Obligations II : Contract Law

Using Examples (eg education, health, etc), critically analyse the

role of contract principles in the provision of public sector


Traditionally, there has been a distinction, in essence if not in entirety, between

public sector bodies on one hand, and private firms on the other.Public service areas,

for example schools, hospitals, and the utilities, were under the control of public

bodies such as local government, and stayed at a distance from the sphere of free

markets and the world of contract law. However, since the reforms of the nineteen-

eighties and nineties, such divisions have become far more blurred.

The Conservative governments of Margaret Thatcher, and later John Major, made

radical changes and applied contract principles to the ownership, culture and control

of many of the services that were previously in the public sector. The motivation for

these changes was mainly ideological. The government, influenced by ideas being

introduced by an ideological counterpart government in the United States, believed

that, in crude terms, the market was best. Many nationalised industries, such as

British Telecom and British Airways, who were seen as inefficient, providing poor

quality services or products, that the taxpayer paid for . Such industries were

privatised and exposed to the pressures and opportunities of the free market.

Later on from this, in the late 1980's, the government sought to improve public

services including health, education and the prison service, using similar free-market

ideas and principles. The reasoning was that applying the rigours of market forces

into these areas would improve their cost-effectiveness, the levels of service and so

on. Part of this philosophy, was that of the empowerment of users of these services

(the patients, parents and pupils, etc) by turning them into "consumers" of a product,

contracting with a "supplier" (the hospital, school, etc). This is related to the liberal,

and in particular free market liberal, idea that individuals are their own best judge

about what is best for them. Much of these ideas were developed by free-market think

tanks such as the Adam Smith institute, who believed welfare economics theories

could be applied in the public sector.

For reasons of practicality and public opinion, these services were not privatised, but

had only market ideas incorporated, where seen to be appropriate and possible. The

NHS was not privatised, but had an internal market introduced, with hospitals and

GP's contracting with each other to buy and sell services. The NHS remained funded

by the taxpayer, so that although patients were increasingly seen as consumers, they

did not have a crucial decision associated with consumerism, ie, how, when and

where to spend their money.

The public services reformed in the 1980's and 1990's by Conservative governments,

are now set to undergo further reform by the Labour government, elected in 1997. The

government places it's emphasis on language of partnership and far less on market

driven ideals. It is clear that there will be no whole scale removal of market

mechanisms in public services. Indeed it may be argued that in some areas, for

example education, future planned reforms go even further than those carried out by

Conservative governments it replaced, in terms of contract culture and market


It is in the sphere of education that the rest of this essay will concentrate on. The

introduction of market mechanisms, and with it the idea of contract between parties,

such as school and parent, have fundamentally changed the way the education system

is run, and future planned reforms may also expand the role of contract and the

market. In particular, the following areas will be looked at:

(1)The introduction of home-school contracts.

(2)The area of parental choice of schools.

(3)The introduction in the next few years of education action zones.

The second of these is an area already fairly well established, as the relevant Acts of

Parliament were enacted by the old government, and it's effects are now being felt.

The third is a policy, now an Act of Parliament, to bring radical change to "failing

schools" through new ideas, including the community and businesses. The first area

to be looked at is something that has increased in popularity over recent years, and

will become a statutory requirement in September 1999.

The three different areas will be looked at in relation to the question, and in