(2 days, 2 hours ago)
Westminster HallRead Hansard Text Read Debate Ministerial Extracts
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Andy McDonald (Middlesbrough and Thornaby East) (Lab)
I beg to move,
That this House has considered outsourcing by Government departments.
It is a pleasure to see you in the Chair, Sir Jeremy. I am pleased to have secured this debate on outsourcing in Government Departments, in which I also intend to discuss the outsourcing of public services more widely, some of the negative consequences of outsourcing and the opportunities of a new wave of insourcing, and to acknowledge that the Government are putting together their national procurement policy, which the Chancellor said last week will be published shortly; I am sure the Minister will have a lot more to say on that.
I wish to draw attention to my entry in the Register of Members’ Financial Interests and the support I have received from a number of trade unions that have their own published policies on outsourcing of public services, some of which provided briefings for today’s debate.
First, I wish to set out the background to the outsourcing of public services and its growth in recent decades, before setting out some of the steps I hope the Government will take in the coming days and weeks to begin a new wave of insourcing. I believe there is a prevailing view on the Government Benches that essential public services should be run for the public, not to make a profit for shareholders. An emphasis on competition and markets has undermined the public service ethos associated with public services and has too often worked against the public interest.
Imran Hussain (Bradford East) (Ind)
I thank my hon. Friend for his years of work in this area; he has been instrumental in shaping the Government’s policy. All too often, particularly in the public sector, outsourcing is disguised in many shapes and forms, but the reality remains that it is back-door privatisation that leads to lower standards and higher costs. Most importantly, workers are treated as second-class citizens, and it has a disproportionate impact on black, Asian and minority ethnic communities. Does he agree that the central question is the one that was in the new deal: is it in the public interest? The answer is that it never is.
Andy McDonald
I thank my hon. Friend for his kind words and wholeheartedly agree with his comments. The whole premise of outsourcing has been to reduce costs, and that is visited on the workforce in terms of pay and other terms and conditions, with the disproportionate impact that he describes, which I will come on to shortly.
All too often, wider social, environmental and economic implications have been eclipsed by the pursuit of narrow short-term cost savings, with an insufficient assessment of the overall costs and longer-term impacts. Since 1979, under the Conservatives, starting with compulsory competitive tendering, there has been a huge growth of private business involvement in public service delivery and its scale. That has resulted in more fragmented, poorer-quality services run by companies seeking to renegotiate contract terms, with staff—often women and minority ethnic employees, as my hon. Friend described—the subject of squeezed terms and salaries.
The last Labour Government invested in public services but did not slow the growth of outsourcing. That allowed the coalition to expand it further, with austerity encouraging public bodies to turn to outsourcing as a means of reducing costs, while ideologically driving it through a White Paper, “Open Public Services”, which argued that few services should be exempt from outsourcing. That is where we were in the run-up to the recent general election, before which Labour set out a clear message on outsourcing.
In February 2021, at the height of the covid pandemic, the now Chancellor set out her concerns about outsourcing. Spend on outsourcing was worth £249 billion in 2014-15, and by 2019-20 had reached £296 billion—a significant sum that dwarfs the NHS budget. She said:
“Outsourced services are not integrated into the fabric of our communities. Unlike our public services and providers, like charities, many of which offer vital frontline services, outsourced companies have not built up trust over time and lack the vital local knowledge and flexibility required.”
Furthermore, she added:
“A shadow state has emerged and it is unaccountable to the people. Even before the pandemic, the government spent an extraordinary £292bn on outsourcing over a third of all public spending and that level is rising year on year. The public pays for these contracts yet so often it cannot adequately scrutinise many of them. This secrecy must stop.”
To set out the case for insourcing, I want to highlight the experience of outsourced workers represented by a number of unions. In the civil service, the Public and Commercial Services Union states that the two-tier gap between directly employed and outsourced workers is widening as pay and terms and conditions for the latter erode, with civil servants reliant on universal credit and workplace food banks. Departments’ budgets are stretched as they deal with the inefficiency of picking up the cost of tendering and awarding contacts, which have to deliver a profit for the contractors.
Kim Johnson (Liverpool Riverside) (Lab)
I thank my hon. Friend for securing this important debate. PCS workers in my constituency who work for the Disclosure and Barring Service are currently in dispute because of inadequate contracts, which put additional burden and stress on them. PCS has continually called for the insourcing of those contracts. Does my hon. Friend agree that the Government need to commit to their policy of insourcing? It is not only workers who are suffering, but children and other adults, because of the outsourcing of local authority services. That needs to change immediately.
Andy McDonald
My hon. Friend is entirely right. That is yet another example of the tension and conflict between delivering high-quality public services and driving down costs, which leaves the people who deliver the services in poverty. That has to be addressed.
Similarly, in the railways, the RMT says that outsourced workers struggle to make ends meet, and it directly attributes that to outsourcing firms profiting from low pay. Many outsourced workers’ wages are anchored to the minimum wage, and they do not have the right to occupational sick pay and decent pay schemes. The RMT argues that insourcing would not only lift living standards by putting money into people’s pockets, but raise workers’ productivity, tackle structural inequality and even achieve greater efficiency in public spending. It is time to start a wave of insourcing now.
In the civil service, the Government have come into office with numerous disputes having recently taken place, or currently taking place, between outsourced service contractors and their employees, including various instances of industrial action. That is disruptive and costly to the civil service, and it is a result of those service providers holding down the pay of their staff, particularly in facilities maintenance areas such as cleaning, catering and security.
PCS, the union representing those workers, wrote to the Prime Minister in mid-July to discuss matters faced by workers across the UK civil service, including those working in contracted out and devolved areas. I know that the Chancellor of the Duchy of Lancaster met with the FDA, Prospect and PCS in June, at the earliest opportunity after taking office, but the number of civil service disputes in contracts inherited from the Government’s predecessors requires action. There are multiple disputes involving PCS members employed as cleaners, post room staff, porters, catering and reception staff in several Government Departments, and they are not limited to one outsourced employer, but concern G4S, ISS and OCS.
Imran Hussain
My hon. Friend is making a powerful case. In Bradford, there was an attempt at outsourced back-door privatisation, which was successfully fought off by me alongside trade unions. Does he agree that trade unions play a crucial role and that it is shameful that, in the disputes he talks of, many of the organisations that hold public contracts have refused even to recognise trade unions?
Andy McDonald
We are giving a lot of attention to the recognition of trade unions. As the Employment Rights Bill progresses, we will want to ensure that that gets proper attention. The people we are talking about are the ones who kept the country going through the covid pandemic. We have come out of that but they are still in dire straits.
I want to mention the dispute involving G4S, as it has resulted in Department for Work and Pensions buildings, including jobcentres, closing for several days. The DWP has been asked to intervene in the dispute and to set out the sanctions it has issued to G4S for failing to deliver its contractual responsibilities. Not many months ago, I was on a picket line outside our jobcentre in Middlesbrough with G4S security guards who were expected to put food on the table at £11.40 per hour—their employer was not the DWP but G4S. We have to ask whether that is a legitimate and moral way to organise our public services.
