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The Shadow State: 9 lessons from the latest outsourcing scandal

If G4S didn't exist, a government minister would have to invent it - Alan White unravels the debate about G4S and outsourcing.

G4S is facing a damages claim over the unlawful killing of Jimmy Mubenga. Photograph: Getty Images

It's been a terrible week for the outsourcing industry and for G4S in particular, with the revelations that the company now faces a damages claim over the unlawful killing of Jimmy Mubenga, and now the news that the Serious Fraud Office will be called in over alleged overcharging for tagging of offenders. There’s been a lot of media coverage of these stories, but so far as I can see most of it rather misses the background. Here are a few points about the business of outsourcing that have emerged from my work over the last year or so.

1. It’s easy to look at the track record of a company like G4S and simply say “this is a bad company: the fact they keep winning contracts is therefore due to political incompetence and vested interests.” So we may as well.

2. But the truth is rather more complicated. For all the reams I’ve written on G4S, and for all the many failings - some of which the company has admitted, some of which it’s disputed - I have no particular beef with it. It’s just a company, and moreover it’s a company that does a lot of unpleasant work the Government doesn’t want to do. If I were a pusillanimous politician I know I’d rather the staff directly on my payroll weren’t the ones involved in, say, deporting asylum seekers or guarding youths in Secure Training Centres. To paraphrase a cliche, if G4S didn’t exist, it would be necessary for a Government minister to invent it.

3. No, this is a system failure as much as it is a company’s. We’re now in a position whereby ministers feel they have to make outsourcing work. These companies are too big to fail: there’s no competition and they’re squeezing other providers out of the market. So we keep rewarding failure because we can’t afford not to. The Government is legally bound to huge contracts it can’t abandon and it won’t offer them elsewhere even if it could because it lacks the commissioning expertise and confidence to do so.

4. And the lack of transparency surrounding these contracts and the companies’ operations is a double-edged sword. On the one hand it leads to scandals such as today’s, on the other it allows cuts to be made on the sly, primarily because of commercial confidentiality laws, which mean the only way grubby hacks like me find out is when local campaigners kick up a stink, as they did here, and here.

5. No wonder this Government - and the last - will need a great many more scandals before they get turned off this idea. Fans of privatisation? Doesn’t come close. They bloody love it. And even if they didn’t, there are more than enough think tanks telling them it’s a good idea. Guess which companies are funding them?

6. Side issue: we’re spending our taxes on dodgy services and not only are any profits not being re-invested in the issues we’re trying to solve, they’re not even staying in the country.

7. For this particular scandal to fall at Chris Grayling’s door is a bit ironic. You have to wonder if he’s quite as bullish about the private sector as he was earlier this year (there’s nothing like being trolled by my own editors to make me feel special).

8. Side issue: Payment By Results. Complex, but another concern. Give this a go if you’ve got some free time.

9. Outsourcing works fine for something like office stationery. People are a bit more complex. And yet it can still work. We just have to do it better. And there are people out there with good ideas about how.