Public service outsourcing: An incomplete doctrine

David Walker

Insufficient attention has been paid to the line taken by Jon Trickett on outsourcing, the strongest and most critical expression of views by a senior Labour figure for a very long time.

Trickett drew movingly on personal experience – illustrating the emotional intelligence present in Ed Miliband’s team – before delivering a sustained critique of public service contracting.

Even since it appeared, further cracks have appeared in the model. Bill Crothers, the government’s procurement chief, has drafted in a corporate chieftain as a ‘crown representative’ to supervise the performance of G4S. This isn’t just naïve, failing to address the market dominance achieved by that company together with Serco, Atos and Capita, but intellectually incoherent.

The very point of outsourcing is to bring the competitive benefits of the market. In which kind of competitive market does an agent appointed by the state second-guess the decisions of a private firm? In this part of the Cameron world view, it seems, socialism rules OK.

And that’s where Jon Trickett’s critique reads as politically costive, as if he were deliberately holding back from saying the obvious. What’s obvious is that the massive expansion of outsourcing in public services in recent times took place under Labour. Successive ministers from Blair (and Brown – remember his dogmatism over the London underground) insisted that ‘reform’ entailed contracting. Labour heaped contract wins on the self-same outfits that have now been shown to be ineffective, potentially dishonest and, as Trickett demonstrates, also costly.

It was Labour that not only appointed Atos to its huge medical assessments contracts but allowed the company to swallow up competitors and establish a monopsonistic position.

Trickett extols the public service ethos, as well he might. But he does not challenge the Blairite contention that public services tend to lead to bureaucracy. Remember the ‘scars’ on the former prime minister’s back won, he said, by taking on vested interests in the civil service and local government.

‘The Tory claim that public service provision is always worse than private sector’ is also a claim made by John Hutton and John Reid. But does Labour now officially believe the converse? Such a belief seems to lie behind Trickett’s arguments in favour of ‘insourcing’ – (re)locating a function inside a council or government department. Or is his view merely empiricist? Does he think that if the figures on cost and quality tell in favour of outsourcing, then it should go ahead, regardless of his points of principle about the public service ethos, or the way contracting by its very nature fragments both the delivery but also the idea and perception of public services?

Trickett makes cogent points about properly assessing transaction costs, the wider effects of outsourcing and risk transfer and what he calls the ‘full life’ costs of a contract. But all this applies as much to contracting with social enterprises and charities as to contracts with the likes of Seria or Serco. His well-made points about investigating earnings in the boardrooms of contractors apply as much to charity fat cats as to company directors.

Does Labour now also believe that the boundary between the state and the voluntary sector (which now earns some £14bn a year from contracted services) should be redrawn? That isn’t the message that Trickett’s colleague, the shadow minster for the third sector Lisa Nandy has been pushing – she is still hailing the charitable sector as a source of innovation.

So, the Trickett doctrine does mark a new departure for Labour. It chimes with the mounting sense that today’s forms of public service contracting simply don’t work. But the doctrine is incomplete. How, without contestability and competition, are public services to be kept from sliding into inertia and self-interest? What role, if any, do charities and social enterprise have as competitors to in-house provision?

3 Comments:

  1. Amelia Willson

    Very informative content !
    Going to read more of your articles

    Reply
  2. Dan Filson

    What is surely odd is that a minister should refuse to answer a simple question about an outsourced service on the grounds of commercial confidentiality. Tough. It’s part of the price you pay for getting public contracts that there should be transparency about what you get for what you provide:

    Mr Slaughter: “To ask the Secretary of State for Justice how much his Department paid to Steria UK for its work on the Oracle Enterprise Resource Planning system for shared services. [190170]”

    Mr Vara: The Ministry of Justice contracted with Steria, following a competitive process under OJEU regulations (contract award reference number 2011/S 61-098274), for the provision of Application Development and Maintenance Services in relation to the development of a new Oracle Enterprise Resource Planning system for shared services. The actual amount paid is commercial in confidence but it did not exceed the contract limit.

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