Six human services ripe for competition or contestability

By Stephen Easton

Thursday September 22, 2016

Six kinds of human services should be first in line for more competition, or at least contestability, according to the Productivity Commission’s early research following up on recommendations of the Harper Competition Policy Review.

Services to remote Indigenous communities, social housing, family and community services, specialist palliative care, public dental care and public hospitals are all ripe for more competition, according to the PC’s preliminary findings, released today.

While the PC often refers to the power of informed choice in appropriately regulated markets, today’s report emphasises it is not saying competition and contestability is a panacea for all human services:

“For some services, and in some settings, direct government provision of services will be the best way to improve the wellbeing of individuals and families.”

Feedback on today’s initial report will be accepted over the next four weeks. “We welcome feedback both on the areas we have identified and others that we may have missed,” commissioner Stephen King said in a statement.

The report suggests residential aged care could also benefit from competition and greater user choice, but didn’t make the list because the PC already made those recommendations in its major 2011 aged care inquiry, and they are yet to be implemented. In coming up with the six service areas, the inquiry looked at the following factors:

  • The extent to which services are already subject to competition, contestability or user choice.
  • Whether reforms to introduce greater competition, contestability or user choice are already proposed or underway, like in disability services, mental health services and vocational education and training.
  • Whether improved outcomes could be better delivered by other reforms other than greater contestability, competition or user choice, such as in school education.

The second part of the PC’s task, once it has finalised its priority targets for reforms that seek to unleash market forces on human services, is to advise on what those reforms should look like. Developing consumer safeguards will be a key part of that report.

“The services we have identified are all different, and one policy response will not fit all,” said King. “We will be taking a case by case approach to unlocking the potential for reform.”


Strong government stewardship will always be required, the report notes, because a lot of human services are delivered to very vulnerable people. The researchers working on the inquiry recognise that having more choice won’t help all of the large and diverse group of social service users, according to special adviser Sean Innis.

“We will be looking at the lessons of the past in developing recommendations on governments’ future role,” he said.

The report notes that government plays a huge role in the eventual outcomes of human services, as the sole or primary source of funding:

“Careful design is needed to ensure the incentives of providers and users are aligned; and that government objectives are met. Care is needed, for example, to avoid overconsumption of services that are ‘free’ to users.”

The PC inquiry sees enforcing consumer rights and protections as a major aspect of the government’s stewardship role, which it argues is bigger than just overseeing the market:

“Stewardship encompasses almost every aspect of system design, including identifying policy priorities and intended outcomes, designing models of service provision, and ensuring that services meet standards of quality, accessibility and suitability for users.”

The report highlights the predatory behaviour of some vocational education and training providers which resulted directly from changes to government funding arrangements. It states the failed VET reforms “illustrate the potential for damaging effects on service users, government budgets and the reputation of an entire sector if governments introduce policy changes without adequate safeguards”.

It also notes concerns expressed by some social work organisations, which pointed out that providers of human services have also “taken advantage of vulnerable people (and poor government stewardship)” in the past.

Evaluating outcomes and finding the most effective practices among service providers is another important aspect of government stewardship. But it can also be very challenging, given a multitude of different types of human services and difficulties in defining and measuring their outcomes in many cases. The report simply advises:

“These difficulties mean that models of service provision and programs for evaluation need to be carefully designed and appropriately resourced.”

The preliminary report firmly supports increased data availability and use, which happens to be the topic of a separate PC inquiry. For human services, the PC is talking about data for consumers, service providers and their stewards in government:

“To make informed choices, users need to understand the range of services that are available to them. Providers require data to analyse and improve their services. Governments need data to identify community needs and expectations, the demand for services and gaps in service provision.

“Better data can be used to target services more accurately to the people who need and would benefit fro m them most. Program design, monitoring and evaluation rely on high-quality data. Governments might better use these data to tailor and improve the programs that are used to deliver services, helping to ensure that the effectiveness of human service provision improves over time.”

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