Outsourcing: Government Departments

Ian Lavery Excerpts

Wednesday 29th January 2025 Westminster Hall

[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.

--- Later in debate ---

[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.