had consulted anyone in the field) he would have avoided the predictable headlines of a ‘humiliating U-turn’. But amidst the general political schadenfreude (which, to his credit, Gove handled graciously in the Commons) an even more important feature of his climbdown has been overlooked.

One of the reasons, it was reported, that Gove could not go through with his plan to create a single exam board for each subject, which he hoped would end the competitive pressures between boards which it is alleged in the present system leads to grade inflation, was that this would fall foul of EU competition law. Gove was apparently warned that the exam boards would sue the Department of Education for breach of procurement rules.

If this is true, it is further evidence of an extraordinary conflict which now lies at the centre of public service provision, between democracy and the EU single market. The organisation of school examinations is part of the core business of government. If in order to raise educational standards a democratically elected government wishes to institute a single examination board it should surely have the right to do so. EU competition rules designed for commercial markets should not be relevant here.

And indeed they weren’t, before government first instituted a market in examination provision. Before that decision was made, EU law would have regarded examinations as a ‘social’ purpose carried out ‘not for profit’; and therefore not subject to procurement rules. But now that a market exists, EU law prevents that decision being repealed, since it would breach the market rights of the present players.

This flouts an important democratic principle. A government which makes a decision to create a market in public services should have the right to reverse such a decision, so long as due process is followed (such as giving market players time to adjust). If it cannot, this means that in making the initial marketisation decision, Government was effectively transferring sovereignty over this area of public provision from Parliament to EU competition law.

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This issue is most acute in the NHS. Through the concept of ‘any qualified provider’, the 2012 Health and Social Care Act explicitly brings much of the provision of health services within the scope of EU competition law. Many people have objected to marketisation on health provision grounds – that it will lead to the fragmentation of integrated health services, that the private sector will cherrypick profitable functions leaving the public sector to pick up the rest, and so on. But the democratic objection is that once marketisation has been established, the new system will become legally irreversible. If a future democratically elected government decided that marketisation hadn’t worked, or was wrong in principle, it could nevertheless not repeal it, because this would then infringe the market rights of the commercial businesses which had by then entered the market.

The same prohibition would occur if a future Government sought another possible reform – a requirement that all market providers in the NHS or in education were non-profit. Given that much of the risk in marketisation lies in the distortion of the public interest from the operation of the profit motive, this might be regarded as a sensible safeguard. But it too would be illegal under EU law, once market procurement of any kind had been instituted.

The problem here lies in EU competition law. It is obviously right that businesses in commercial markets face a level playing field when competing for public business. And EU law does recognise that social purpose allows public services to be exempt from competition and procurement law. But it does not currently allow the reversal of public decisions to create market competition. It should.

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Strangely, you won’t find this proposal in the Government’s or Conservative Party’s plans to opt out of various aspects of EU law. The single market is the one aspect of the EU they like: its use to entrench the marketisation of public services is an added bonus. But this should be in the Labour and Lib Dem prospectuses for European reform.

In his masterful study of ‘the strange non-death of neo-liberalism’, Colin Crouch shows how the creeping marketisation of public services over the last two decades has undermined the very basis of the public sphere, creating an effect he calls ‘post-democracy’. Michael Gove has unwittingly revealed its further advance.

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