The Staggers

The New Statesman’s rolling politics blog

The battle against privatisation

Outsourcing of public services continues apace as austerity bites.

By Kate Belgrave Published 10 December 2011 12:03

Last week, a group of public sector workers, supporters and others who've had enough of the neoliberal mantra that "public services improve if they're run by the private sector" protested outside a Capita conference called "New Models of Service Delivery - Opening Up Local Government Services to New Providers".

That was Capita - one of the country's biggest outsourcing firms, playing host (at more than £300 per head, behind closed doors) to senior council people who are in the process of deciding which private companies should win contracts to provide council services.

"There's no transparency - these big outsourcing plans are being discussed behind the backs of the residents and staff who are most affected," said Barnet Alliance For Public Services protestor Vicki Morris. "It's wrong for the companies who will profit from outsourcing to have privileged access to those making outsourcing decisions." Morris's group is fighting a Barnet council plan (called One Barnet) to mass-outsource council services. Capita is bidding for a £750m contract to provide services like finance and revenues and benefits as part of One Barnet.

There's every reason to suppose that Capita will get that contract. If there's a manual on snorkelling cash out of the public sector, Capita wrote it - every page. Last year, Capita's profits increased by 12 per cent to £364.2m, with dividends up by 19 per cent (you can read the rest here if you can stand it).

No matter that the questionable achievements of some of the outsourcing giants have frightened a few councils off. More ought to be terrified. Sefton council recently decided to terminate a £65m contract with Capita Symonds (a division of the Capita Group), because it failed (spectacularly) to deliver expected savings. Mouchel, another of the UK's biggest outsourcing companies, is in a tight spot. In October, chief executive Richard Cuthbert resigned when a £4.3m hole was found in the company's accounts. Mouchel reportedly has a net debt of £879m. The European Services Strategy Unit has an excellent document cataloguing some of Capita, Mouchel and BT's larger contracts and failures, as does almost every edition of Private Eye.

Still, the goldrush goes on. The public services industry is not just big business - it is and has been colossal business. Figures vary, but Unison reports estimated a worth of £79bn in 2008 with growth expected to put that figure near £100bn round about now. Wherever the total settles in so-called austerity, you can rest assured that the likes of Capita will fling themselves at it.

None of which is good news for those at the rough end of the trade. Public sector workers and service users know only too well what happens when services are outsourced. Staff salaries and leave allowances are slashed (often drastically in already-low-paid sectors like care), working hours extended (often to the detriment of a service) and unions sidelined as private companies look to destroy workers' terms and squeeze every pound out of contracts to pass to shareholders and senior managers.

Barnet Unison branch secretary John Burgess describes privatising in the austerity era as "outsourcing cuts" - councils offloading public services to companies which slash services and staff numbers, and diffuse political heat. Burgess would know. He and his members have already taken strike action in protest at Barnet council's radical, and unstable, mass-outsourcing plan (hard questions have been asked this year about the council's ability to manage big contracts with private sector companies).

Southampton council workers are gearing for a similar fight. That council wants to turn itself into a commissioning council - which means it would exist mostly to engage private companies to deliver services, rather than provide services directly itself.

Other councils are taking an incremental, rather than whole-hog, approach to outsourcing. Bristol council is chipping away at care homes and services. Nottinghamshire is doing the same. And, as Vicki Morris says, far too much of it is happening out of the public eye. Contracts fail and money is tight, but ideology prevails.

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Tags: Outsourcing Public services

More from Kate Belgrave

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23 comments

Sat, 2011-12-10 21:16 — hangbitch (not verified)

Surely one of the advantages of allowing staff and unions to put in inhouse bids would be exactly that - to get councils to cost services when and if that hasn't been done.

A lot of work like that has been done as part of the so-called "efficiency" era, but putting in inhouse bids could be an advantage. I've worked in the public sector myself and feel I have a fairly clear-eyed view on it. Some of it is done very well by very committed people. Some of it is not done well. It's like everything. The sector must be constantly examined to make sure that the right people - service users, who are often much in need - always get the best services they can get. The public service is about the service users and that must never be forgotten.

But I don't see that the rush to outsource addresses that in a substantial way. At all. I don't know that coming up with a figure like £750m and simply stating that a strategic partner is best placed to deliver services constitutes a thorough analysis. Barnet council has been heavily criticised this year for its poor business cases - its complete failure to deliver exactly the kind of cost analysis you describe - and its handling of private sector relationships. The Metpro scandal was a case in point - no tendering, no financial checks - just a big pile of money handed to a private company with no process.

