Private and confidential

21 June 2005

Sanjiv Sachdev, Principal Lecturer at Kingston Business School, discusses the problems of commercial confidentiality and private providers.

In the wake of Jamie Oliver's campaign to improve school meals – and the revelation that Greenwich spent a meagre 38 pence per meal – the Soil Association undertook a survey of spending by local education authorities on school meals. While most LEAs responded, many refused to on the grounds that this information was commercially confidential.¹ There is a clear public interest in the disclosure of information about publicly funded, public services. But instead, many parents were unable to find out how much of their taxes are spent on their children's meals in their children's schools. The problem of commercial confidentiality preventing public scrutiny is one replicated across many public services and is an issue that is set to grow as we increase our reliance on the private sector to deliver public services. While the public sector often leaves much to be desired in its public disclosure, matters that were once in the public realm are in danger of being ring-fenced and kept from public view by private sector interests. In the process, transparency is reduced, accountability lessened and democracy weakened.

Private providers often aspire to 'a spirit of openness', 'open book accounting' and 'a commitment to accountability'². However, in practice, accountability is sometimes much more limited. Examples are abundant: Ruane³ cites the case of a trade unionist who had been unable to obtain from an NHS trust manager confirmation that new catering facilities within a particular PFI scheme were to be cook chill, even though the contract had already been signed and the plans drawn up. Mair⁴ found that many of the cost comparisons between PFI and the public sector 'simply cannot be made' as the information in the former is 'commercial in confidence'. The cloak of commercial confidentiality is not confined to members of the public – even members of Parliament find it difficult to obtain the most basic information. Thus, when asked by MPs about the level of staff absence in private prisons, the prisons Minister replied that 'information about privately managed prisons is not available as it is commercial in confidence'.⁵ According to Nathan⁶, in 2000, the Chief Inspector of Prisons was forced to have his first inspection report of Kilmarnock Prison pulped at the printers because it included Premier Prison Services staffing levels in the prison. In Wolds prison, Group 4 management would not provide staff with information on the contractually specified staffing levels – an area of contention – because it was 'commercial in confidence'⁷. In 2004, the private prison provider, UKDS, refused to supply information to the Prison Service Pay Review Body on the grounds that this would 'compromise their competitive position'.⁸

This problem is not confined to Britain. In the United States, 'most of the information about employee salaries in private prisons is anecdotal because the companies are not held to any public disclosure requirements'⁹. Investigation into Australia's private prisons, despite its Freedom of Information Act, is seriously impeded by 'commercial in confidence' constraints.¹⁰

Criticism of the lack of accountability in public private partnerships is widespread. The Institute of Public Policy Research (IPPR)¹¹ argues that PPPs 'accentuate' accountability problems and moreover, that 'levels of access to information and redress should not vary according to whether or not public services are delivered via the public or private sectors'.

The new Freedom of Information Act (FOI) offers some hope of redress. According to the Treasury¹², presumably referring to Section 43 of the FOI Act, commercial confidentiality is only justifiable 'where this would cause real harm to the legitimate commercial or legal interests of suppliers, contractors, the public sector client or any other party'. However, these exemptions are subject to a public interest test, ie. where access to the information would further the understanding of, and participation in the debate of, issues of the day, or facilitate the accountability and transparency of public authorities for decisions taken by them or in the spending of public money. Indeed, the issue of the accountability of private providers is one explicitly raised in the Commissioner for Information's awareness guidance note¹³: 'Where a public authority is purchasing goods or services, there is a public interest in ensuring that they get value for money. This is particularly true at a time when there is a public debate around the increasing role private companies have in delivering public services.'

As yet, the Act remains untested; subsequent case law should clarify its scope. Moreover, there seem to be proposals in prospect to extend the FOI Act further, subject to consultation, in relation to private providers – measures that are needed if confidence in our governance is to be maintained.

Early advocates of the private provision of public services were fond of quoting Deng Xiaoping's line that 'it doesn't matter if a cat is black or white, so long as it catches mice', implying that, if a Communist regime could see the merits of the private sector provision, it was time that tardy social democrats did so too. But the quotation is revealing in another sense: the dictums of a dictatorship are being posed as a model for democracies; the lack of transparency and accountability in China governance is ignored. Advocates of private prisons argued that they should be 'subject to the same provision of law that directs the state'¹⁴ – however, instead, private firms often seem to occupy a privileged position, protected from the disclosure requirements of the public sector. It should be an axiom of public service that we know how our money is being spent on our behalf for our services. A culture of openness needs nurturing – one that does not overly rely on the sanction of law. It is time that private providers opened up, not because that is what they are legally obliged to do, but because they should do so if they are to operate in the public realm.

1 Lawrence F (2005) 'School meal spending: aces and dunces', Guardian, 24th March.
2 All from Aldridge R (2004) 'Diversity of practice', The PFI Journal, December No.47.
3 Ruane S (2000) 'Acquiescence and opposition: the private finance initiative in the National Health Service', Policy and Politics vol. 28, no. 3, p.411-424.
4 Mair J (2000) 'On location in PFI-land', Public Finance, 1st December.
5 Cited in Nathan S (2002) 'Monitoring the Private Sector', Annual Report, London: Prison Reform Trust.
6 Nathan S (2003) 'Prison Privatisation in the United Kingdom' in ed. Coyle A, et al, Capitalist Punishment, London: Zed Books.
7 James A, et al (1997) 'Privatizing Prisons', London: Sage Publications.
8 DLA MCG (2004) 'Privately Managed Custodial Services', September, Liverpool.
9 Miller J (2003) 'Worker Rights in Private Prisons' in ed. Coyle A, et al, Capitalist Punishment, London: Zed Books.
10 Moyle P (1993) 'Privatisation of prisons in New South Wales and Queensland; a review of some key developments', Howard Journal of Criminal Justice, vol. 32, p.231-50.
11 IPPR (2001) 'Building Better Partnerships', London: IPPR.
12 HM Treasury (2003) 'PFI: Meeting the Investment Challenge', London: TSO.
13 See www.informationcommissioner.gov.uk.
14 Logan C (1987) 'Privatizing Prisons: The Moral Case', London: Adam Smith Institute.