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John Tizard: Insourcing – the future for public services

Monday March 1st, 2021

Many local authorities of all political persuasions have been insourcing previously outsourced public services over the last few years. There is no sign that this trend will not continue.

John Tizard

Meanwhile central government has been pressing ahead with outsourcing. Ministers continue to promote the benefits of outsourcing services to the private sector and to argue for the alleged benefits of competition between providers. This model of public service delivery fits their ideological position and there seems to be little regard for the evidence of the efficacy of outsourcing.

During the COVID-19 crisis the government has undertaken much outsourcing including contracting with a range of companies for the delivery of the test and trace service. The performance of many of the contracts and their public value has been questionable, with some high-profile failure. 

The efficacy and appropriateness of public service outsourcing is being questioned by public sector managers, politicians, the media and the public. Contrasts are being drawn between the impressive national vaccination programme undertaken within the public sector by the NHS and the outsourced test and trace arrangements. The latter are also being adversely compared to local authority and local NHS trace and test services. 

For some time, I have argued that the ‘love in’ with public service outsourcing should end, including here in Government Opportunities. Many others across the political spectrum, trade unions and managers have been making the same case.

Therefore, it was encouraging to hear the Shadow Minister for the Cabinet Office, Rachel Reeves, MP state very clearly last month that a future Labour government will embark on a radical insourcing programme. She also committed a Labour government to extend the Freedom of Information Act to all public service contracts and contractors. These are very welcome and positive commitments.

I believe that to fulfil this policy pledge it would be sensible to commit to appointing a minister to oversee the policy across Whitehall and to appoint a lead minister in each Whitehall department to provide political leadership for insourcing.

Given the complexity of reviewing and renegotiating contracts and the need to ensure the effective transfer of services and staff from the private sector to the public sector, there will be a need for specialist skills. I would urge the establishment of a unit within the Cabinet Office to provide professional leadership and advice to departments to drive a programme of insourcing – this unit would require commercial, procurement, HR and legal expertise as well as change management and operational re-engineering competencies.

A government committed to pursuing a programme of insourcing will need to agree criteria for considering what to insource and when, based on a number of factors including the costs of so doing, the length of contract remaining and the immediate capacity of the public sector to manage the transition and ensuing services – though managers would transfer under TUPE arrangements – but overall use a public interest test.

It should set the default as insourced publicly owned, publicly managed and publicly accountable services and will need to put in place a robust process and criteria for determining if and when to deviate from the default. Any decision to outsource should be based on the public interest, and whilst it should take into account the expertise and capacity of the public sector, it should also consider the option of investing to grow public sector capacity. Any such decision should take into account the views of stakeholders including staff and service users and be subject to public and political scrutiny. Those taking the decision must be accountable.

A government serious about a universal policy of insourcing will have to require all the wider public sector under its control to follow the same approach, and actively encourage and incentivise local government and others to do the same. It should ensure that insourcing is addressed in external public sector audits and inspections.

It will not be practical nor in the public interest nor cost-effective to end every outsourcing contract immediately, but this should not be cover for not proceeding with the policy speedily and comprehensively. There should be transparency about the speed of implementation and what contracts are and are not included, and why. And the programme should be developed with the active involvement of staff, trade unions and service users and where necessary their advocates.

Any outsourced services and their contractors should be subject to the Freedom of Information Act as should be all aspects of public sector procurement and contract management. There must be transparency of operational and financial performance including payments, staff terms and conditions, executive pay and much more to ensure that contractors are on a level platform with the public sector. Contracts should set profit caps, require open book accounting and internal external audit, set minimum employment standards, and require compliance with other public policy goals.

In pursuing a policy and programme of insourcing, government and the wider public sector should positively consider the role that other forms of social provision including social enterprises, charities and the wider voluntary and community sector may play. I expect that this will usually be through the provision of advisory and advocacy services, and specialist services that complement but do no replace publicly managed services.

Rachel Reeves has caught the public mood and her intervention chimes with many leaders across the public sector.

There is a real chance to start to make insourcing the default option – and we should not have to wait for 2024 or whenever there might be a change of government. As local government demonstrates, insourcing has cross-party support and champions. Let town halls speak to Whitehall and let’s move towards this prize now. It would be in the public interest so to do.

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