Outsourcing meets its outer limits

Every British prime minister since Margaret Thatcher has sought to mobilise the private sector to deliver public services more efficiently. Few can match the zeal shown by the coalition under David Cameron for pushing the boundaries into new territory.

The administration’s forward-leaning policy has not always gone smoothly. Public confidence has been badly dented by a series of calamities, including the lack of Olympic security guards, missing out-of-hours doctors, fraudulent overcharging for tagging criminals and a dismal attempt to run disability assessment tests.

While company executives have sometimes been brought to book, and share prices have fallen with each scandal, there is a sense that democratic accountability is absent. Companies may have their wrists slapped when things go wrong, but they are soon given a clean bill of health by the Cabinet Office and return to the market.

Ten months before the next election, the Labour party is seeking to capitalise on these concerns. Rachel Reeves, the shadow work and pensions secretary, has called for outsourcing to be reformed. She wants more smaller companies to enter the lucrative £190bn market. Labour would also like to see providers pay higher wages.

There may be merit to these measures. But Ms Reeves’s remedy does nothing to fix the underlying problems involved in outsourcing.

British governments of all political colours have been too promiscuous about transferring activities to the private sector. Not every public service lends itself to going private. The powers invested in the state for sensitive services such as prisons can never be adequately captured in a contract, and should not be supplied by private contractors. The government must control its temptation to outsource on all fronts. The rush to outsource the probation service is a case in point.

In those areas where outsourcing is appropriate, government needs to be much smarter about monitoring and challenging poor performance. The growth of outsourcing has outstripped the capability of the civil service to keep providers on their toes.

The government should equip officials with the skills commensurate to negotiate on equal terms with large providers and to hold them to account throughout the lifetime of the contracts. Elaborate monitoring systems dreamt up by consultants must be simplified.

Finally, trust needs to be restored to the entire outsourcing project. It must be shown as more than a ruse to push down wages and cut costs. Quality should be the clear aim – which will sometimes mean big is not best.

Trust also requires more transparency, especially about performance against targets. Government needs to show there is sufficient competition during the tendering process and an ability to manage a change in provider, should the company be found to fall consistently short. Outsourcing has an important role to play, if implemented properly. A more thoughtful approach is needed.

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Letter in response to this editorial:

Not promiscuous about outsourcing, but incoherent / From Mr Andrew Haldenby