Sunday 21 July 2019 1:18 pm

Industry slams Labour plan to bring outsourced public services in-house

Business leaders have pilloried a Labour policy announcement to bring local council jobs like construction, bin collection and school dinners in-house.

John McDonnell this weekend said the party wants local councils to carry out the services themselves rather than pay companies to do it.

The Confederation of British Industry’s chief UK policy director Matthew Fell said: “Labour’s rejection of the innovation, investment and cost savings suppliers can bring to vital public services and infrastructure is an extreme move devoid of evidence, based on the ideology of the past.”

Read more: Whitehall ploughs one-third of annual budget into outsourced services

In a speech on Saturday, McDonnell said Labour would roll back four decades of outsourcing policy. The party hopes to change the law to make councils carry out the services unless there are “significant barriers” to doing so.

He called the industry a “rip off”, accusing firms of profiteering when they should be doing a public good. “Outsourcing is, and always has been, an assault on labour. It’s a deliberate, direct strategy to undermine the power of trade unions,” he said.

“The government’s ideological pursuit of privatisation and outsourcing has seen the public pay the price as fat cat bosses count their profits.”

The Midland Metropolitan hospital near Birmingham was partially built when outsourcer Carillion collapsed in early 2018. Work has yet to resume (Getty Images)

‘An assault on the taxpayer’

One industry chief executive told City A.M: “This is yet another example of extremely poor, unfunded policy making from the Labour party”. 

They accused McDonnell of “putting ideology before actual analysis of the benefits that outsourcing has delivered: improving services and significantly reducing the cost of services to the taxpayer”. 

“McDonnell calls outsourcing an assault on labour. In fact the Labour party will just assault the taxpayer to pay for misguided policies like this.”

A spokesman for communities secretary James Brokenshire told City A.M: “It should be for local councils and local communities to decide which services to outsource, not John McDonnell.

“This is a dogma-driven plan to increase central control and reverse local decision making. It is nakedly anti-free market and crucially won’t provide best value for money for hard-working Council tax payers. 

“Rather than undermining local councils as Labour propose we should be looking at what further powers we can give to local communities to deliver the services they need.”

Read more: Whitehall must overhaul public sector outsourcing in wake of failures, says think tank

Outsourcing public services under pressure

Despite the criticism, the industry has come under strain in recent years. Several high-profile failures have thrust the question of whether private companies should provide public services into the spotlight.

Until Carillion collapsed in January 2018, it was responsible for providing meals for 218 schools. 

It also maintained 50 prisons and had construction contracts with the HS2 high speed railway line, the Royal Opera House and a new £475m hospital in the west Midlands, the Midland Metropolitan hospital.

Work has not restarted on the hospital, which was to provide 670 beds on its planned October 2018 completion date.

Local councils spend £80bn a year on outsourced services like school meals (Getty Images)

Greater accountability

Labour also plans to make wholesale changes where it allows outsourcing to continue.

One policy would be to make outsourced public service contracts subject to the Freedom of Information Act. This would force private companies to be more transparent about how well – and how cost-efficiently – they deliver services.

The policy strand echoes comments by information commissioner Elizabeth Denham earlier this year.

Read more: A year on from Carillion: 12 months that brought outsourcing to its knees

Denham said the Grenfell Tower fire and Carillion’s collapse showed FOI laws should extend to all public service suppliers.

Labour hopes to introduce to a fair wage clause, trade union recognition, annual gender pay audits and time-limited contracts.

Main image: Getty