Which brings us back to the central point - nobody's getting a look in, except these big outsourcing companies. How is it that Capita can hold these closed conferences with the very people who are making these outsourcing decisions? Why is it that we're not permitted to see paperwork around these decisions? If you go to the Sefton council website and look for information on the Capita contract decision, you'll find that information has been excluded. I understand the technical reasons for the exclusion, but don't subscribe to them at all. Vicki Morris has an excellent point in the OP - all of this is taking place without the involvement of the very people who will be providing and using these services.

Of course you can always point to a contract which has gone wrong. (unfortunately, it's possible to point to heaps). TUPE doesn't offer cast-iron protection - it can be dismantled for business reasons, which is exactly what happened to the Fremantle careworkers. They weren't just asked to work harder, though - they were literally told to take on as many extra shifts as they needed to to make up lost money. There's been asked to work harder and then there's been rubbed into the ground. Careworking is a physically and emotionally demanding job. You want it done well - you pay decent money and get people to work realistic hours. You don't cut their pay by 30% and simply tell them to pull finger. Care is in terrible crisis as it is.

Interesting point about the voluntary sector taking the brunt as councils make them take the hit. A number of people have made that point to me. There's a story there too, I think.

Sat, 2011-12-10 22:44 — Martin (not verified)

Sensible comments hangbitch. But to describe it as a rush to outsource is a bit OTT. Outsourcing has been around for more than 30 years, and so far something like 15% of authorities have outsourced back office administration/IT etc. so it's more like a crawl.

Pressure on employee T&c is omething that we all face nowadays, indeed the government itself is now (rightly) facing up to the unaffordability of pension terms that the rivals sector gave up on years ago. So it isn't just a nasty private sector thing.

There are many constructive reasons why it may be preferable for an authority to keep services in-house. But in order to justify doing so they must surely ensure that they are cost-competitive. After all we can all think of other things that could be done with whatever savings can be achieved.

As for Barnet I am not that close to the existing issues and challenges. But my info is that there are four bidders, Capita, BT, Serco and HCL. I would hope that the process is fair and would be surprised if any of them is a shoe-in.

Sat, 2011-12-10 23:11 — Nodbod (not verified)

Outsourcing, at any level, is a failure by the incumbent management. A simplistic view but one that I have seen from the inside and the outside. The thing is that Capita, Serco et al are doing this as part of their raison d'etre, councils do it once, mostly, and get caught every time. I was part of a school governing committee that went for a PFI bid. "It's the only way that we can get the work done." Nominally the school was going to get £6m worth of refurbishment and rebuilding and the company took over the running of the school for 25 years. The only dissenting voice was mine so the project went ahead. What was eventually got was £4.5m of refurb only but the company still got the school for 25 years. As I say, they do it on a weekly basis, the school will only do it once and there is no support (so far as I could see) from anyone. Indeed the council were instrumental in pushing the line "it's the only way you will get it done." I asked that the exisiting building support staff were protected. They were lost to a man! Teachers, huh, salt of the earth. They forget all this when they want support though.

I have seen the bid process from the inside and outside. At one council the council either lied or just did not know the level of equipment that they had. They stated that the level was less than 75% of what was truly there. The company that won the contract knew that but allowed the bid to stand on the agreement that the council supplied an inventory to be supported. So for each job - does the unit appear on the inventory? If yes, do the job. If not, report the unit and have it added to the inventory. Return to base, under no circumstances do the job. Wait for second call. Check that it is on the inventory and do the job. Two calls, each carrying a price, to do the job. The staff at the council were warned not to call for support any more as the entire budget had been spent prior to the contract finishing. If the support staff had been kept in house then they are a fixed overhead.

At another site, all the little, fiddly administration jobs no longer get done because one team transferred in house but the other team were TUPEd out and their numbers halved. The outsourced TUPE staff say - it is not on the Support Level Agreement; the in-house staff say "but you used to do it" and they do not have the manpower, will or gumption to do it themselves. However the outsource company will pick the work up as an extra project and at extra cost, obviously.

In all the cases above, it is poor effective management that has lead to these situations. However no-one ever resigns, no-one is called to account, no-one carries the can.

