Outsourcing: Government Departments

Bobby Dean Excerpts

Wednesday 29th January 2025 Westminster Hall

[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—]