CILIP Update 9/11/11 “Monster or Saviour” article on privatised libraries

Few subjects raise such polarisation of opinion as the taking over of library services by private companies.  It is such an emotive issue that there is even an argument about what word to use to describe it.  Generally, those against it call it privatisation while those more in favour call it outsourcing.  Whatever one calls it, on the one side it is seen as a monster and, on the other, as a semi-magical saviour.  This article aims to summarise the experience so far and to summarise the various points.

 Why now?

Under the stark financial pressure facing libraries and other public services, it is only natural that all alternatives are being investigated.  This is even more so in the current political climate where there is a strong presumption on the part of the government, many councils and most especially in the media, of “public sector bad, private sector good”. Although primarily aimed at encouraging local participation in services, the Localism Bill and the Open Public Services white paper may give a strong impetus towards private companies taking over public services, even against the opposition of the relevant local council.  Indeed the Bill has been called “a one-way ticket to privatisation”[1].  Croydon, Wandsworth and Wokingham are all currently considering some form of withdrawing from direct control of their library services, with more doubtless doing so behind the scenes.

Past experience: Laing in Hounslow

There are currently only two private companies, LSSI in the USA and Laing in the UK, that run public library services in the English-speaking world, although other companies, such as Civica, have indicated  an interest in also doing so.

Laing[2] gained the Hounslow contract due to the collapse of another earlier outsourcing (to a Trust) attempt.  In the two years since taking over the system, the Council states that Laing has made £1.25m of efficiencies[3] in Hounslow, with overall library attendance improving by 7%.  The methods used include introducing new financial management systems, outsourcing backroom tasks like recruitment, introducing new computer systems and installing WiFi. However, Hounslow council (not Laing itself) provided £5 million[4] specifically for library improvements during this period and so the private company cannot claim unique responsibility for this.

More importantly, though, Laing has not made Hounslow immune to the current cuts. Far from it.  17 staff have left due to compulsory redundancies, 4 due to voluntary redundancies, 3 through ill health/early retirement, 6 through retirement and 2 for other reasons[5]. Apart from the six retirees, all of these losses were December 2010 and thus before the cuts started in earnest.  This is a very high ratio in comparison to similar situations in the public sector where early retirement and voluntary redundancies remain the preferred options.  This year, more significantly, it was only due to a strong reaction from a public consultation that halted the closure of eight[6] of its eleven branches. This was the second highest ratio of closures to remaining branches in the UK during this period. Being forced to back down on the closures, the service instead has decided on a 100% cut to the bookfund (that is, no new books will be bought this year), with plans for a reduction in opening hours and a reduction in skilled staff in 2012[7].  The coverage of these cuts in the local media also shows the fallacy of a (suspected) political reason for outsourcing, in that newspapers clearly attributed the cuts to the council and none of the blame was affixed to the private company.

Born in the USA

Over the Atlantic, it is a very different picture in terms of the popularity, or unpopularity, of private companies.  Although, like Laing here, LSSI is the only private supplier of public library services in the USA, it is the fifth largest provider of services overall, with 16 separate library contracts across the country.

This company has made the strong claim that it is able to make 35% savings[8] on UK library budgets while not affecting frontline services, via a variety of different strategies.  One way stated is by utilising economies of scale.  This could be considerable if the company achieves its ambition to run 15% of the UK library market within four years[9]. However, any current economies of scale are entirely notional, with no current contracts and the UK side currently being run from an office space above a London lettings agency[10]. Somewhat remarkably, considering the distance and differences between the two countries, LSSI has suggested that it could rely on the remote expertise of American library staff to help get over this problem in the short-term. Other money-saving methods put forward including running cafes, bookshops, IT facilities, and co-location with other public services.

By far and away, the most significant way the company has argued it can save money is through the more efficient use of library staff, including the provocative statement by its chief executive that :

“A lot of libraries are atrocious. Their policies are all about job security. That’s why the profession is nervous about us. You can go to a library for 35 years and never have to do anything and then have your retirement. We’re not running our company that way. You come to us, you’re going to have to work.”[11]

LSSI benefits from 15% less staff costs[12] than equivalent other library services, although there is much debate about how this has been achieved.  On the one side, the company points out that it employs over one hundred professional staff and that the public does not notice the difference. It’s website[13] is full of pictures of happy library staff and testimonials from them. On the other side, US professional library associations are critical.  A recent Illinois Library Association report[14] points out a harsher reality of mass firings, rehirings at lower pay, loss of healthcare and pension benefits and reductions in materials budgets.  A similar situation is seen in California where the “library workforce is no longer represented by a union… Ebook availability is more constrained under the new system…when asked to disclose salaries, for example, the company declined to release any information.”[15] .

Their history is also not one of uninterrupted growth and expansion.  Fargo (North Dakota) ended its contract with the company over the late payment of bills[16] in 2003.  In California, it is claimed the takeover of Santa Clarita’s system will cost the taxpayer $12 million[17].  Also in the same state, 71,000 people signed a petition in support of legislation (AB 438[18]) that will make it harder to privatise other  public libraries.  This legislation has passed all hurdles and is, at the time of writing, awaiting assent of the governor.