There are other disputes between the PCS and G4S, ISS and OCS in the Department for Business and Trade, the Department for Education, the Department for Energy Security and Net Zero, the Foreign, Commonwealth and Development Office, the Department for Science, Innovation and Technology and the Cabinet Office. The Government should intervene and ensure that the Government Property Agency meets PCS to help reach a conclusion with the outsourced firms.
We need a hard stop to new outsourcing, because not only have the Government inherited poorly performing outsourced contracts, but there is concern that they might be about to re-let to private providers that have already failed in His Majesty’s Prison and Probation Service. In the halcyon days when I was a member of Select Committees, we made trips to other jurisdictions and we were met with horror by other parliamentarians who found it anathema that prisons were in private hands. They thought that it was contradictory and unacceptable for anybody other than the state to be involved in incarceration. There is a fundamental question we need to ask ourselves.
The Government have the opportunity to put this right by insourcing facilities and estates management, rather than increasing the profits of private companies. If prisoners are living in squalor, those union members are working in squalor. Just as unions have argued that it is not too late to invite in-house tenders, it is now time to invest in existing prisons—not just new prisons—by ensuring that the Prison Service runs its own maintenance and facilities management.
Prison maintenance in England and Wales was fully privatised in 2015, with Amey winning the contract for the north and Carillion the one for the south, later replaced by Gov Facilities Services Ltd—GFSL—which took over its contracts. A race to the bottom continued, and 10 years later there is widespread prison squalor and an estimated maintenance backlog of almost £2 billion.
Amey and GFSL’s contracts were extended in 2020 and are up for renewal over the coming months. The prison unions are calling for maintenance to be brought back in-house—not with GFSL, but with a return to full works departments in every establishment. However, the Government have previously stated that the public sector will not be invited to bid for the new contracts, after a 2023 assessment apparently determined that a privatised solution was the preferred option for meeting prison maintenance service needs.
It was welcome that the Prisons Minister, Lord Timpson, recently promised:
“As future prison maintenance contracts approach expiry, we will conduct detailed assessments to inform decisions about whether to continue to outsource services”.—[Official Report, House of Lords, 23 January 2025; Vol. 842, c. 1804.]
I was pleased to hear the Prisons Minister tell the House yesterday that the Government still have an open mind on maintenance contracts. The private sector has completely failed to deliver on its promises around prison maintenance, with staff, inmates and the taxpayer all paying the price. Will the Minister explain why the Government seem to be following the last Government’s privatisation plans, despite the obvious failure of running key prison services for profit?
The Minister set out to the House last autumn how the new national procurement policy framework would be a legal framework to deliver greater value for money and improve social value, which the previous policy statement did not do. Will the Minister give some indication as to whether the framework might be founded upon such a review?
The task before the Government is twofold. First, in the civil service, the Government must intervene in industrial disputes and ensure that public services are not disrupted by contractors prioritising profit over public service and at the expense of public servants’ livelihoods. Secondly, I encourage the Government not to enter into any further outsourced contract arrangements in the civil service or elsewhere before a review into the costs and impact of the outsourcing is complete, and before a new strategy setting out the case for a new wave of insourcing has been published. I agree with the PCS proposal to
“seek an agreement on a programme of civil service insourcing and rights for contractor staff. Whilst services remain outsourced”
the PCS
“seek an agreement on union recognition for all facilities management workers and selected outsourced staff. A key element of that agreement would be parity for private sector workers with civil servants in respect of pay and terms and conditions of employment.”
Similarly, Unison has set out its concern:
“Any decisions by public bodies to outsource any services should have to pass a key public interest test.”
That test should consider: the quality of the service that would be delivered; value for money; the effects on workers’ job conditions, such as pay and holiday entitlements; the implications for other public services and their budgets; the impact on the local economy and its job market; and the ability of the contractor to meet climate targets and equality considerations. Unison has also said that
“the test should be applied to contracts coming up for renewal whilst providing services in-house should become the default position.”
I wholeheartedly agree with that notion.
In her speech in 2021, the Chancellor said that
“under Keir Starmer’s Labour government we will see the biggest wave of insourcing of public services for a generation.”
It is now time to deliver just that.
Several hon. Members rose—
Sir Jeremy Wright (in the Chair)
Order. It will be obvious to everyone that there is considerable interest in this debate. May I ask all Members to bob if you wish to speak, and to continue to do that so that we can see you still wish to speak? I hope that if everyone can restrict themselves to about four minutes, we will get everybody in. I want to start calling the Front Benchers at 10.30 am.
John McDonnell (Hayes and Harlington) (Ind)
I have come to this debate because of our recent experiences of visiting picket lines, with regard both to Government Departments and, in particular, the railway sector. I have been a trade union rep in the public sector, but I have also been a manager in the public sector: I was chief executive of the Association of London Government and I also was in a London borough, managing large numbers of staff.
When you have the scale of disputes that we have, I think we have to recognise that there is an underlying industrial relations problem that has to be addressed. I would invite the Minister to join us on some of those picket lines over the coming weeks, because the disputes in the Government Departments are starting again next week and we will have picket lines for several Government Departments around Whitehall.
I have tried to identify the underlying problem causing these disputes, and when we talk to the workers themselves on the picket lines, it is strikingly obvious. Some of them—well, all the ones I have met—are on, I think, shocking levels of low pay. When you talk to them, particularly those based in London, you wonder how they are surviving on the pay that they are receiving. Also, they have conditions of work that I thought we had eradicated years ago. I am talking about lack of access to sick pay, some of them being paid below legal minimums at the moment, and many of them being without any pension rights whatever apart from the statutory pension. So we have a group of people who are on low pay, in insecure work, and feeling extremely exploited, so they have no other resort but to take industrial action. I want to point out what is interesting. I invite everyone to come on those picket lines and look around them, because the vast majority of those workers are from the BAME community; so there is also an issue with inequality in our employment practices as well.
Various unions have provided us with briefings for the debate today, and most of them have done surveys of their members to identify what is the issue facing their members that they should be putting to management. Some of the survey results are stark. The RMT did a survey, and I want to talk about the response that it had from its members. It has about 10,000 members who have been outsourced on trains; Transport for London, for cleaning, has 2,000; and Network Rail has 2,500. What happened then? In the survey results that came back, 80% of the workforce who had been outsourced were saying that they were struggling to meet their basic needs: to pay the rent, pay for food, and so on; 90% were worried about bills coming in. What was interesting was that more than 80% of them were saying, “We come to work when we’re sick, because we can’t take the time off—we can’t even afford to be sick.”
That is why the disputes are taking place, and they involve the same old companies: G4S, ISS, OCS and Mitie. These are companies that have made extensive profits out of the outsourcing, and the bulk of their profits is obviously made from the low pay that they are forcing upon their members of staff. It causes real anger among the workforce when they are seeing these companies paying out high dividends to shareholders, while at the same time they will not pay the staff a decent wage.
There needs to be an understanding in Government that if we are to have decent public services, there has to be a re-examination of how we provide those public services. I agree with what has been said by the deputy leader of our party, and by the Chancellor, which is that we need
“the biggest wave of insourcing…for a generation”,
because I think that is the way to tackle insecure work, low pay, and so on.
My hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald) raised the other issue about outsourcing, which is that it has an impact on productivity. If a worker is exploited, if they are not paid properly, if they are worried at work about how they are going to survive, it does impact on how they deliver the service. That is inevitable; it would have an impact on all of us. As a result we have found that productivity issues are a real problem in some of these sectors. Unfortunately, because of the old Treasury Green Book model, that is resulting in even more outsourcing being justified: it becomes a vicious circle.
Mr Gregory Campbell (East Londonderry) (DUP)
The right hon. Gentleman said that he fully agreed with the deputy leader of his party. I wonder whether there was an undue emphasis on the word “deputy” rather than “leader”.
John McDonnell
I am lost on that one—completely. There are conspiracy theories here that I have never even heard of or even thought of, so I will pass on that one.
What we are asking the Minister for today is a strategy. The first step in that strategy must be to meet the unions themselves. A number of unions have asked whether they can they have a meeting whereby, Department by Department, they can work with the Government, looking at what contracts there are, seeing how those contracts can be brought in in this biggest wave of insourcing in a generation, and how the legislation, particularly the Employment Rights Bill that is progressing through Parliament at the moment, can include the initiative and rights and responsibilities to bring that insourcing about. There is a strategy that can be developed alongside the Government’s procurement policy, that can address all these issues and will be cost-effective for the Government in the long term.
Steve Witherden (Montgomeryshire and Glyndŵr) (Lab)
It is a pleasure to serve under your chairmanship, Sir Jeremy. I congratulate my hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald) on securing this crucial debate. I have had the privilege of standing in solidarity with the facilities management staff and speaking at the PCS pickets that have been mentioned by others in this debate. Their demands could not be clearer: fair pay, better working conditions and an end to outsourcing in Government Departments. While delivering vital services such as cleaning, catering and security to keep civil service Departments running effectively, those employed on outsourced contracts are treated as second-class employees compared with their in-house counterparts. The result is a two-tier system with a sharp racial divide. BAME and migrant workers are disproportionately employed in these roles.
Last year we saw the long and hard-fought dispute between the Department for Education and its outsourced cleaners come to an end. Reports of those workers being overworked, treated “like rats” and denied the London living wage were truly appalling. Unfortunately, such treatment is common practice when it comes to the subcontracting of Government services to private firms. Many workers on outsourced contracts struggle to make ends meet, especially during the ongoing cost of living crisis, as their wages are often limited to the national minimum or living wage. In some Government Departments and agency workplaces, PCS members have even resorted to establishing food banks to support low-paid staff. Adding to their economic insecurity, those workers are also excluded from access to decent pension schemes.
The current outsourcing model weakens the Government’s ability to hold companies accountable. Basic protections for outsourced workers, such as company sick pay, are shirked, often forcing employees to continue working while unwell as they cannot afford to take time off. These outsourcing practices propagate the exploitation of employees. The companies behind them can easily avoid taking responsibility for poor pay and conditions, and the quality and fairness of essential public services are being compromised all the while. Will the Government honour the welcome promise of
“the biggest wave of insourcing…for a generation”?
Will they bring services back in-house where they belong and show their loyalty to the cleaners, the security staff and all the other undervalued workers who keep this country running, not the profiteering directors of outsourcing companies? Diolch yn fawr.
Sir Jeremy Wright (in the Chair)
Within your four minutes—thank you very much.
Jim Shannon (Strangford) (DUP)
It is a pleasure to serve under your chairmanship, Sir Jeremy. I thank the hon. Member for Middlesbrough and Thornaby East (Andy McDonald) for securing this debate. I do not say this lightly: he is truly a doughty champion—so I say well done.
The issue of outsourcing is a sticky one that I well remember from my days as an alderman on Ards council. My wife used to say, “If you’re looking for the alderman, you mean the older man.” She always called me the older man, not the alderman. She put me in my place manys a time.
I served on Ards borough council from 1985 to 2010, and I can well recall the financial arguments for and against outsourcing, and weighing the control we had against that which we would lose. I want to give a specific example that will, I hope, illustrate and support what the hon. Member for Middlesbrough and Thornaby East and other hon. Members have said.
Ards borough council decided to keep leisure in house when we created our new leisure centre, which is now called the Blair Mayne wellbeing and leisure complex, after the heroic SAS man who is portrayed in “SAS Rogue Heroes” every Sunday night at 9 pm or thereabouts. North Down borough council had outsourced its service, and when the councils were amalgamated, both outsourced and in-house services were being provided. The pros and cons of each option are easy to see, and yet it is hard to determine the best way forward. That example shows most effectively that we should never believe in a one-size-fits-all approach.
Mr Gregory Campbell
On the point of one size not fitting all, does my hon. Friend agree that we must look at the issue in a sensible, pragmatic way, and that neither a hyper-capitalist approach nor a radical socialist approach is the answer to these problems? We need a sensible, pragmatic approach that delivers good, effective services to the public while protecting the rights of those who work in those services.
Jim Shannon
My hon. Friend is right. We are all trying to ensure that the programmes and services are delivered and that, more importantly, the rights of workers are protected. He has hit that nail on the head.
The outsourcing of services can never be a no-brainer; it must always be a decision that is thought through from beginning to end, and with more than the financial bottom line as a guide. The hon. Member for Middlesbrough and Thornaby East referred to it not being about profit margins. It should never be about profit margins; it should be about ensuring that the service is right. I agree with him.
We need to be sure that outsourcing companies behave in an ethical way when it comes to issues such as zero-hour contracts. That is made more difficult by the changes to national insurance, the blame for which lies with the Government. The group that runs Ards and North Down borough council’s Bangor leisure centre is concerned about £20 million in extra labour costs due to the changes to national insurance contributions and the minimum wage in the October Budget.
As always, that will affect profits, and I am concerned that the loser will be the low-paid worker with minimal rights. This is the key issue that must be taken into consideration in the context of outsourcing. The Government make decisions and say that businesses will have to swallow the cost, but too often the reality is that the staff have to. It is the wee man and the wee woman in the street who will pay, through the goods that they buy. Some companies that provided paid morning and afternoon coffee breaks are now saying that they can afford to do only the bare legal minimum. That is the unintended consequence of decisions made in this place.
At the same time, there is a time and a place for outsourcing, where expertise demands it. For major capital projects, the niche work must often be outsourced, rather than hiring in for short-term purposes. If there is to be a moving of the goalposts regarding outsourcing, we must retain the ability to get necessary work done in a short space of time.
In times of emergency, such as that currently happening at home with the after-effects of the storm, it is clear that outsourcing must always be on the table. Our road service, Transport NI, does not have the capacity to clear and make roads safe. The ability to hire contractors is vital, and it needs to be able to be done quickly. Those who wish to see an end to outsourcing need to be careful. Providing services in-house, with greater control, is better, but one size does not fit all. It may be beneficial to lean towards doing things in-house, but any decisions must be well considered and weighted, as I know the Minister’s will be.
Sir Jeremy Wright (in the Chair)
Order. I gently remind all Members that we must get to four minutes each voluntarily or I will have to impose something less voluntary. I call Jon Trickett.
Jon Trickett (Normanton and Hemsworth) (Lab)
I spent the last 10 years, under our two previous leaders, working on our outsourcing. It is hard to summarise 10 years’ work in three and a half minutes, but I came to the conclusion that outsourcing simply does not work for a number of reasons that I will outline quickly and in broad terms.
