The government’s repeated failure to outsource public services effectively has “caused harm and waste,” stoking calls from Labour to nationalise them, according to research.
In a stinging rebuke of outsourcing failures over recent years, the Institute for Government (IfG) said this evening the policy has, at times, “let down” the people most in need in society.
Corporate failures such as the collapse of Carillion, delisting of Interserve and a number of high-profile botched contracts have “wasted millions of pounds, delivered poor services and undermined public trust,” it said.
Among these, G4S allowed a prison it ran to fall into chaos, Capita failed to send letters about NHS cervical cancer screenings to 40,000 women and Serco was found to have charged for electronically tagging offenders who had returned to prison, left the country or even died.
The government spends £292bn a year, more than a third of all public spending, on procuring goods, works and services from external suppliers.
However, the IfG added, Labour’s policy of bringing public services back into government hands by default “would be a mistake,” and risks “throwing away the successes” of outsourcing.
‘A broken model’
Labour’s shadow chancellor John McDonnell called the policy a “failed experiment” and a “racket”. He reiterated that the party would make local councils carry out services like construction, bin collection and school dinners themselves rather than pay companies to do it.
“The ‘string of high-profile failures’ discussed in this report are not just one-offs – they reflect a broken model for delivering public services, which prioritises profit over people,” he said.
While contracting out construction work has at times jeopardized projects, the government has by-and-large made savings and enjoyed quality improvements from outsourcing so-called support services like waste collection and catering, the IfG said.
“In areas where outsourcing has failed, bringing services back in-house could improve them,” it said. “But bringing swathes of services back into government hands by default risks throwing away the significant benefits that outsourcing can deliver.”
A G4S spokesperson said outsourcing had “helped improve standards and competition in the market and still has much to offer,” adding that the company had “built significant knowledge and expertise” in the services it provided.
Tom Sasse, Institute for Government senior researcher, said: “A lot of confusion continues to crowd the debate over outsourcing. Labour’s policy of bringing services back into government hands by default risks throwing away the benefits of outsourcing. But at the same time, the government must address the causes of repeated outsourcing failures.”
Interserve chief executive Debbie White told City A.M. recent improvements such as new guidelines for civil servants on public procurement “will enhance the quality and delivery of public services”.
The guidelines, published in February and known within Whitehall as the outsourcing playbook, set out best practice not only for how to outsource services, but also when to do so.
White added that the playbook, which was written in consultation with industry, is “a significant step towards improving decision-making as to when government should use its in-house resources or when it should work in partnership with the private and third sectors”.
A Capita spokesperson added: “It’s right to re-examine how the private sector and government can work together.”
But, they said: “We are disappointed that the IfG has included outdated information on a number of Capita contracts and failed to reflect improvements made over the past 18 months.”
A Cabinet Office spokesperson said: “This government will always champion the private sector’s vital role in delivering our public services.
“Over the past year we have made great strides in improving how we work with the private sector, including introducing an outsourcing ‘playbook’ which has been welcomed by industry, and bringing in new rules to ensure government suppliers pay their bills on time.”