Other points to consider

One of the key points put forward for the use of private companies is that they need to work harder in order to beat their competitors.  Public libraries may not be such a perfect marketplace.  In Hounslow, the long length (fifteen years) of the contract could lead to inefficiency unless there is close monitoring and get-out clauses in the council contract. In addition, and quite unlike in other businesses, it is impossible to run public libraries at a profit.  The private company needs to be paid by the council for doing so instead. There is simply a limit to what efficiencies can be produced in increase the profit of the private company.  In such circumstances, the temptation to achieve higher returns by “sweating the assets” (that is, cutting down on investment in staff, stock, buildings and maintenance) may be great.

There is, or will be, more competition in the UK marketplace due to the advent of other players.  Competing bids from Laing, LSSI and other companies, councils or Trusts are likely to make sure the winning company has had to work hard for its victory.  The key here will be the length of the contract given.  In a sector where there is no significant capital investment needed, there is no need for a long contract in order to recoup initial outgoings.  Where there is a significant capital investment needed, the experience of PFI does not suggest that doing it on the private company’s credit card is the most efficient way forward.  It may be that in all cases a shorter contract will make it more likely the private company will be responsive to the council and to local need.

Another concern is that private companies, unlike public ones, have a record of going bankrupt in even the most essential sectors, as the recent Southern Cross care homes example has shown.  In such a case it could well be expensive and complicated for the Council to regain that library.  The ownership of LSSI by a private equity firm (Islington Capital Partners) is perhaps worrying in this respect, although being public libraries are perhaps the epitome of a “safe” market, it would be easy to exaggerate this risk.

A contradiction exists between the “localism” agenda and having a large multinational or foreign firm taking it over on a long contract.  An electorate led to expect that they can decide on local issues may not readily accept, or be happy, with such an outcome. Connected with this, in these days of the Big Society and a push towards unpaid help (complementary or not complementary to the paid staff), it is questionable how willing local people would be to volunteer their time at a branch run by a private company.

Although is not yet so unclear in the UK, the strong public reaction against the outsourcing of libraries in America, suggests that privatisation may not be the popular choice.  Very strong feelings have been aroused there and there are indications that similar will be raised here, although the moves are at such an early stage in this country that it has not really impacted on the public consciousness.  The emotiveness of the issue and a feeling almost of wrongness about it (one almost hear the cries of “is nothing safe?”) means that moves have the potential to be as big as the “Save our Libraries” movement that rose pretty much spontaneously earlier this year.

There is another, more ethical, question that needs to be considered.  Public libraries are often cited as being the last truly neutral non-commercial public space.  This goes further than merely not charging for books. It represents a fear of a McLibrary, where the stock provided and the answers to questions given are influenced by considerations of profit, although there are no concrete examples known to me of this being the case in practice.

The efficiency argument against private companies

The over-riding problem with private companies being naturally more efficient than councils is that they have no ways to achieve this that are denied to councils.  There are no legal barriers to councils investing £5 million in its own buildings or putting in cafes  or new computers.  There is also nothing preventing council library services benefiting from economies of scale, as shown in the many different consortia (notably the London Libraries Consortium and the South West Peninsula Library Partnership) and the merging of backroom library services (for example, Bexley and Bromley). Indeed, councils up and down the country have done all of these things, and more, normally with success.

Sadly, as the readership of Update will know all too well, there are equally also currently cases where councils are also imitating private company practice by reducing the pay, terms and conditions and pensions of their staff.  There is even a case (in Plymouth) of the council de-recognising a trade union. The national tally I do of cuts by local authority at Public Libraries News shows that cutting of number of qualified and unqualified staff is hardly the preserve of private companies and, indeed, that some authorities do not boast a single qualified librarian.

The challenge to private companies is to show how they can be more efficient than a well-run council. When the operating costs and profit of a private company, as is normal with council outsourcing contracts, is up to 20%[19], that seems a very tall order indeed.  In the case of Wokingham, which expects to save £170,000 per year by tendering[20] out its branches, one can question what is stopping the council itself making the savings, without someone else making a profit into the bargain. This argument, in its most brutal and apolitical form, is that an efficiently (or, depending on one’s point of view or political leanings, brutally) run council service can and does do the same things as a privately run library but with no “profit” lost to it.

Politically, it may also not be “efficient” for a local council to push through such an agenda when the returns are so small.  Given that public libraries are only around 1% of local council expenditure, the amount of time taken by councillors on complaints about cuts to them can be amazingly disproportionate.  In a different context, politicians as far afield as Brent, Somerset, and Doncaster have all discovered how quickly public libraries can take over their lives and even, such as in the case of Suffolk, be a contributory factor in them losing their jobs.  In such a situation, far from being a magic bullet for all their ills, privatisation/outsourcing from an economic, ethical or even a political standpoint, may simply not be worth it.