Labour announces insourcing revolution to end “scandal” of public service outsourcing - John McDonnell

Today Labour’s Shadow Chancellor John McDonnell and Shadow Local Government Secretary Andrew Gwynne will announce an insourcing revolution to reverse the trend of public services being outsourced to private providers and bring these services back ‘in house’, to be delivered by the public sector. 

Criticising the “scandal” of “rip off” outsourcing of key public services Labour is today committing itself to ‘insourcing’ the delivery of key public services to improve services, save taxpayers’ money and increase democratic accountability of public services. 

Labour’s plans will roll back decades of orthodoxy that have seen local councils forced into outsourcing the delivery of key public services to private companies, including construction and maintenance work, bin collections, cleaning, school dinners, playing field maintenance and the management of local leisure centres.

Announcing the plans, Labour will also criticise the legacy of decades of outsourcing in local government, with private companies failing to uphold their contracts to deliver services, standards deteriorating and the taxpayer picking up the bill. 

Under the new plans announced today, Labour will:

• Legislate to ensure that local authorities review all service contracts when they expire;
• Legislate to create a presumption that service contracts will be brought back inhouse and delivered by the public sector unless certain conditions and exemptions are met;
• Empower citizens and community groups by giving them the right to request information from councils showing that any outsourcing decision is consistent with these criteria;
• Transform the legislative framework around outsourcing contacts by making them subject to the Human Rights Act and the Freedom of Information Act and introducing a new set of minimum standards in contracts where outsourcing has to continue, including a fair wage clause, trade union recognition, support local labour and supply chains, annual gender pay audits and time-limited contracts;
• Support local government in delivering these changes by providing a model contract (to save councils time and resources), access to the Government Legal Department for contract management and greater support for collaboration amongst councillors. 

Democratising Local Public Services: A Plan for Twenty-First Century Insourcing – Labour’s blueprint for a radical overhaul of local government – will be announced today at an event in London held by Labour’s Community Wealth Building Unit, a network of councillors and experts working together to rebuild local economies, renew faith in local services and deliver a renaissance of local government in communities across Britain in the face of austerity.

Labour’s Shadow Chancellor John McDonnell MP will say:

“After year upon year of failures the public has rightly lost confidence in the privatisation of our public services and the carve up of the public realm for private profit.

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

“It’s time to end the outsourcing scandal which has seen private companies rip off the taxpayer, degrade our public services and put people at risk whilst remaining wholly unaccountable to the people who rely on and fund these services."

Labour’s Shadow Communities and Local Government Secretary Andrew Gwynne MP will say:

“Labour will end this racket and ensure that our vital public services are delivered in the interests of the people our local authorities are here to serve, not in the interest of outsourcing firms’ profit margins and wealthy shareholders. 

“People are more important than profit, and our public services belong to local people. 

“Labour will set out in law that inhouse delivery of public services delivered by the public sector will be the default option for councils. 

“In government, Labour will boost local economies by spending taxpayers’ money on local suppliers and local workers, and we will support councils as they deliver radical change and give power back to our communities. 

“Our plan is a plan for public services run for the many, not the private interests of the few.” 

ENDS

Notes to Editors 

Labour's report, Democratising Local Public Services: A Plan for Twenty-First Century Insourcing, is available here: http://labour.org.uk/wp-content/uploads/2019/07/Democratising-Local-Public-Services.pdf

Labour’s Community Wealth Building Unit brings together councillors, unions, think tanks and experts to offer advice to Labour councils

https://www.mirror.co.uk/news/politics/labour-use-preston-model-boost-11990623 

https://www.communitywealthbuilding.org.uk/ 

Legislative changes that have forcibly outsourced public services previously provided by the public sector through local government include:

• The Local Government, Planning and Land Act 1980, which introduced compulsory competitive tendering for construction or maintenance work;
• The Local Government Act 1988, which set out eight ‘defined activities’ – including refuse collection, building cleaning, school and welfare catering and ground maintenance – and prohibited local authorities from carrying out these activities unless tendering and bid processes were complied with;
• Sports and leisure services were added to the outsourcing regime in 1990, with a further range of services including computing, administrative and legal services added from 1992.

In the past decade, the outsourcing of public services to private companies has led to serious failings in contract delivery and deteriorations in standards across local government services:

• In 2011, Barnet Council was forced to pay out around £10m following a contract dispute with private company Catalyst Housing over care buildings, and in 2013 Barnet Council had to pay thousands of pounds for “emergency” IT services after its regular outsourced provider went into administration.
  Source: Alan White and Kate Belgrave, ‘Nine spectacular council outsourcing failures’, New Statesman, 29 August 2013;
• Bedfordshire County Council’s contract with HBS for finance, human resources and other services was ended early after high levels of dissatisfaction with services.
  Source: Alan White and Kate Belgrave, ‘Nine spectacular council outsourcing failures’, New Statesman, 29 August 2013; and information gathered from interviews as part of research for the Labour Party paper.

In response to these failures, many local authorities are already beginning to insource services and bring the delivery of services back inhouse:

• Sefton Council brought Capita Symonds’ contact for technical services back inhouse in 2011, following dismay with the poor quality of service provided;
• Islington Council insourced its housing repairs and maintenance services to improve quality and standards;
• Nottingham City Council brought staff catering and building maintenance services back inhouse to avoid high overheads being that were being paid as part of the outsourced delivery of these services;
• Halton Council insourced its leisure centres to save money, delivering savings of £300,000 per year;
• Stoke on Trent City Council delivered savings of £5 million a year after bringing housing and civic building repairs and maintenance services back inhouse. 
  Source: Mo Baines, ‘Rebuilding Capacity: The Case for Insourcing Public Contracts’, APSE research (2019).

There have also been strong objections voiced to the lack of accountability and transparency involved in the outsourcing of public services. The Information Commission has noted that less than a quarter of the general public think that the activities of private providers of public services are accessible, and the National Audit Office has criticised the opacity of private providers’ financial records.

Source: Information Commissioner’s Office, Outsourcing Oversight? The case for reforming access to information law, 2019, at p. 6.

National Audit Office, The Role of Major Contractors in the Delivery of Public Services, 2013, at p. 15.

Labour has also previously announced that it will bring PFI contracts back inhouse: see Shadow Chancellor John McDonnell’s speech to Labour Party conference –https://labour.org.uk/press/shadow-chancellor-john-mcdonnell-speech-to-labour/.

Under this insourcing plan, Labour will create a legislative presumption that outsourced contacts will be brought in house, unless certain conditions are met. Outsourced service contracts will only remain contracted-out if 10 criteria are met concerning: measurement and evaluation; contract management skills; the supply of service providers; the skills and capabilities amongst the existing workforce; the need for public premises; any strategic need for public capacity; evidence of cost efficiency if provided inhouse; implications of the service for at-risk groups, coercive powers, or people’s rights; whether the service is a de facto monopoly; and whether the service makes exceptional demands on workers.

Exemptions will be allowed where risks related to contact with at-risk individuals, the exercise of coercive powers, or infringement of people’s rights are best mitigated by retaining the contracting-out of services, or where a council can demonstrate, with reference to evidence, significant capacity barriers to insourcing.