Outsourcing: Government Departments

Imran Hussain Excerpts

Wednesday 29th January 2025 Westminster Hall

[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.

[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.