When Blair started the NHS IT project no-one told him that going down the route chosen was never going to work for at least 10 to 15 years, using the technology available. If you had gone to anyone in IT support and said we want an IT system to do this, this, this and this and it has got to work nationally, they would have laughed at you. But a combination of politics, consultants and outsourcing companies saw a gravy train come into view. Blair was told exactly what he wanted to hear and so the train pulls out of the station with all the noses in the trough. The tax payer will not get one penny back.

The outsourcing companies, consultants, and hangers on do what they do; make money for their companies. They may provide a service but that is not what they are there for, they are there for maximising shareholder return. They are clever at what they do. They wine and dine the great and good. Also, once outsourced, when it all goes for a ball of chalk, no shit sticks to the seniors in the public body because they were not in control, it was the outsourcing company that was at fault. So for senior people it is a win-win situation.

The root problem in UK Inc is that we do not have good managers. In the Public Sector in particular they are time serving, position and title driven and concerned only with minimising their own culpability. We need a sort out at the very highest levels right through middle management and actually sort out good managers from the run of the mill post fillers. And don't look at PRP or bonus payments as an indication of managerial prowess; they all vote for each other anyway.

Mon, 2011-12-12 14:27 — SC (not verified)

"Mouchel reportedly has a net debt of £879m."

you might want to review that figure...you're missing a "."

Sun, 2011-12-11 10:50 — Bodva (not verified)

Martin, what a load of biased claptrap.

I live in Lewisham where the directly elected Mayor is an expert on privatisation (he was a consultant for Capita) and three things are apparent about outsource:

1. the services delivered have deteriorated – I won’t bore you with examples,

2. less people are employed – there have been job losses,

3. the staff who remain are paid less.

We have 36 percent unemployment in the 16-24 age group.

In the Summer we had riots.

Guess what? Only a quarter of rioter had jobs (national average).

We need jobs not cuts.

If we don’t get young people into employment there is going to more trouble, a lot more.

I don’t mind paying more taxes to secure better public services and lower unemployment.

No tax cut would be enough to pay for the security I will need to protect my home and my family if things go on as they are.

Welcome to the 21st Century.

Sun, 2011-12-11 11:54 — Poppydog (not verified)

Please get your facts rights. Mouchel's current debt is £87.9M a tnth of what you report. (see recent Company accounts) Please remember that there are many workers and their families dependent on this company for a living and inaccurate reporting like yours increases the chances of being them being on the dole in the New Year

Sun, 2011-12-11 11:56 — hangbitch (not verified)

Kate here again.

Think you've just about summed it up there, Bodva (I live in Lewisham too as it happens).

One of the main reasons I wrote the original post was precisely because I've seen firsthand and have found so many examples of really poor outcomes from outsourcing. Couple that with the extraordinary lack of transparency, enormous sums of money and council failures to produce reasonable business case material and you have a very troubling scenario which, at the very least, requires thorough, and ongoing, discussion in public forums.

The austerity era is proving purely appalling for many, many people. The notion that councils and government might be throwing huge, lucrative contracts at big outsourcing companies on the basis of ideology, rather than detailed business cases, or likely outcomes, needs to be focused on.

Council services for the most vulnerable across the country have been targeted and removed in this first year of cuts - adult care services (a huge issue), short-break respite homes for children with disabilities, daycentres for people with disabilities, supported-living hostels for people with mental health illnesses - the list just goes on and on.

It is imperative that every last pound goes to those people who really require services. I personally do not count Capita or Serco shareholders and senior managers among those people.

Sun, 2011-12-11 15:28 — E Hart (not verified)

Privatisation seldom delivers anything but substandard, expensive and duplicate services (in contravention of economies of scale) but it does provide nice salaries, bonuses and dividends to corporate and wealthy individual shareholders.

These 'benefits' are increasingly leveraged from the non-share-owning public and those who have to work for these capitalist paradigms. It is all nonsense of course. It must occur even to the devotees of privatisation that Britain's demise as a manufacturing giant owes a lot to the shareholding model which often sucks the lifeblood out of the host. Also, with the evident failure of the PLC in the past 60 years of British industrial and economic history you might conclude that we aren't too hot at running things.

Sun, 2011-12-11 16:50 — andyg (not verified)

I'm glad to read at last in the NS an article that deals with the realities of everyday life. I find that those people who state that privatisation is the cheaper option are those that constantly moan about the rise in council tax. For those private companies that boast of employing young apprentices, they do so only from the subsidies of government and at the expence of older workers. These young people are often employed on fixed term contracts. As soon as their scheme finishes they have to leave and make way for the next lot of young workers.The training that they receive is poor and quality is not incorporated into it. Ask any worker that has worked for both public and private employer and they will tell you that as a tax payer you are paying more than double for a less quality, cheaper parts service. The council(s) could deliver for less if only they were better organised.

