Do Public Interest Companies form a Third Way within Public Services?
| Author | Rajiv Prabhakar |
| Published date | 01 August 2004 |
| Date | 01 August 2004 |
| DOI | http://doi.org/10.1111/j.1467-856X.2004.00144.x |
| Subject Matter | Original Article |
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Do Public Interest Companies form a
Third Way within Public Services?
Rajiv Prabhakar
Public interest companies have recently attracted the attention of the British government. These
companies are charged with delivering public services in the public interest. Network Rail and
foundation hospitals are examples of this policy approach. Many of its advocates believe that these
bodies form a third way within public services. This claim has stimulated much controversy. This
article asks if public interest companies constitute a third way within the public sector. My main
conclusion is that these bodies do generate a third way within public services. This analysis is
important for clarifying the nature of a significant set of policy developments as well as shedding
light on the attempts by New Labour to create a broader third way beyond state-centred social
democracy and free markets.
Introduction
Public interest companies have stimulated much attention in Britain in recent
times. Paul Maltby writes that over the
last year the debate about the best way to deliver public services has stum-
bled on a new option—a not-for-profit company, or ‘public interest
company’ (PICs). From Network Rail, National Air Traffic Services and
Foundation Hospitals, there has been much political and media attention
towards those ‘new’ organisational forms (Maltby 2003a, 2).
Public interest companies such as foundation hospitals and Network Rail are sup-
posed to be organisations that display a degree of independence from the state and
are charged with delivering a public service in the public interest. There has been
much disagreement, however, within policy circles about the nature of these
bodies. For its advocates, the public interest company offers a ‘third way’ alterna-
tive to traditional public enterprise (where the state funds and provides public ser-
vices) and for-profit, private corporations. John Kay, for example, says that the
transformation of ‘Welsh Water into the non-profit Glas Cymru is one of the many
steps on the road back from privatisation to public service ... It is simply cheaper
to raise finance for a ring-fenced public service than for a diversified private
company. In this fundamental way, the market itself has rejected privatisation’
(Kay 2001, 10). Kay rejects, however, the claim that a state-centred model of
welfare should be the preferred alternative to privatisation. In ‘nationalised indus-
tries and in directly controlled government services a declining accountability for
performance was combined with arbitrary interference in operational decisions’
(Kay 2001, 10). He supports a public interest company model as an alternative to
nationalisation and privatisation. Opponents contend in contrast that the public
BJPIR: 2004 VOL 6, 353–369
© Political Studies Association, 2004. Published by Blackwell Publishing Ltd, 9600 Garsington Road,
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