Outsourcing: Government Departments

Grahame Morris Excerpts

Wednesday 29th January 2025 Westminster Hall

[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.

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[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.