Better in than out: Carillion and Covid show outsourcing is not the answer

Three years ago last month, Carillion went into liquidation, buckling under the crippling weight of its £1.5bn debt and costing the UK taxpayer an estimated £148m, as well as 800 people their jobs. At the time, Carillion had in the region of 450 public sector contracts on its books, from school meal provision, prison maintenance and in-patient bed provision to a £1.4bn joint venture contract for HS2.

Carillion’s collapse spectacularly exposed the government’s long, dangerous and pervasive addiction to outsourcing. With this government’s approach to outsourcing rarely resulting in better quality and value-for-money for taxpayers, it can only be assumed that this obsession is fuelled by the Tories’ historic and ideological distrust of public institutions and local councils.

As their procurement policy has laid bare during the pandemic, with almost £2bn worth of crony Covid contracts going to Tory friends and donors, it is further driven by their rampant ‘jobs for the boys’ culture. This is illustrated nowhere more starkly than the government’s Serco-led contact tracing system in England, which – despite the many millions spent on it – for months upon months failed to have more than a “marginal impact”.

With SAGE saying that Test and Trace remains a vital tool in getting our lives back to normal, the government simply cannot continue to hand out these contracts at huge cost, to companies like Serco that simply aren’t up to the task.

For months, local public health teams in England were plugging the gaps in Serco’s national system and reaching more people, particularly in harder-to-reach communities. Yet they received little extra support for contact tracing, while Serco won so big from the contracts that they were able to pay dividends to their shareholders for the first time in over six years.

The UK government must do the right thing with contact tracing: sack Serco and hand over control to our local councils, not only to invest in the long term in our public services, but to get better results for our communities. The fixation on a centralised and privatised model of contact tracing not only funnels money away from our public services. It also makes them less resilient in the long run.

Contact tracing is just one example – it is crucial to reset the balance on outsourcing more widely. That is why Rachel Reeves has announced that a Labour government will oversee the biggest wave of insourcing for a generation. There is a substantial and growing body of evidence that shows insourcing works.

Several government departments are slowly facing up to this fact, bringing some outsourced services back in-house, including HMRC and the DVLA, owing to the poor performance of their contractors. But with billions spent on contracts without tender by this government, that only scratches the surface.

If you’re looking for the strongest evidence that insourcing works, look no further than Labour councils up and down the country. They are proving that bringing public services in-house can significantly reduce costs, improve quality, better integrate services, increase flexibility over how services are run and – most importantly – run services for people over profit.

Islington Council, for example, has adopted an ‘in-house by default’ policy, which has saved it £14m since 2010. Nottingham City Council has saved £500,000 annually by insourcing maintenance of its civic buildings and delivered a 17% cut in the cost of staff catering by bringing it back in-house.

After establishing a trading company to take over from an outsourced provider, Hammersmith and Fulham Council reduced the number of complaints on its housing repair service. And Labour councils in Ealing, Newham, and Redbridge have all brought their council housing management back in-house.

A clear consensus is growing among local councils that insourcing is the way forward. 78% of local authorities now believe insourcing gives them more flexibility, and two-thirds say it also saves money. Half of all local authorities say it has improved the quality of the service while simplifying how they’re managed.

I’m a local councillor as well as an MP. I’ve seen how frustrated local residents are at services being several stages of outsourcing away from them. For example, local parks managed by companies that are managed by another company that is managed by the council. Or social services managed by companies that seem to keep changing, which leaves residents and relatives at a loss as to who to work with for the best care.

Hackney mayor Philip Glanville puts it well: “There has not been an example that I am aware of where we have brought something in-house and it has not cost us less to deliver that service. We have seen that at almost every step you get a more coordinated response, save money, create better services and improve terms and conditions for the workforce.”

That’s not to say that insourcing all services is the only answer here – but it’s an absolutely vital part of building our future resilience. After years of underfunding and disempowerment for local councils, Labour’s vision is about removing the barriers that both hold back proper, community-led insourcing and create a false economy that pushes huge sums to outsourcing while further weakening our local public services in the same fell swoop.

Of course, there will always be a place for external expertise and advice. This can be from local and national businesses and from community organisations. There are good British businesses and third sector organisations, who have risen to such huge challenges in the last year and have the expertise and experience to deliver, unlike some of the Conservative pals who have turned out millions of unusable masks and test kits.

By empowering and properly supporting our local councils, we can switch to an ‘insource first’ policy. I know first-hand that it will save so much money and will nurture our local services, which have been hollowed out and weakened by a decade of austerity. It’s time to trust our local councils again and put public services back in the hands of those who know their communities best.