Sat, 2011-12-10 12:24 — Briar (not verified)

Privatisation is why austerity is happening. Governments in the West (servants of the banks that they are) chose to impose austerity policies so they could create the shock that would allow them to steal our public services. Naomi Klein sets out the strategy clearly in The Shock Doctrine. But knowing what is going on doesn't help us to stop it, it seems. So much for the information age spreading democracy and engagement.

Sat, 2011-12-10 13:45 — Rog T Barneteye.blogspot.com (not verified)

There are 3 bidders for the main Barnet Contract. Capita, EC Harris and FM Conway. Council Leader Richard Cornelius said at the Scrutiny Committee on Tuesday night that Harris and Conway sound like Firms of solicitors. No biase there then? - http://barneteye.blogspot.com/2011/12/barnet-council-budget-and-performa...

Sat, 2011-12-10 15:07 — H Henderson (not verified)

Capita offered me a job. Longer hours no pension and free fruit. It's a shame that their shareholders and board of directors arn't paid in fruit.

Sat, 2011-12-10 15:09 — Bodva (not verified)

Labour's choice of a candidate in this Thursday’s Feltham and Heston by-election works as a consultant on public services with leading privatisation specialists, Price Waterhouse Cooper.

The only party consistently opposed to public services being privatised is London People Before Profit.

Their candidate, George Hallam, is a trade unionist and local campaigner. He is the only candidate who was on strike on the 30th November in defence of public services.

People Before Profit says:
Cut unemployment through an industrial policy that aims to re-establisht manufacturing in Britain, support for small businesses, starting a huge house building programme that would to give training and skills to young unemployed people and cut costs.by improving energy efficiency

Sun, 2011-12-11 20:15 — Bodva (not verified)

I seems that there is a consensus developing here.

The question now is: "What are you going to do about it."

I think backing London People Before Profit is the best option.

Sat, 2011-12-10 15:57 — Nixon is Lord (not verified)

If you can get the same amount and quality of service for less money, why not?
Why spend more money for the same thing?

Sat, 2011-12-10 16:51 — hangbitch (not verified)

Well, that's the problem right there, if you're saying that outsourcing means the same service for less money.

It doesn't. That Sefton council termination of a Capita Symonds contract mentioned in the OP came about precisely because promised savings (and new jobs) never materialised after services were outsourced. It's precisely because savings weren't realised that the council decided to call time.

That's the reason that a lot of council outsourcing contracts end - because the promised services and savings never actually arrive.

Barnet council had the same sort of experience with outsourced care. The Fremantle Trust took over their care services for the elderly - and duly started to try to "save" money by slashing careworkers' salaries viciously. Careworkers (not the best-paid people around as it is) had to respond - they took industrial action over several years to try and get their wages back, or at least get them returned to pre-privatisation levels. Meanwhile, management told them that if they wanted to get their wages up, they should work more hours. After several years of dispute, the council admitted that the salary-cutting had not been particularly effective and Fremantle's partner organisation Catalyst Housing came after millions extra from the council - about £8m which it eventually won in arbitration.

And that's the exact point. The argument that the private sector delivers a better service for less is not necessarily an argument that is based in fact. It is an argument that is based in boardrooms of organisations like Capita and Serco and has been spread into the public service by outsourcing companies' sales teams.

Buyer beware. And check out the salaries and bonuses paid to the senior managers of organisations like Serco and Capita while you're at it. They are extremely highly paid - disgustingly so, some would say.

Sun, 2011-12-11 22:51 — hangbitch (not verified)

Definitely some good campaigns to get around.

Organisations like the Barnet Alliance in the original post are pretty hot on outsourcing too - they know a lot about what is happening and where.

There are also some very good bloggers who examine these contracts and the issues around them in very fine details. Google for (had problems adding the links so hopefully they'll work):

Barnet Eye
http://barneteye.blogspot.com/

Mrs Angry aka Broken Barnet
http://wwwbrokenbarnet.blogspot.com/

Mr Reasonable
http://reasonablenewbarnet.blogspot.com/

Mr Mustard
http://lbbspending.blogspot.com/

They are top workers.