Let me first pay tribute to the workers who go to work one day to discover suddenly that their contract of employment has been sold to another employer—almost like a modern-day form of servitude. So often, we then see cuts to services, and pay and conditions. Much has been made of that already this morning. I pay tribute to those workers, particularly the three women in my constituency who went to work, found that their employer had changed, their union had been derecognised and their pensions removed. They fought like titans: they went on strike, then to a tribunal, and eventually finished up being sacked. The courage of working people fighting for justice should never be forgotten.
There are several things about outsourcing that simply do not work. The first is that no evidence whatsoever has ever been produced showing that it is cheaper to outsource than to keep services in house, especially when we count the transactional costs, which remain with the civil service and the Government. If we add those together, it always costs more to outsource. Secondly, when there is a disaster—as there is from time to time—the profits go to shareholders but the risks remain with the public sector, so we have the privatisation of profit but the socialisation of risk and quite often the cost of bankruptcy.
We have already talked about pay and conditions being driven down and about a two-tier workforce, so I will not go further into that, but I will speak a little about what my hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald) described as a shadow state. One third of all taxpayer money is now spent on outsourcing—a staggering amount of money—and that is a direct assault on our democratic processes. I say that because Ministers do not have day-to-day supervision of and responsibility for the actions of outsourced operations. That poses problems not just for democracy but for Parliament. It has become clear over time that questions that we Back Benchers are entitled to ask questions on behalf of our constituents and the nation simply cannot be answered because they relate to services provided by the private sector—that is a major assault. On Monday, I will have been an MP for 29 years—some will say that that is far too long—and in that time, Parliament’s capacity to ask questions about public services has been massively diminished as a result of what has happened.
My other point relates to freedom of information requests. We know that we as citizens can make freedom of information requests about any services provided by the public sector. The minute a service is outsourced, though, that capacity goes. Time and again, we encounter problems with services provided through taxpayer money but in a privatised form, and we are not able to get to the truth of what has really been happening with that service. The lack of accountability to Ministers and to Parliament, and the exemption from freedom of information, all make outsourcing very difficult.
I remember speaking to Dave Prentis, the then leader of Unison, about ethos. He said to me, “Look, Jon, it’s about ethos. The ethos of the private sector is largely driven by the desire to maximise shareholder value; the ethos of services provided in the public sector is just that—public service.” The difference between the two kinds of ethos is at the centre of the problem that we face when we deal with outsourcing.
I would love to speak longer about these matters on another occasion, but let me make my final point. I came to the conclusion that, in the end, the only way to deal with this is to have a legal presumption in favour of insourcing. That was the policy that the Labour party went on, and one that I hope this Government will build on by bringing forward the large wave of insourcing that we have talked about many times before.
Graham Leadbitter (Moray West, Nairn and Strathspey) (SNP)
It is a pleasure to serve under your chairship, Sir Jeremy. I congratulate the hon. Member for Middlesbrough and Thornaby East (Andy McDonald) on securing this debate.
I want to take the debate in a slightly different direction, as there has not been much mention of national security so far. I am a Member for a constituency that has a large Ministry of Defence footprint, particularly in the RAF. Outsourcing of catering and mess facility management over many years has had a significant and detrimental impact on the cohesion of our fighting forces, not just on bases in my constituency, but in every base where outsourcing has occurred.
The reason is because we have a two-tier workforce. We have people who have been TUPE-ed across from the civil service, who started their career as MOD civil servants. They are now working alongside people who are on considerably lower pay for doing the same job. That creates division in the workplace. People who are getting paid less, and are valued less, then do not value their employer. This is understandable: why should anyone value an employer that does not particularly value them? We end up in a situation where there is less attention paid and standards fall.
There are situations where a contract is ending—with maybe six months left to run—and, for the sake of argument, let us say that the staffing complement for the team should be about 25 but it is now down to 15. Does the employer have any intention whatsoever of bridging that gap with another 10 people, when it is struggling to make a profit in the last six months of a contract? Absolutely not. It will be sucked up by the 15 people doing the job of 25. That is a totally unacceptable way to work.
If we parliamentarians and the civil service believe that the people who work directly for them are worth a living wage, they should believe that for every single person that is doing a job that facilitates what that organisation does. It is a simple act of fairness. In the military, they talk about the esprit de corps or a single-force approach; if there is that separation, then that is not there. If people are not getting the quality of food or accommodation they want, they will not stay. We can spend a fortune training them, and they can be very good at what they do, but they will not stay in because the facilities are not good enough for them. If we want a coherent military, people who are dedicated to it and good national security, we must treat all the workers, whether they are service personnel, civilians or contractors —and I would rather they were not contractors—with the same degree of respect and with the same degree of rights.
The other problem that I want to highlight is that people who have been TUPE-ed across when contracts have been put out may, broadly speaking, retain their pay and conditions, but what they do not tend to retain is their pension. That is an absolute travesty because it is completely mortgaging their retirement life and their right to a decent retirement. Many of them, particularly in more rural areas where our services are being provided, may not have other opportunities to move into another role within the same organisation to avoid being contracted out.
I want to pick up on a point that was made about radical socialism. There is nothing radical about paying a fair wage for a fair day’s work. It is just a matter of human decency. I will leave it at that.
Brian Leishman (Alloa and Grangemouth) (Lab)
It is an honour to serve under your chairship today, Sir Jeremy. I thank my hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald) for highlighting this issue and securing this debate.
The faith that the private sector will always deliver value for money and the standard of service that we require and desire is rooted in a political ideology that knows the cost of everything but the value of nothing. Like many of my right hon. and hon. Friends, I was delighted by our party’s pre-election pledge to oversee the biggest wave of insourcing for a generation, so that we can see a change in culture from the continuous erosion of service provision, the reliance on the private sector and the race to the bottom.
I pay credit to my hon. Friend the Member for Liverpool Riverside (Kim Johnson) for highlighting the need for prison maintenance insourcing and her call for the Government to bring all prison maintenance back in house at the earliest opportunity.
As my hon. Friend the Member for Middlesbrough and Thornaby East said, it is well documented that our prison estate is crumbling after years of neglect, with prison maintenance privatisation being an example of escalating costs while service provision deteriorates. For our prisons to be the rehabilitation facilities that society needs them to be, they cannot be the decrepit and fetid facilities that so many are currently. Likewise, no worker—especially not hard-working prison officers, who have a physically, mentally and emotionally demanding job—should be expected to go to their place of work, and carry out their duties to the standard they want, and is expected of them, in an environment that makes their role so much harder and unpleasant.
Like so many problems the Government face, these are not issues that are of our making. However, they are our problems to sort now, and a problem like prison maintenance does have a solution. The Government should take the leap, and stop the overwhelming reliance on the private sector to provide services. It is time the Government trusted themselves to provide a solution. We can then invest in people and provide a quality of service that looks after workers, communities and the infrastructure of our country.
Bobby Dean (Carshalton and Wallington) (LD)
It is a pleasure to serve under your chairship, Sir Jeremy. I would like to make a few points about public sector capabilities, compatibility with the profit motive, and the process for outsourcing.
