Today the Smith Institute launches Out of Contract – Time to move on from the love in with outsourcing and PFI. It is a timely paper, coming as it does in the wake of the liquidation of Carillion, and the National Audit Office report on PFI and PF2.
The report pulls together – in an easily digestible way – a critical analysis, alive with detail, of where we are on privatisation. More importantly, it also offers a constructive practical framework of ideas for starting to take a new agenda forward.
The critique identifies many of the criticisms Unison would make:
- The questions about the most effective use of taxpayers’ money and public value.
- The lack of transparency and the opaque relationships between companies; and how democratic oversight has been undermined and weakened.
- The loss of skills and knowledge within the public sector that accompanies privatisation and then weakens future procurement and contract management.
- The undermining of workers’ bargaining rights; and the profits generated by attacking workers’ pay and terms and conditions or by churning the workforce and giving new employees inferior defined contribution pension schemes
- The fragmentation of services and how the need to respond to change is often inhibited by contract requirements.
- Poor service quality and conspicuous contract failures.
- The way decisions made by public bodies are distorted by the existence of PFI contracts and the claims those contracts have on the finances of those public bodies
The paper calls for a complete rethink of outsourcing and PFI, for a root and branch review, for a Domesday Book of significant contracts and for the evaluation of performance across the plethora of contracts that an individual company may hold.
The report recommends in-house provision as the default option for public services, involvement of public and staff, transparent reporting of profit, labour and living wage clauses, union recognition, and compliance with fair tax and boardroom remuneration.
Following the liquidation of Carillion, Unison argues that it is time to reassert the need for the public service ethos in the delivery of public services. It’s over 20 years since the Nolan committee published the seven principles of public life – selflessness; integrity; objectivity; accountability; openness; honesty and leadership.
We need an equivalent set of principles that will apply to any private company, and its management and directors, when they receive public money to deliver public services.
Openness and accountability require full transparency. Procurement information should be available online, including tender documentation, bids and all signed and amended contracts. George Osborne made a commitment in February 2010, to “publish government contracts in full… [to] enable the public to hold ministers and civil servants to account like never before”. He failed to deliver. Freedom of information requirements must be written into contracts with the open book accounting called for by the NAO.
As for integrity and selflessness, there can be no place for companies that use tax havens, blacklist workers (as Carillion admitted), or who seek to undermine workers’ bargaining rights, generate profits by attacking pay and conditions and churn the workforce to cut pension entitlements.
Theresa May this weekend said in The Observer that public support is “conditional – it can only exist as long as we are all playing by the same rules”, adding: “I’m determined to ensure we do – to level the playing field and stand up to the small minority of businesses that give the majority a bad name”.
Does that include ending the two-tier workforce? Does it include stopping the practice of putting new employees into “cheaper pension schemes”? In both of these, companies “recklessly put short-term profit ahead of long-term success”.
Service quality is critical. When failure occurs then procurement frameworks would ensure speedy intervention, preventing situations such as those at the Great Western Hospital Trust in Swindon, which in 2014 reported that “concerns about food hygiene and cleanliness, have posed a potential risk to patients, visitors and staff”.The trust was, however, powerless to intervene as “Carillion were contracted to provide these services by Semperian – effectively the ‘owners’ of the building under the PFI agreement”.
Ultimately, the public interest and public service must be the primary motivation, not the pursuance of profit.
Christina McAnea is assistant general secretary of Unison.
Out of Contract: Time to move on from the ‘love in’ with outsourcing and PFI is published today by the Smith Institute.