The Shadow State: how to stop outsourcing scandals

The government should be free to outsource work to whoever it likes: but it must be open in its decisions so it can be held accountable when it gets them wrong.

Four years ago, I began to write about outsourcing for this publication. That series of articles eventually became known as "The Shadow State", and this month I’ve published a book compiling many of those reports, along with subsequent work for other publications, to try to make sense of it all.

I didn’t come to the subject back in 2012 with any particular political axe to grind. What motivated me to write about the subject was a simple point: I could see the government was keen to increase the number of services it outsourced – but I couldn’t see why.

Before I began, the scandals around the outsourcing industry had been coming thick and fast. In 2012, Britain had been forced to call in the army to provide security for the Olympics after G4S announced it was unable to deliver its services. Questions were beginning to be asked about other companies, including Serco, Capita, the now-defunct A4e, Atos and others.

If the government outsourced to save money or to get a better quality of service, the circumstantial evidence, it seemed to me, suggested it was failing in its aims. But what really struck me as I began to study the subject, was how many different areas of the state I ended up writing about.

Almost every area of the justice sector - from police to probation via courts and prisons – had been touched by the outsourcing industry. So too had employment and benefits services, health care, social care, not to mention all sorts of less obvious backroom departments  – at times it seemed like every service the state provided for the public had been touched by the outsourcing industry.

This was a gigantic change in the way that government operated which had taken place over the last 20 or so years, yet analysis of it – either in official government reports, or advisers’ memoirs and the like – was thin on the ground.

Two other things became clear: first, when problems occurred, more often than not they were born of mismanagement rather than genuine malice or greed.  Which was rather exacerbated by the second problem: no one seemed to have a bloody clue what was going on at any stage of the process.

Of course, to talk about “problems” is to downplay the extent of suffering for which outsourcing companies have been, to a greater or lesser extent, responsible. Think of the deaths in youth prisons, in care homes, in the asylum detention system, of the misery inflicted on disabled people by issues with fitness-to-work tests. These incidents are not insignificant.

Are they directly born of the decision to outsource? The direct line of responsibility is often nebulous – sometimes staff appear to be directly culpable; sometimes the system, for which government is ultimately responsible, is more to blame. It remains unclear in a number of cases whether people who have died after being restrained to death by guards working for outsourcing companies lost their lives because of poor government guidelines, or the way in which they were deployed. Often it feels like this muddiness over accountability suits everyone involved.

Without doubt, the state sector has its fair share of bureaucratic cruelty and incompetence. But the introduction of a profit incentive and the lack of transparency about that never fails to add an element of scandal to these tragedies. Only this week we learned that the Home Office would not reveal whether women had been raped in Yarl’s Wood because of "commercial confidentiality".

In part due to the amount of details which are shielded from public scrutiny, lessons are not learned. This takes us to the second point. There is no central intelligence when it comes to outsourcing. Failure is rewarded again and again, primarily because there are so few companies to choose from. 

As an example - with G4S and Serco under a Serious Fraud Office investigation over the tagging scandal, the government turned to Capita – which was promptly forced, due to a lack of suppliers, to outsource some of the job to…G4S.  

What’s more, the Chinese walls between the companies and the Whitehall officials who contract them are often paper thin – there is little oversight when ministers and civil servants choose to work in a private sector to which they may only recently have given work.

Since my New Statesman series finished, the Conservatives have registered an overwhelming general election victory. The growing scale of government outsourcing has continued apace. Having looked at this subject for years, I've reached a simple conclusion: The government should be free to outsource work to whoever it likes: but it must be open in its decisions so it can be held accountable when it gets them wrong.

The question of how we contract, why we contract, and whether we get value for money when we do has begun to rise to the forefront of public attention. No longer is it the preserve of the political left and no longer is it just about the well-known outsourcing companies. It was all over the headlines following another story I worked on: the collapse of the south London children’s charity Kids Company. 

The parliamentary committee that reported on Kids Company felt that there were many lessons to be learned about wider government procurement. Those who watched the hearings would have been stunned to learn the charity had been awarded millions by a government department - the Cabinet Office - whose ministers had visited it once in the last two decades.

Perhaps the tide is beginning to shift. The Government has also made plenty of noises about open commissioning – though whether its actions will match its rhetoric remains to be seen – while the renationalisation of troubled Medway youth jail is something of a precedent in terms of justice, where for years the outsourcing industry has grown without respite.

We live in an age where the public demands greater openness in how government operates. One suspects that if the shroud is ever fully lifted on the outsourcing sector, the things revealed may not be too pretty.

Shadow State: Inside the Secret Companies that Run Britain, by Alan White, is published now. Alan's original New Statesman articles on outsourcing can be found here and here.

Alan White's work has appeared in the Observer, Times, Private Eye, The National and the TLS. As John Heale, he is the author of One Blood: Inside Britain's Gang Culture.