Before I start, I would like to reinforce the comments that the hon. Member for Alloa and Grangemouth (Brian Leishman) made about ideology. It is important to point that the claims that are made about the outsourcing benefits are not rooted in scientific fact; they are very contestable beliefs, and Members have put forward evidence against that notion today. That is worth underlining, because too often when I talk with officers at a local authority level, or Government bodies, it is accepted as fact that the public sector is somehow clunky and more expensive than the private sector. We need to continue to push back at that at every level. I know there will be some people of a socialist persuasion in this room, but getting this question right is also important to those who care about social justice in a well-functioning, mixed economy, too. I think we are currently getting the question completely wrong.
On public sector capabilities, I think we infantilise the public sector. We talk about it as incapable of producing top talent or brilliant innovations, yet we have so much evidence to the contrary. We seem to accept that, because the private sector can offer higher wages, it somehow always delivers better outcomes, but that is clearly not true. People take a lot of pride in public sector work, and that can motivate them in ways that the private sector can never motivate individuals. If I had more time today, I would point to some of the many innovations that started off in the public sector, which are sometimes picked up by the private sector, which then claims the credit for it. We can attract talent, but we need to facilitate that in the right way, with the right pay, conditions and working culture in the public sector.
I understand the many ways in which the profit motive can be in conflict with the aims of those of us in the public sector. I have seen it at a local authority level, where we contract out housing repairs, and jobs are always done to task instead of to the satisfaction of the resident. We have since brought our housing repair services in house, and have seen much better outcomes from the perspective of residents, because people are arriving at their properties and trying to make them good, rather than just working to the job that is on the ticket.
The other thing, which worries me more, is market regulation. We have very poor market regulation of contractors, which allows monopolies or oligopolies to build up very quickly. We have seen that probably worst of all in the children’s home sector, which is a service that used to be delivered by the public sector. In many respects, the public sector has lost the expertise and capability to deliver properly in that area, and now we have private equity firms that have eaten up the sector—completely oligopolised it—and, as a result, captured that market and charged local authorities through the roof for services that the public sector should certainly be delivering.
I make those points to explain how I understand the profit motive and how poor markets can lead to bad outcomes, but it does not always have to be that way. Crucial to this is procurement and contracting expertise. I default to the position that many Members have expressed, which is that insourcing will very often be the better way forward, particularly when proper pay and conditions for the labour force are enforced. However, there will be situations where outsourcing makes sense, particularly where specialist skillsets cannot be retained in house, perhaps because local authority budgets mean that it is not the right thing, and so on. In those situations, we need to make sure we have the very best and toughest negotiators and contract specialists in house. That is where outsourcing falls down time and again, because there is an over-reliance on the private sector’s expertise and views on what is best for the contract, and we end up losing out every single time.
We need much better standards for what we expect from the outcomes of contracts and an ability to break them much sooner if those outcomes are not being delivered. We also need to be able to monitor and enforce them better. The points made about labour conditions and pay need to be non-negotiable, because if the only way that outsourcing works out cheaper for a local authority is by treading down on workers, that is not a good enough reason to outsource a service.
In conclusion, the Government have inherited decades-worth of assumed knowledge about this area, whereby people feel that outsourcing is the only route forward for many services. I hope that this Government will start to review that and think again.
Several hon. Members rose—
Sir Jeremy Wright (in the Chair)
Order. We have 10 minutes left, and I hope to bring three more people in, so I ask colleagues to restrict themselves accordingly.
Grahame Morris (Easington) (Lab)
It is an honour to serve under your chairmanship, Sir Jeremy. I wish the Minister, Members and staff kung hei fat choi—happy Chinese new year. I congratulate my good and hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald) on securing this important debate on outsourcing, and also on the excellent and unseen work he has done in the background for many years.
Outsourcing has become deeply embedded in our public sector, yet it remains an inefficient and flawed model. Trade unions and MPs have repeatedly warned that it prioritises private profit over fair pay, secure jobs and quality services. My good and hon. Friend the Member for Alloa and Grangemouth (Brian Leishman) gave some excellent examples of that in prison maintenance contracts. I encourage Members of Parliament to visit the prisons serving their areas, speak to the governors and look at the eye-watering sums that are being charged by private contractors for really quite simple jobs. It is not value for money by any measure.
Colleagues have raised various concerns. In the two minutes I have got, I want to focus on two issues: the creation of a two-tier workforce and the failure to deliver value for money for taxpayers. From prisons to railways and Government Departments, outsourcing has become the norm, but for many workers this means low pay, insecure contracts and poor conditions, while private firms reap significant financial rewards at public expense. This cannot continue.
In the case of the civil service, every worker deserves dignity, respect and fair treatment, yet this is far from the reality for outsourced staff. Despite working alongside Ministers and civil servants, they are denied company or departmental sick pay, decent pensions and access to civil service pay scales. These exploitative employment practices exist at the heart of Government, and I respectfully remind the Minister that, in her own Department, outsourced workers are being denied sick pay from day one.
Beyond that, we need a complete overhaul of outsourcing in Government. At the very least, Government Departments must require private sector contractors to engage meaningfully with trade unions to ensure fair pay and conditions for all. Outsourcing companies are exploiting both the Government and the taxpayer. They inflate costs by charging excessive fees for contracts and extra services, while driving down wages and basic employment conditions to line the pockets of shareholders. It is a broken system.
Finally, will the Minister provide a clear update on her plans to deliver the Government’s insourcing commitment? In the interim, will she intervene in the ongoing disputes within Government Departments, including her own, to ensure that all workers receive basic rights from day one? If we truly want to build a high-wage economy and drive real growth, we need to start by guaranteeing that Government workers have fair pay, decent conditions and job security. That means ending wasteful outsourcing and cutting out the worst offending firms, which undermine workers and taxpayers alike.
Ian Lavery (Blyth and Ashington) (Lab)
I thank my hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald) for bringing this timely debate to the Chamber. As ever, it is a pleasure to serve under your chairmanship, Sir Jeremy.
I want to dispel some myths in the few minutes that I have got. I want us to wake up and smell the coffee, because this is not “outsourcing”. What is outsourcing? It is privatisation. One hon. Member said it is privatisation by the back door, but it is not; it is just privatisation. We have got to get to grips with how privatisation in this country is getting out of control. Who benefits and who does not benefit? The reality is that the companies are making fortunes and the workers are struggling to make ends meet.
There are some private companies that are actually providing food banks in their places of work for the people they employ. How obscene is that? It is not about socialism or about even left-wing ideology; it is about decency and respect. It is about ambition and giving people a fair deal. That is what we should be about in a prosperous country like the one we live in. Who suffers under privatisation? I was one of the people who worked in a nationalised industry that was privatised over a period of time, so I have got experience of this. Who suffers? It is the workers.
It has been mentioned: reduction in pay, sacking of the labour force, lack of trade union recognition—even trying to fight back—nae sick pay, nae holiday pay. It is absolutely absurd. It served them! We need to be saying what it really is, and the Government Departments are ridden with individuals who are working under the most horrendous of conditions. I pay tribute to the many workers who have worked tirelessly. Many of those in privatised companies are claiming universal credit. The company directors are trousering fortunes, while the workers are losing out on the rights that I have just mentioned. It is horrendous. Some of them cannot make ends meet. Many of them are going to work when they really should not be there, because of sickness, for example. It is just wholly unacceptable.
