Could Labour use outsourcing to improve pay and conditions?

Before Ed Miliband and One Nation. Before Blair, Brown and New Labour. Before Tony Giddens, Life Politics and the Third Way. Before John Smith and Social Justice. Before Callaghan and the Social Contract. Before Wilson and the white heat of technology. Before Crosland and Equality. Before all that, in the words of the 1945 manifesto, there was a:

“Labour Party [that] stands for order as against the chaos…we stand for order, for positive constructive progress as against the chaos of economic do-as-they-please anarchy.

“The Labour Party…[stands] for the wise organisation and use of the economic assets of the nation for the public good.”

The 1945 Manifesto does not mention ‘equality’ once. ‘Opportunity’ is only mentioned once, ‘National and local authorities should co-operate to enable people to enjoy their leisure to the full, to have opportunities for healthy recreation’ – not in the sense of opportunity used widely in political circles today. Nary a ‘hard-working family’ in sight.

The central Labour case was that it stood for a rational planned economy, eliminating economic inefficiency, high unemployment and therefore poverty, against laissez-faire irrational capitalism.

Arguably the high point of planning in the Labour party ideology was 1959, when Aneuran Bevan could declare, borrowing a phrase from Lenin, that “Socialism in the context of modern society means the conquest of the commanding heights of the economy”. It directly informed Harold Wilson’s concept of a ‘national plan’, and fell from grace with the disappointments of the 1960s.

Until the third coming of Peter Mandelson (European-style industrial policy, anyone?), such ideas – that Labour should re-engineer capitalism, not just prepare people for it or soften the blow suffered its victims – appeared to be the preserve of the flat-earth left.

And yet oddly enough, with Thatcher having recently undergone political apotheosis, the state is due to become stronger.

As the population ages, the proportion of the economy taken up by public spending is set to rise. The 2020 Public Services Trust, whose commissioners include figures like Stephen Dorrell and Roger Liddle, estimates that it could reach as high as 63% by 2030.

And what puts the state in an even stronger position is the onward march of outsourcing, a legacy of Thatcherism which is unlikely to be turned back. Young political science graduates need a job that pays the rent, and the most likely suppliers are lobbying companies. Ex-MPs and ministers need a job that pays the mortgage (post-parliamentary life can be grim) and lobbying firms and companies that apply for public sector contracts are likely to supply them. Think tanks need to be funded, event fringes organised, and who is likely to pay the bill if not the companies that apply for public sector contracts and the lobby firms that represent them? Whether this is a positive development or not is highly debatable, but it appears likely we are stuck with it.

So in the main, future and present politicians may argue for ‘choice’ in public services, privatisation, two-tier public services where the well-off can ‘top-up’ the services they receive or jump the queue, and all manner of things repellent to the Left. But they are not likely to argue to implement lower spending.

We are already seeing the effects of this. The Tories ringfence NHS spending. The Investec 2013 Hot 100 of the UK’s fastest growing companies was headed by Potensial a residential care company that provides services for adults with mental illness and learning difficulties revenue ‘depends heavily on the public sector’. In the top five is also Alternergy (A solar panel company that benefits from government subsidies) Smartway ( a pharmaceutical company, and thereby affected by NHS purchasing practice), Liberty Group Investments ( a plumbing and heating contractor that mostly works for local authorities).

But given that the state is spending more and more money, and more and more money is being spent with private firms, this actually gives the state incredible power. It’s as if while sunk in sweet neoliberal dreams, the state sleepwalked to the commanding heights of the economy.

After all, as the guardian of taxpayers money, the state should ask some serious questions.

• Where are these companies based for tax purposes? If it’s stashed offshore, taxpayers are set to lose billions. In fact, the public sector comparitor – an amount that private companies, when applying for PFI contractors, can undercut the public sector by, is based on the idea that the state recoups some of its payment through the tax system.
• Does the company pay living wage? Because if it doesn’t then tax credits feature as a hidden cost of any contract that the taxpayer has to foot the bill for.
• Does it offer a pension for ordinary employees? Because if it doesn’t the taxpayer is more likely to have to give additional support to that person when they retire.

This has been neglected terrain in the Labour Party. The right has seen outsourcing as a form of virility test, and the left as a clarion call to fight privatisation. And so, as we have seen in scandals involving A4E and G4S, the outsourced sector becomes a wild west part of the economy that lacks accountability.

How a Labour government, acting as the guardian of taxpayers’ money and adopting what you might say is a laser focus towards each penny, uses this power to ensure better pay and conditions is a complex legal and economic question.

However, a good start would be to extend Freedom of Information Act (FoIA) to the practices of outsourced companies in some regards. Many on the left are in awe of the Taxpayers’ Alliance, but all they have done is make mass freedom of information requests to collect anecdotes to undermine the public sector. The actual resultant policies (like banning union facility time) came later. If Labour extends the FoIA, and allows left campaigners and bloggers to do their jobs, the policies by which the government can exercise the commanding heights of the economy must surely follow.