A culture in which the customer comes last will fail and fail again
However friendly people working a call centre are, they are caught in a process that puts the customer last. Photograph: Murdo Macleod for the Observer
Lloyds Bank casually announced last week that it was setting aside another £1.8bn to meet potential claims from customers after knowingly selling them expensive insurance policies they could not need nor use. The grand total of provisions it has made is now nearly £10bn for claims from up to 700,000 people – a stunning indictment of its business practices.
Yet there is little public angst. Last December, Lloyds was fined a record £28m by the Financial Conduct Authority for the period between 1 January 2010 and 31 March 2012 – during which the government held a 39% stake in the bank – for having lax controls and incentivising its staff to treat its customers as milch cows. Extravagant "champagne" bonuses were offered to staff who could loot their customers with policies cynically designed to offer nothing of value, nothing less than organised theft. In Ireland at least, the former executives of the bust Anglo Irish bank are on trial. In Britain, the former head of Lloyds retail banking division, Helen Weir, has gone on to become finance director of John Lewis, but at least she has said how sorry she is. That's all right then.
Otherwise, Lloyds Bank is hardly eating humble pie. While Barclays chief executive, Antony Jenkins, is trying to engineer a massive change in his bank's culture, his counterpart at Lloyds seems to be focused on one target only – ensuring sufficient profitability to allow the government to offload more of its stake and, along the way, to vastly enrich himself. There has been zero pressure from his largest shareholder – the government – to reproduce Jenkins's initiative and do more about the mis-selling scandal than to utter bromides about winning back trust. The solution is for the bank to become 100% owned by the private sector as soon as possible, seen as an unalloyed good thing.
This combination – feckless owners, in this case HM Treasury, which cares nothing about the bank's ethics but only about its share price, alongside managers who appear to see their customers as objects to be fleeced – is deadly. But the media are hardly abuzz with sustained complaint and protest. Rather, they have helped construct the doctrine that anything done in the private sector is generally fabulous, and that £10bn scandals such as Lloyds, while deplorable, are the exception. Meanwhile, anything done in the public sector is by definition abominable, wasteful and ripe for privatisation or contracting out. The sooner Lloyds is in the private sector away from the "dead" hand of state ownership the better. But the state has not been a dead hand: it has been preoccupied with its own financial interests, like every other private owner.
Lloyds is not alone: the other banks have earmarked another £10bn for mis-selling similar products. Their investment bank arms are engulfed with charges of colluding to rig interest rates and foreign exchange markets on a global scale, along with more record-breaking fines. Meanwhile, the average customer's experience remains dismal. Staff in disempowered branches and industrialised call centres do their best to be friendly, but work within processes in which a good customer experience is plainly a low priority. Trying to exercise my right to flex a credit facility recently was a descent into a privatised Orwellian madness, while anyone who has had to look after an elderly relative's financial affairs enters a bureaucratic, time-consuming labyrinth.
This is not a culture confined to banking. Bombardier recently walked away from a £350m contract to provide signalling for London Underground: it had underestimated the technical complexity and would not commit the resource to meet its side of the bargain. But last week it picked up the £1bn contract to build 65 trains for Crossrail, with its disgraceful behaviour over the signalling contract forgotten, threatening to close its Derby plant if it did not get the business.
Then there are Serco and G4S, with their litany of failures as holders of government contracts. The root of their difficulties is, whatever their original virtues, both have built a culture in which exploiting, rather than serving, the customer comes first – whether it's Serco charging the state for electronically tagging prisoners who did not exist or G4S woefully underproviding security guards for the Olympics. The same dynamic – transient, greedy owners and pay systems that over-reward short-term financial success and cutting corners – produces the same result.
Now large parts of the probation service are to be run in the same way by the same kind of company, with the justice secretary, Chris Grayling, absurdly promising more " reform" and "efficiency". He is outdone by his colleague Dan Poulter at health, selling off 80% of Plasma Resources UK, the NHS company that secures blood plasma for British patients, to Bain Capital, the private equity company built by presidential candidate Mitt Romney. Bain's sole interest is financial, constrained only by its fear of a reputational disaster if patients start dying as it cuts costs and over-rewards managers who try to fleece the NHS, as they necessarily will. Who could consign the provision of blood plasma to such custodians? Only a fool, knave or Tory politician.
The NHS takes a daily pummelling, but enter its portals and a very different culture rules. Despite all the efforts of successive New Labour and Conservative ministers intent on reproducing the private sector "disciplines" that so animate Lloyds, Bombardier, Serco, G4S et al, it still manages to combine humanity and efficiency. Its systems are not extravagant, but there is a sense, as I recently discovered with a close family member in a long spell in hospital, that the patient remains at the centre of everyone's preoccupations.
The public sector is imperfect: it is run and operated by fallible human beings. There are spectacular failings, ranging from the BBC's wasted £100m on its digital media initiative to the unfolding IT disaster over universal credit. But what it does not deserve is universal castigation because a priori it must be useless. It is accountable. It does not loot its users. It is pretty efficient. It is humane.
Nor does the private sector warrant such fawning praise or the self-pity of many of its leaders who claim that profit is still a dirty word. It can do magic – the smartphone, anti-cancer drugs, multiple apps, robots – but it cuts corners too. The headlines, as I write, are of a food scandal in which a third of sampled foodstuffs are wrongly labelled. Regulation, derided as a burden on business, is, rather, what society deploys to keep business honest, whether it emanates from London or Brussels. It is time for a reset and a rebalance. End the jihad against all things public and invite business genuinely to earn its profits.