We have got to get to grips with this privatisation. We have got no other option. We need to protect people in this country from the abuses and the exploitation by privateers, who are making fortunes at the cost of those in the industry. I urge my hon. Friend the Minister to listen to what my hon. Friend the Member for Normanton and Hemsworth (Jon Trickett) said about the legal presumption of in-house employment, because the reality is that we cannot control what we do not own.
Sir Jeremy Wright (in the Chair)
I thank all hon. Members who have spoken for their restraint. It has allowed me to get one more hon. Member in, but I ask her to please bring her remarks to a close at 10.30 am.
Bell Ribeiro-Addy (Clapham and Brixton Hill) (Lab)
It is a pleasure to serve under your chairship, Sir Jeremy. I thank my hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald) for securing the debate.
As the chair of the all-party parliamentary group on immigration detention, I want to raise the deeply troubling subject of the outsourcing of the management of immigration removal centres to private companies. I do not believe in Government outsourcing for public services —I struggle to think of an example that demonstrates good value for money—yet our asylum system, and particularly immigration removal centres, is being run for profit.
In 2019, the Conservative Government awarded asylum contracts worth £4 billion for 10 years to just three companies: Serco, Mears and Clearsprings Ready Homes, each of which raked in millions. Although some might point to the profit-sharing agreement that they are meant to have with the Government, the threshold for payback has not been disclosed. A freedom of information request to the Home Office revealed that not a penny of profit has actually gone back to the Treasury under that agreement.
We would hope that those companies were at least providing a good service, but that is not the case. We have seen reports of several deaths, suicides and suicide attempts at those facilities. Almost every single one of the removal centres operated by those companies have seen numerous recorded cases of overcrowding, hostile and unsanitary conditions, and mistreatment and abuse of detainees, both physical and psychological. I have seen some of those conditions for myself. Almost every one of the companies have had severe accusations of mismanagement levelled against them, backed up by hard evidence.
I do not believe that our asylum process should be run for profit, and I certainly do not believe that companies doing a shoddy job should continue to be handed lucrative contracts while making the lives of some of the most vulnerable people in this country absolutely miserable. I urge the Government to review those contracts, and if they are not willing to bring the entire asylum system in house, they should at least revoke the contracts of the awful companies that I have listed.
Jess Brown-Fuller (Chichester) (LD)
It is a pleasure to serve under your chairmanship, Sir Jeremy. I thank the hon. Member for Middlesbrough and Thornaby East (Andy McDonald) for securing today’s important debate. I think we can agree across the House that this debate is really about the workers, and the disproportionate effect that outsourcing has on some—especially those in the BAME community, as the hon. Member for Bradford East (Imran Hussain) and the right hon. Member for Hayes and Harlington (John McDonnell) mentioned.
Time and again, we have seen examples of Government Departments outsourcing their obligations to others who have failed to fulfil their duties, representing poor value for money for the public. Examples of such systemic failures include procurement issues in the NHS, poor accommodation standards in the military, and failing, poorly designed programmes for tutoring in English schools.
In 2022-23, the public sector spent around £326 billion—29% of its total spending—buying goods and services from the private sector. As my hon. Friend the Member for Carshalton and Wallington (Bobby Dean) reflected, that creates monopolies in the private sector, so support in the public sector is totally eroded and it is unable to provide those services any more. As the hon. Member for Normanton and Hemsworth (Jon Trickett) said, this means that a third of taxpayer money is now being spent on outsourcing. In the light of those figures, we must ensure that public procurement processes do not undermine confidence in our institutions, especially following years of a Conservative Government that caused significant damage to public trust in politics and public institutions.
Let me give an example of the lack of accountability that the hon. Member for Normanton and Hemsworth talked about. With local authorities reneging on their responsibilities to manage new roads, land management companies such as FirstPort come in and charge excessive fees to homeowners. Politicians of all parties—the Conservatives, Labour and the Liberal Democrats—have hauled that company in to say, “You are treating your householders poorly,” but how do we actually hold them to account if they are a private company providing a private service? Nothing will change unless we bring the service back in house.
During the covid pandemic, there were clear failures in procurement processes, particularly through the use of VIP lanes for Government contracts. That led to £9 billion being wasted on personal protective equipment that had to be written off, and £2.6 billion being spent on items deemed not suitable for the NHS, which accounted for one in 10 items purchased overall. It is imperative that robust rules are in place to guarantee that vital public spending is conducted effectively, efficiently and transparently, and that scandals like the misuse of VIP lanes will be avoided.
There are huge opportunities in the NHS to get this right. The Government should investigate the merits of national commissioning and procurement of National Institute for Health and Care Excellence-approved digital technology, devices and diagnostics, much like is currently done for medicines. There are fantastic examples of integrated care boards using commissioned services that have improved patient experience and created a more joined-up health pathway, but we do not see those best-practice models rolled out across the whole of our healthcare service, because of the fragmented approach to procurement, with individual ICBs doing their own commissioning.
Far from restricting choice for local NHS trusts, cutting the cost of new tech and digital services could make them available for the first time in areas where they currently are not available. Care boards often have to commission such innovations and services from companies separately, causing a far greater overall cost. As many Members have said today, we have no evidence that commissioning services out actually saves the public sector any money at all. The NHS has huge buying power and the Government should make the most of it to improve patient treatment. Commissioning based on NICE guidelines could also help clinicians to better determine which devices or digital innovations work best for their patients.
Something that is often missed when we talk about outsourcing is that frontline services in healthcare are already all outsourced. Nobody working in the frontline of our healthcare professions is employed directly by the NHS. Our general practitioners, pharmacists, dentists and audiologists are all outsourced; they are all part of private companies. I recently saw the real effect of that, when a GP federation that provided doctors across my constituency and the wider area fell apart. Suddenly, lots of doctors who, as far as they were concerned, worked for the NHS were out of work with no recompense. We know that we have a crisis and that we need doctors on the frontline providing general practice services, but when that private company collapsed, there was nothing available for those doctors, even though they had always felt that they were part of the NHS.
The Liberal Democrats also really want to improve the standard of Ministry of Defence housing by reviewing outsourced housing and maintenance contracts, which have represented poor value for money, leading to inadequate accommodation for our service personnel. The facilities are often outsourced, too, as the hon. Member for Moray West, Nairn and Strathspey (Graham Leadbitter) said.
The Thorney Island barracks in my constituency have long called for improvements to accommodation and infrastructure facilities, so I was glad to hear about plans for new accommodation to be constructed there later this year. However, too many of our service personnel across the country have to put up with homes leaking sewage, inadequate rooms for their families and a lack of basic information about when improvements will be forthcoming.
The MOD has historically failed to get good value for money from its management of contracts for service family accommodation, which it leases from Annington Property Ltd. In the 1990s, the Conservative Government sold off MOD accommodation to Annington, which made £550 million in profit in 2021, but the MOD is still responsible for the upkeep of the properties, with five maintenance contracts worth £640 million being established in 2022.
