One year on from the collapse of outsourcing giant Carillion, and the TUC is calling for greater transparency in the way private firms are able to profit from and operate public services.
Carillion was on-site at St Helier Hospital when the company collapsed last year
The Carillion collapse had some knock-on effects in and around Croydon, with the borough’s library services able to be taken back into council control, while replacing the outsourcer’s subsidiaries saw delays impact the completion of the Viridor incinerator at Beddington Lane, which is still not fully operational, six months late.
Carillion was on site at St Helier Hospital, too, as part of a £12million project, when the company went bust.
But many public services in and around Croydon continue to be delivered through for-profit private companies, such as Crapita dealing with the council’s IT systems, many of our schools effectively outsourced through academy chains such as Harris and Oasis, Skanska on our street lights, Greenwich Leisure running Croydon Arena, the swimming pools and leisure centres, and then there’s idVerde and rubbish contractors Veolia.
In the case of idVerde, the parks and gardens contract was negotiated at such a low price that they have never been able to deliver the expected service – for instance, leaving the grass in the borough’s parks uncut for months on end.
Matters got so bad by the middle of last year that a decision was taken to terminate the arrangement. At the end of this month, Croydon will take back the parks service in-house, with around 80 employees being transfered on to the council pay roll.
In some respects, Carillion’s collapse was also because they had low-balled many of their bids for major contracts, to secure the work, in the expectation that they might cut corners, drive down costs, or simply employ fewer people to get the job done.
The TUC says that Carillion’s collapse “symbolised the bankruptcy of the privatisation dogma”.
Are we getting a good deal from Veolia? The TUC wants to make it easier to work out
They are calling for greater accountability about public service contracts. “We need a new Domesday Book to make public service contracts transparent,” says the TUC.
They suggest three key questions that we all need to ask:
- Who provides our public services?
- How much do we pay them?
- How well do they work?
Matt Dykes, the TUC’s senior policy officer, says, “If you care about the services we all rely on and which our taxes pay for, these are reasonable questions.
“And if you’re responsible for delivering that service – whether a government department, local authority or NHS Trust – they are crucial questions to ask.”
Yet despite outsourcing being a key feature of our public services for more than 30 years, the government does not monitor, record or provide that data in an accessible and open way.
The TUC has published a report that explores the options for making public service outsourcing much more accessible and transparent, including the need for an independent body that will maintain a “Domesday Book” of all contracts, including their performance on the outsourcing of services.
“Given private contractors are funded by your taxes, you deserve to know how much profit they make, what dividends they pay, how much their senior management pay themselves, how they treat their workforce, and what their tax arrangements are,” Dykes says.
“A new Domesday Book for public services will achieve this. It will mean better data – and therefore better value for money for taxpayers.”
At the moment public service contract and performance details are generally only known to the commissioning body responsible and, of course, to the private sector provider. In some cases, this detail is not even made available clearly to the commissioning local authority.
Viridor stand to receive £1bn of public money over 25 years for operating the Beddington incinerator. But details of the deal are denied even to elected councillors
In Croydon, the council’s waste and incineration contracts with Veolia and Viridor are managed by the South London Waste Partnership, together with Sutton, Kingston and Merton. There are no councillors from the opposition parties involved in SLWP decisions, and its contracts are kept at arms length from each of the councils.
Some of the data is available via EU procurement journals, or through FoI requests, but much is withheld under the catch-all opt-out of “commercial confidentiality”.
The National Audit Office estimates that around half of the £195billion that the state spends on all externally provided goods and services goes to the external contractors.
The TUC says, “That works out around £3,500 per household annually – but we don’t know exactly because the NAO can provide no precise figure.”
Dyke says, “The collapse of Carillion a year ago shone a light on this problem. The Insolvency Service, picking up the pieces, found themselves bogged down tracing which of the 300 or so subsidiary companies in the Carillion conglomerate were providing what services and to which parts of the public sector.
“The stunning lack of accountability and transparency for public services delivered through private contractors would be completely unacceptable if those services were provided in-house.
“If we are to achieve a step change in the way we design and deliver our services, improve contract management and put the public interest first, we need hard data.”
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Outsourcing is always presented as a mechanism for controlling public expenditure and improving public services. In practice it has become a mechanism to avoid oversight and audit control with no rational mechanism to judge if the public are receiving alleged public expenditure savings or improved services.
A register of interests between those who commission such outsourced contracts and then join the company who has received the contract will reveal the shocking state of the public outsourcing of essential services in this country and the implicit corruption that underwrites this process.
Wholesale privatisation/externalisation rarely works well. A better model is to retain a reasonable degree of core expertise and local knowledge but purchase externally where specialist knowledge is required or where there are peaks in demand. In that way the contractors and consultants are “kept on their toes” as they don’t have long term security of contract.