Liberal Democrat leader
has outlined plans to reform
the discredited public sector outsourcing industry as part
of a major business speech to progressive think-tank IPPR
this morning.
Outsourcing has come under fire in recent months following the
collapse of Carillion and the financial woes of Capita, both of
which ran or run swathes of public sector contracts.
’s five-point plan calls
for:
1) no outsourcing where the profit motive should not play
a role, such as rehabilitation of offenders
2) private sector companies that deliver public sector contracts
to be subject to Freedom of
Information requests
3) a share of public contracts should be reserved for businesses
run by target demographics, including women, ethnic minorities,
disabled people, and ex-servicemen and women
4) better trained, specialist professionals in civil service
procurement roles that negotiate contracts
5) consideration be given to the creation of new legal
entities for companies that regularly deliver public sector
contracts
In the speech, said:
“While Liberal
Democrats reject misguided calls following the
collapse of Carillion to bring
all contracted activity in-house and ban future
outsourcing. There are good reasons for government to
bring in external expertise on major
construction projects for example.
“To make those contracts work for the public – who pay for them –
we have identified a five-point plan to reform
procurement and the operation of private sector
contracts for the better.
“First of
all, we
must set clear red
lines for sensitive areas in
which the profit motive should play no role
– such
as the rehabilitation
of prisoners and ex-offenders and
the assessment of
welfare claimants
- where private
multinationals such as Atos and
G4S have poor track
records.
“Secondly, private sector companies which deliver public
sector services should be subject to Freedom of Information
requests. This is an agenda my colleagues
pushed in government, but which was resisted by the
Conservatives.
“Companies with a crucial role in supporting the basic
infrastructure of the country must be accountable to the public.
“To give an example, the internal machinations about risk and
responsibility which must have taken place in the train operating
companies prior to introduction of the dreadful “Rail Plan
2020”, should be exposed to the light of day.
“Thirdly, the
government should use procurement to
promote social mobility and
diversity by reserving a
share
of public contracts
for businesses run by
target demographics including women, ethnic
minorities, disabled
people, ex-offenders and
ex-servicemen and women.
“It could learn from the United States, where this already
happens at both the Federal and State levels through
so-called “set-asides” mandated by the Small Business
Administration.
“While the UK government already has a
soft target for spending on small
businesses, going one step further
by setting aside contracts and targeting
specific demographics would create additional opportunities
for groups typically under represented in business and
entrepreneurship.
“Fourth,
where projects are
outsourced, the public sector needs better
trained, better prepared
and business-savvy officials who can negotiate and oversee
contracts in order
to secure better value for
money. There is some encouragement to
be derived from the creation of a commercial
cadre within the UK civil
service, though how
effective this will be remains to be seen.
“Finally, we should consider creating a new
legally-defined corporate form
for companies that
regularly deliver major
public-sector
contracts, as floated most recently by
the IoD.”
The wide-ranging speech also covered the need for a UK
sovereign wealth fund and the urgency of tackling share
buy-backs, which companies often use to inflate their share price
and trigger undeserved corporate bonuses.
said:
“Those of us who have no doctrinal
obsession with privatisation can see that publicly
owned enterprises can be both valuable and efficient.
“Policymakers should use the wide range of
tools at their disposal to encourage greater take-up of these
different forms of ownership, to encourage diversity
and promote a fairer distribution of power
and wealth.
“These tools include tax
breaks for specific types of
company, increasing lending to such companies
either through public institutions such as the British
Business Bank or by incentivising private banks, and in
the case of employee ownership giving workers stronger rights
to request shares, particularly when their
companies change hands.
“And there are other ways of
giving citizens a direct stake in the success of
enterprises.
“My party is actively considering a
recent IPPR proposal to distribute financial wealth through
a sovereign wealth fund financed by some combination of
higher corporation and wealth taxes, taxes on financial
transactions; the receipts from future asset sales, as with RBS;
and the absorption of the Crown Estate...
“The Institute of Directors has called for
greater transparency over share buy-back arrangements that
benefit high-up managers and inflate stock prices and dividends
at the expense of real investment, and over clawback provisions
for bonuses when companies fail.
“But we need to go further. We
need to review sharply restricting or, if necessary, outright
banning share buy-backs, as was the case in the USA
before 1982. Recently, the Democrats in Congress introduced a
Bill to do so once again. As former US Labor Secretary Robert
Reich argues ‘there is no reason buybacks should be considered
anything but illegal manipulation of stock’.
“I would say that, when manipulated
to trigger bonuses, share buybacks are little more than legalised
fraud.”