We welcome the Government’s commitment to reviewing outsourced services through public interest tests to prevent a recurrence of scandals such as the PPE debacle and the challenges faced in MOD housing provision, but it is essential that outsourcing occurs with full transparency from Government Departments, to ensure that deals struck represent good value for money for the public and are not handouts to “VIPs” without a proper process in place. The Liberal Democrats would also ensure that Ministers received annual training to prevent further scandals about standards, and we would enshrine the ministerial code in legislation. We will continue to call for measures that strengthen tests to prevent misuse of public funds, in order to rebuild trust in our institutions.
Mike Wood (Kingswinford and South Staffordshire) (Con)
I congratulate the hon. Member for Middlesbrough and Thornaby East (Andy McDonald) on securing this debate. He may not be surprised to learn that I do not agree with his general position. I thank the many Members who have contributed to the debate. I must admit that some of the contributions by Government Members left me feeling a little nostalgic, although I suspect that the Prime Minister and some Government Whips might prefer them to keep such views under wraps a little more.
It is a pleasure to speak in this debate on outsourcing, which, when handled well, delivers efficiency, value for money and innovation in the provision of public services. Unfortunately, however, the actions we have seen so far from the Government are further complicating and undermining effective public procurement. Rather than building on the progress made by the previous Government, Labour is making public procurement more burdensome, less efficient and increasingly dictated by trade unions. That will make it more difficult to make outsourcing work for service users and taxpayers.
The Procurement Act 2023 was introduced to ensure a streamlined, modernised and effective procurement system that would deliver better outcomes for taxpayers. The Act was designed to cut red tape, improve transparency and ensure that public contracts were awarded based on value and efficiency, but the new Government have delayed its implementation. They have announced plans for a new national procurement policy statement—
Grahame Morris
I am interested in the hon. Member’s contention about value for money. Does he actually believe that the prison maintenance contract delivers value for money for the taxpayer?
Mike Wood
Numerous reports, not least by the Institute for Government, have found that, in many areas of Government activity, outsourcing and public procurement from private providers improves service and value for money for the taxpayer. Of course, it can be done badly, and the Probation Service is the obvious example where it clearly never worked. Although the pandemic brought things to a critical point, it was becoming increasingly difficult even before then to argue that that private provision was providing a satisfactory service.
We are still waiting for the national procurement policy statement, less than four weeks before the Procurement Act is due to commence. The new Government claim that the Act, in its current form, does not meet their vision for harnessing public procurement to deliver economic growth, value for money and social value, but it looks increasingly as though what they mean is that they want to use public contracts as a vehicle to expand trade union influence in Government, imposing costly and unnecessary regulatory burdens on businesses. In the absence of a national procurement policy statement, the Government are introducing further restrictions and bureaucracy through what they call “Make Work Pay”, but for a lot of employers that looks a lot like just making jobs more expensive.
Businesses seeking Government contracts are to be required to demonstrate trade union recognition, access for union organisers, collective bargaining arrangements, adherence to so-called fair work standards that go well beyond legal obligations, and other social commitments. Recent parliamentary answers have confirmed that those requirements will apply not only to large firms, but to small and medium-sized enterprises, undoing a lot of the good work in the Procurement Act that aimed to open up public procurement contracts to a wider range of smaller businesses.
This is not about ensuring fair treatment of workers. UK employment law already provides robust protections. This is about allowing unions to dictate the terms of our public procurement, favouring firms that meet ideological criteria rather than those that offer the best value and most efficient service.
Ian Lavery
Does the hon. Gentleman think it is right that in certain private companies, individuals are able to claim universal credit, while directors of the very same companies are trousering thousands of pounds, as are the dividend holders? It is a burden on the taxpayer—does he agree?
Mike Wood
Businesses have to fulfil their legal obligations. The previous Government introduced the national living wage, which will increase this April under the current Government, and of course where businesses of whatever type are failing to pay the national living wage, there must be proper enforcement and legal consequences.
We need to be clear about what the Government’s changes mean in practice. Instead of being awarded contracts on the basis of cost-effectiveness and efficiency, businesses will have to navigate a minefield of additional requirements, making it harder for SMEs to compete for public contracts. The added complexity will inevitably drive up costs and reduce competition, and it will ultimately mean that taxpayers get less for their money and a poorer service.
Beyond increasing costs and inefficiencies, this approach risks distorting the market by prioritising ideology over quality. Public contracts must be awarded to the best providers, whether in house or private. That means those that offer the most efficient service at the best price, rather than those that can best navigate a politically driven procurement system. The increased focus on trade union influence in procurement raises serious concerns about political favouritism and undermines the principle of fair competition.
Mike Wood
I really need to make progress so that the Minister can respond.
It is particularly troubling that Labour has refused to clarify exactly how the new procurement rules will work in practice. The NPPS, which is meant to lay out the Government’s plans, has yet to be published, leaving businesses uncertain about the future landscape of public contracts. The previous version was published nearly six months before the Procurement Act was due to commence. It is now less than four weeks before the date the Minister indicated that the Act will commence. There is no sign of what the new rules will be, and yet businesses will be expected to adapt.
Furthermore, it is essential to recognise that the regulatory burden placed on firms seeking Government contracts will have a chilling effect on investment, innovation and the growth that I understand the Chancellor is speaking of this morning. If businesses perceive that public procurement is more about politics than performance, they will simply withdraw from bidding for contracts. That will leave fewer providers and make us more reliant on a small number of mega-contractors, reducing competitive pressure to drive efficiencies. That would be disastrous for taxpayers, who deserve the best services at the lowest cost.
The previous Government recognised the need for reform and took decisive action to improve procurement. This Government, on the other hand, are undoing that work by creating a system in which trade unions hold the keys to public contracts and require businesses to comply with unnecessary and costly obligations that do nothing to improve service delivery.
Public procurement should be about securing the best services at the best price for the taxpayer, not about enforcing an ideological agenda. Labour’s approach will lead to inefficiency and waste, and will reduce competition —all at the expense of businesses and the public, who rely on well-managed services. If the Government continue down this path, they risk severely damaging the UK’s ability to run a fair and efficient public procurement system.
I have a number of questions that I hope the Minister will address. When will the Government next update their model services contract guidance and the outsourcing playbook? Are Departments still on track to save £550 million this financial year, as the Government promised they would in November? What steps are the Government taking to ensure that microbusinesses and SMEs are not excluded from bidding for, or engaging with, public sector outsourcing opportunities? What contact has the Minister had with the Business Services Association regarding any updates to the Government’s outsourcing policies? What discussions have she and her colleagues had with colleagues at the Crown Commercial Service regarding the operation of the RM6277 framework? Finally, do the Government still expect the Procurement Act to commence on 24 February? If they do, does the Minister think the very short time that businesses have to adapt between the publication of the policy statement and the commencement of the Act is acceptable?
Outsourcing and public procurement are a real test for this Government. Will they fall back on the ideology of the past or represent the interests of the public going forward? Are they working in the interests of those who use and pay for services, or in the interests of union paymasters?
Sir Jeremy Wright (in the Chair)
I will now call the Minister to respond. If there is any time left before 11 o’clock, I will invite Andy McDonald to wind up, if he wishes to.
