Labour will reduce the role of outsourcing companies, says Reeves

If Labour win the general election next May, the Labour leadership have announced that they will reduce the role of large outsourcing companies in providing public services – particularly in relation to delivering the government’s Work Programme.

Following her announcement on Universal Credit yesterday, Rachel Reeves, the shadow work and pensions secretary told the Financial Times (£) that Labour would look to move away from a system that relies on centrally commissioned contracts. A move that might be welcomed by many, especially considering the chair of the public accounts committee, Margaret Hodge, has calculated that roughly half of all public spending on goods and services goes in the pockets of private companies.

Instead, assumedly as part of their wider emphasis on devolution of powers, Labour would consider ensuring that services were provided by local-level bodies. This would benefit the local community, Reeves said, because such organisations tend to have good relationships with local business and they have a strong understanding of local unemployment patterns.

Striking a similar tone to her performance in the Commons yesterday (when she launched an attack on the coalition) Reeves was sure to stress that the Work Programme – where providers are paid on the basis of on how many people they help get into work – had not helped the most disadvantaged in society.

In light of this she said: “I think we [a next Labour government] are going to challenge the status quo. The current structure of the Work Programme favours big companies able to provide the upfront investment necessary for a scheme which pays only on the basis of results.”

But Labour’s proposals don’t stop there, Reeves went on to outline how the party would look at ensuring that government suppliers pay their employees the living wage. She explained that this would include  “smaller charities and businesses” This kind of move can be manageable, because, she said, there is at least one example where  “the supplier absorbed the cost through their profit margins.”  

She was sure to stress that before making any decisions, the part are “looking at the cost implications.” But Reeves retained a promising level of optimism regarding the living wage; citing Barclays as a success story, she stressed that since the bank introduced the living wage “the turnover of low paid staff has fallen dramatically, so the turnover of cleaners is something like a third of the national average. It has lowered recruitment costs and has lowered training costs and they have higher productivity.”