The problem is defined as the constant danger of 'rent seeking' by public sector providers - exploitation of a monopoly position to rip off or under serve 'consumers'*. The implication is that we need 'contestability'.
Much of the middle level policy debate that takes place around 'public sector reform' in either its New Labour or Coalition manifestations can be boiled down to an argument about which services should be subject to which different kinds of such contestability; how immediate or regular such threats should be; and the degree to which the boundaries between third sector not for profit alternatives and the private sector itself can be blurred in defining potential alternative managers of public services.
Political and policy 'creativity' gets defined as thinking up new ways in which this basic underlying default assumption can be packaged as empowering consumers. Hence the change of emphasis from direct efforts at privatising state services such as we saw in the 1980s to more nuanced emphases on consumer choice of services, as evident in the drift of schools policy over the last decade or the shift to user controlled (a misnomer) budgets in social care. This social care development has the added 'advantage' of blurring another key boundary: between what the state should pay for and what each individual should pay for.
The Browne report is shot through with this kind of thinking, as Stefan Collini so tellingly analyses in the LRB,
"Browne proposes to scrap most of this. In its place, he wants to see a system in which the universities are providers of services, students are the (rational) consumers of those services, and the state plays the role of the regulator. His premise is that ‘students are best placed to make the judgment about what they want to get from participating in higher education.’ His frequently repeated mantra is ‘student choice will drive up quality,’ and the measure of quality is ‘student satisfaction’.....even in its own wildly optimistic terms, this report proposes a hefty cut in funding. In suggesting that the standard fee should initially be set at £6000 (which particular institutions might choose to exceed, though there will be various disincentives, including a ‘levy’ which would claw some of it back), Browne acknowledges that this would not fully replace the value of the block grant even for the most successful institutions. .....‘The purpose of starting the levy at a lower point is to instil a focus on efficiency throughout the system.’ Lots of courses may have to be closed and lots of people sacked, but that must mean, by definition, that they weren’t offering a product the consumer wanted, so good riddance."
This is, of course, manifest nonsense: ask the students. They seem to have a fairly good grasp of the fact that it is the providers - especially the Russell Group - not themselves, the putative 'customers', who benefit from the tuition fee rises. In fact the whole tuition fees plan arising from the Browne report could be seen as a form of provider capture: but one based on introducing quasi markets and 'consumer choice' - the very mechanisms which so called Public Choice theory tends to recommend as antidotes to provider capture. So here we a have an apparent case of the empirical/practical dog eating its own theoretical tail as it were: the whole approach collapses into incomprehensibility, at least when applied in this particular circumstance.
All theories have limits to their applicability. It may yet prove to be the Coalition's regret that public choice theory in Britain reaches its' limits just at a time when they're committed to slashing the state. But then that would leave them 'ideologically naked' as it were, simply cutting for cutting's sake. & that's not a good place for any government to be.
*Does this ever actually happen? Yes. I have direct personal experience of it happening. But does it happen often enough to be thought of as a structural problem which demands wholesale 'public sector reform'? No, I don't think this is proven in any sense, despite various Public Choice theorists having won the Nobel Prize for Economics. So I suspect we dealing with one of those 'true but trivial' issues which have engaged Chris Dillow in recent weeks - but one which is being used, systematically, for directly political ends.