The Parliamentary Secretary, Cabinet Office (Georgia Gould)
This is my first time responding to a Westminster Hall debate, and it is an honour to serve under your chairmanship, Sir Jeremy. I join many Members in expressing my thanks to my hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald) for his contribution, and I echo the comments that have been made about his constructive and thoughtful work on this issue.
Many Members had only a short time to set out their views. My hon. Friend the Member for Normanton and Hemsworth (Jon Trickett) said that four minutes was not quite enough, given his 29 years’ experience. That far surpasses my few months, so I would welcome the opportunity to have further discussions with any colleagues across the House. Critical issues were raised about a whole range of public services, and I would welcome the opportunity to sit down with Members ahead of putting forward the new national procurement policy statement.
I join many Members in paying tribute to the work of outsourced staff—the security guards, cleaners and catering teams—who play a vital role in supporting Government and who allow all of us to do our jobs. They serve the public and the public sector, and are, in the case of the security teams, the front door to Government. Whether staff are directly employed or contracted, they are engaging in vital public services, and these should be decent jobs with progression routes, as we have heard.
My hon. Friend the Member for Middlesbrough and Thornaby East is right to raise the topic of outsourcing. As the Government set out in our plan to make work pay, we need to learn the lessons from the collapse of Carillion and more effectively manage markets to ensure the right mix of provision. That means ending the previous Administration’s dogmatic drive to privatise our public services.
I was interested to hear the comments about ideology, having watched for the last 14 years as an ideologically driven approach led to waste, poor value for money and, in some cases, poor public services—for example, the hon. Member for Kingswinford and South Staffordshire (Mike Wood) referenced the failed outsourcing of probation services. We must ensure that all contracts are transparent and accountable and provide value for money for the British taxpayer.
I was surprised to hear the comments about progress. Like the right hon. Member for Hayes and Harlington (John McDonnell), I have a background in local government—I think we both have a background at Camden council. While I was in local government, I saw billions wasted on PPE, and I saw the waste of the test and trace contract, when those of us in local government knew that public health officials and housing staff were ready to go out and do that work. Yet, so much money went to private providers, and I saw the ballooning cost of consultants.
The hon. Member for Carshalton and Wallington (Bobby Dean) referenced children’s homes. The new Government have had to step in to end the exploitative practice of some private sector organisations making excessive profits from services for vulnerable children. Under the previous Government, we saw a significant increase in privately run children’s homes, with a Competition and Markets Authority report suggesting that the 15 largest children’s home providers make an average 23% profit per year. Is that value for money? This Government have shone a light on those profits, set a new cap and given Ofsted new powers to investigate and impose fines for exploitative practices.
As the leader of a council, I saw how insourced public services, when managed carefully over time, with robust assessment of benefits and outcomes, can deliver savings for taxpayers and better public services. During covid, I saw how our in-house repairs service immediately moved to delivering food, often volunteering to work long hours to support residents. I saw the pride and commitment that came from working for the council, and the greater flexibility and innovation that that could bring. I agree with the hon. Member for Carshalton and Wallington that there is huge innovation in the public sector.
As we saw under the previous Government, outsourced services can too often deliver a race to the bottom on quality and standards, and a self-defeating approach that harms taxpayers and value for money. This Government are determined to deliver good public services and better value for money. That includes making decisions about how to deliver services to avoid the waste we saw under the previous Government. We have already begun to deliver reform of the frameworks for outsourcing, with provisions in the Employment Rights Bill to strengthen and reinstate the two-tier code introduced under the last Labour Government. The new Procurement Act will come into effect next month, creating a simpler and more flexible procurement system underpinned by a new mission-focused national procurement policy statement.
I did not recognise the comments made about that work. I have engaged deeply with SMEs, businesses, the voluntary sector, social enterprise, contracting authorities, trade unions and a wide range of stakeholders to ensure that the NPPS delivers our missions for the country, with growth at the heart of what we want to achieve. The statement will set out the Government’s policy priorities, and contracting authorities will have to have regard to it when carrying out procurements. That will be the first step to ending the last Government’s ideological fixation with outsourcing. I am pleased to say that the statement is almost complete, as we continue to have those conversations, and I look forward to laying it before both Houses shortly.
I want to respond directly to the points made about outsourcing. I agree with the position of Christina McAnea and Unison, which was highlighted by my hon. Friend the Member for Middlesbrough and Thornaby East, that a public interest test should be in place before services are outsourced, to ensure value for money and the best outcomes. The NPPS will set out how we plan to make it easier for public authorities to test the best possible model to provide value for money and outcomes for the taxpayer, and end the ideological presumption on outsourcing.
Through these measures, the Government will achieve greater value for money for the people and businesses of this country, moving away from relying on a few large suppliers and being more open to investment across the country in the areas that need it most. Key to that is supporting SMEs. I hear so often from SMEs that they find engaging with Government procurement complex and burdensome. Part of the work we want to do involves diversifying the providers that come forward, whether that is SMEs, social enterprises or voluntary sector organisations.
We have also begun to assess the areas of Government that could be done more effectively in house, and where there may be compelling reasons for Government to develop their own capabilities and capacity to deliver good value for money and better public services. Again, I welcome a wider discussion of that. That work will recognise the practical hurdles to building Government capacity, particularly in a constrained fiscal environment, and when many public services are under huge strain. Having brought a number of services in house in local government, I know that it can be very powerful and save money, but it also takes time, planning and investment. The lead-in times on procurement are significant, and there is no quick fix. However, active work is happening on those critical issues.
We are clear that we will end the last Government’s tunnel vision on large-scale outsourcing and consider the best way to achieve our missions and the best outcomes for citizens. As I have set out, we want to see more diversity, including social enterprises, co-ops, mutuals, voluntary sector organisations and SMEs. We will use the measures in the Procurement Act to open up procurement to that more diverse supply base. Hon. Members spoke of ensuring that we have the right capacity to manage contracts, as well as transparency throughout the process, and that will be at the core of the work we are leading.
We are clear that public sector procurement is an important engine of growth for the economy and that there are purpose-driven businesses providing good-quality jobs. However, as we have heard from some surveys, there is poor practice across the economy. That is why we have introduced the Employment Rights Bill to increase standards and ensure there are decent jobs, not just as part of Government contracts, but across the economy. I do not have a huge amount of time, and I will not go through all the measures, but they address some of the questions put to me today. The provisions in the Employment Rights Bill will empower Ministers to reinstate and strengthen the two-tier code through regulations and a statutory code of practice, which is critical.
I end by thanking my hon. Friend the Member for Middlesbrough and Thornaby East for bringing forward this issue. As we work on the new NPPS, his insights and those of all those here are very welcome, and I am open to ideas from every part of the House. Close to £400 billion is spent on public procurement, which is a huge amount, and we need to ensure that it provides growth and opportunity across the country. We should use procurement to ensure that there are good jobs for our citizens in every community. Whenever we decide to spend taxpayers’ money, it is right that we make an assessment of what will deliver the best outcomes for citizens and value for money. Unlike the last Government, we will never put ideology before people.
Sir Jeremy Wright (in the Chair)
I thank the Minister for her debut performance in Westminster Hall.
Question put and agreed to.
Resolved,
That this House has considered outsourcing by Government departments.