Transparency is the thing for me. These meetings and decisions can no longer be held in exclusion and all outsourcing decisions ought to be put to residents and service users for comment.

Sat, 2011-12-10 17:07 — Bodva (not verified)

Because of:
a)the macroeconomic effects. In a recession cutting public spending reduces aggregate demand. This is because lack of confidence means that even if the benefits of lower costs are passed on in the form of tax cuts the money will be saved not spent on consumer goods or invested. This is not a good idea: you risk crashing the economy.

b) social effects.. Privatisation is only viable if it is profitable i.e. lots of money is channels off to a small number of executives and shareholders. Where do these profits come from? The main cost of public services is the wage bill .This has to be reduced either by efficiency savings (less staff) or by a cut in real wages. Even if there were no wage cuts for frontline staff this would increase inequality. However, in practice wage cuts are almost invariably part of the deal (there is no easier way of reducing costs). Either way privatisation inevitably leads to greater inequality.

As 'The Spirit Level' has shown inequality has a large number of negative effects e.g. increased levels of depression and mental illness. Even if we ignore the human suffering involved these side effects have associated costs. It is quite conceivable that the net effects of 'cheaper' public services is increased expenditure.

Privatisation is being penny wise and pound foolish.

Sat, 2011-12-10 17:50 — kate (not verified)

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Sat, 2011-12-10 18:33 — Lisa Ansell (not verified)

The bid specialist services of copywriters, designers etc are in big demand at mo.

These bids are big and so complex that they can only be competed for by a small pool of the largest companies in Britain, and often with them working together. The bids alone require teams of people working long hours to assemble. This process effectively freezes out any competition, is very expensive and very complicated.

The history of value for money from this kind of privatisation is never discussed, but it doesnt save money.Ever. It has the same effect every time, and in terms of local authority services this is only the latest and probably final chapter in a history of gradual erosion and fracturing of services. If we actually reported on social policy, and people were familiar with seeing the links between poltics and reality, it would be understood that this is not a new battle just because the tories are in. Many of the bidding processes for entire Local Authorities started way before Labour left power.

Good stuff Kate.

Sat, 2011-12-10 18:52 — hangbitch (not verified)

Cheers for the responses.

Lisa and Bodva have it absolutely right there - this sphere is in no way "competitive" or "market-based" as neoliberals would have it. Only a small number of companies are in a position to compete for these contracts, so in no way is the field thrown open for true competition. It's protectionism at its very best and in-house bids barely get a look-in - even though councils sometimes get there in the end inadvertently. Councils like Sefton are now returning staff to the council's employ, because Capita simply didn't deliver.

The outsourcing of public services is simply the overlaying of a capitalist model onto public services. A few people at the top do very, very well (Serco and Capita senior executives collect enormous salaries and bonuses) while the rest don't do well at all. Unions are sidelined, TUPE transfer protections dismantled and low-paid staff like careworkers destroyed as their wages are cut and hours extended.

And yes, this has indeed been an issue for years and across many different adminsitrations. The "private companies do things better than the public sector" line has been pushed and pushed by administrations of all hues. It's about the profit motive and no party I know of has proved too shy of enabling that. The best responses I've seen have been from good local union organisers who have members and communities putting up the fight and getting information out there.

Sat, 2011-12-10 19:03 — Lisa Ansell (not verified)

Lets face it we could name the handful of companies who have been milking our public sector on one hand. But only because we know the sector and those names are repeated everywhere. Serco, Capita, Costain...

THis is not opening up anything to a market. This is a takeover of companies who could show the public sector a thing or two about waste. And these companies deal with Downing Street, they treat local authority officials like petty bureacrats to be kept smiling. With a conveyor belt of division heads and executives moving seamlessly between these companies, in the fog of whitehall, downing street, they don't even have to bother with currying favour in the party machinery. They already have it. How are the New Statesman sponsorships looking these days?

Sat, 2011-12-10 20:09 — Martin (not verified)

What a load of biased claptrap. I work in the sector and two things are apparent from councils deciding to outsource:

1 They don't even know what it costs them to run the services they outsource

2 When they finally figure it out they seek minimum 30% reductions, and they get them.

Yes you can always point to a contract which has gone wrong. But many go very well indeed. It is rare for staff t&c to be cut, because they are protected by the law. And if staff have to work harder and be more efficient, well welcome to the 21st century folks.

It is a disgrace that most councils look to cut funding for the voluntary sector before seeing if their own useless managers could be improved upon.