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John Tizard: Will a majority Conservative Government lead to a public service outsourcing bonanza?

Monday January 13th, 2020

With the start of a new year and a new, strong majority Conservative Government, public service outsourcing companies are no doubt buoyed and optimistic, in anticipation of a splurge of new contracts as a consequence of no real thaw in the economic and political strategy of austerity.

John Tizard

Of course, there are some signs that they may be right to be optimistic but not, I suggest, that they should be cautious in their expectations. They will see some encouraging indicators from their perspective.

Already the NHS has announced a procurement process for NHS cancer care and children’s ­treatment services.

I expect that there will be many more examples of such procurement processes in the NHS – in spite of assurances during the general election campaign that a Conservative Government would not extend contracting in the NHS. There will be more in local government, in central government, the defence sector, police and criminal justice too. There is no indication that the Government intends to reduce the role of the private sector in DWP assessments or in the prison service. Indeed, there are some outriders already pressing for more outsourcing and to extend the role of the private sector in core education services – this is not being embraced at the moment by ministers but often the scope of outsourcing is extended incrementally and without fanfare amidst political denial.

Outsourcing companies may well be hoping that within 12 months and whatever form it finally takes, Brexit will lead to a major reform (for reform, read ‘easing’) of the public procurement regulations. Indeed, the Government has already indicated that it wishes to review and potentially reform public procurement law post-Brexit, with a view to making it easier to award contracts – and in particular to British and specifically ‘local’ firms.

Companies (or at least, the ‘less ethical’ of them) may be hoping that in its zeal to deregulate, the Government will also weaken employment rights such as TUPE (which is an EU-based, legal right) as well as trade union effectiveness and protections around pensions and pay. They may also hope that the limited legal protection for staff employed in precarious jobs and other protections will also be weakened (they will certainly expect that these will not be strengthened or extended). They will recall that the Coalition Government previously weakened regulations in this area (for example, rescinding the ‘two tier’ code).

A further cause for optimism from the outsourcing sector will be the acknowledgement that the Government is very unlikely to withdraw or seriously amend the 2011 ‘Open Public Services’ White Paper or the NHS and Social Care Act of 2012. Equally, it is not likely to be inclined to extend legislation such as the Freedom of Information Act to cover contractors or to make outsourcing more transparent and accountable.

So, given the picture above, one can see why the sector may anticipating significant growth accompanied by less regulatory restraint.

However, these firms should not start popping the champagne corks too soon – even though I accept that their future business will inevitably be more secure than it would have been had Labour won the general election.

First, I really do wonder how much reform of public procurement regulations there actually will be given that these comprise highly complex sets of rules, which have to balance value for money and probity. More significantly, any trade deal with the EU is likely to require at the very least ‘some’ alignment of public procurement rules – as likely will any deals under the auspices of WTO and any bilateral deals between the UK and other countries. State aid rules will certainly have to be aligned.

Some companies may at this stage just be looking forward to a general ‘liberalisation’ of public procurement regulations, but I suspect they may end up coming to realise that the current EU ones are, in fact, pretty reasonable already. And in turn, the Government may come to realise that the current regulations are broadly sensible, and, more specifically, that they ‘enable’ and do not ‘prevent’ procurement being used to drive social and environmental agendas.

I would also point to growing evidence that some Conservative-led local authorities (though by no means all) are pulling away from outsourcing and bringing services back in-house. There are many reasons for this in-sourcing and there is growing interest in in-sourcing across the entirety of the local government political spectrum. And the case for in-sourcing is just as strong in central government and the NHS as it is in local government – so no one should expect every senior public sector executive to set his/her default as advocating for outsourcing in ways that they may have done a decade ago.

Of course, ideology and inertia to change policy and practice will mean that under this Government there will always be a substantial role for the private sector and specifically for outsourcing. And this Government’s ministers are always likely, instinctively, to promote ‘private’ ahead of ‘public’ provision. That said, despite the Government’s austerity programme and its belief that competition will more often than not drive quality up and price down, there is in fact little evidence of this and much to the contrary in respect of public services.

The reality is that the Government will wish to buy and contract primarily on price, whatever its rhetoric. It may even seek to diminish the right and ability of public bodies to take social, environmental, employment and even local economic considerations into account when procuring. It is quite feasible that international trade deals will hardwire such limitations into the procurement regulations – and that such deals will consequently expose UK public services to competition from still more offshore and foreign-based companies (such is the ‘law of unintended consequences’).

Low-price contracting does not work for the service user, staff, provider or ultimately the public sector. Social care is an example of where low contract prices are undermining quality and squeezing providers out of the market.

It is to be hoped that over the next few months, Government and outsourcing companies will seriously assess the risks that could so easily open up if a low-cost deregulated public service outsourcing culture is nurtured. ‘Responsible’ companies will not welcome lowest-price deregulated public service contracting, while ‘rogue’ companies might well do so.

Finally, public opinion could potentially play an important role in tempering the thirst for public service outsourcing. Trade unions, charities, the media, MPs and opposition political parties will continue to challenge outsourcing and its efficacy at both the macro level and on a project-by-project basis. It is most certainly my view that they should press for a comprehensive evidence-based review of the efficacy of outsourcing.

There is even a chance that some responsible companies that have been involved in a more benign outsourcing environment may tacitly support the above, in as far as such campaigns might constrain the ideological and naive zealots of more and more price-driven contracting.


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