Outsourcing (Government Departments)

Jackie Doyle-Price Excerpts

Wednesday 25th April 2012 Westminster Hall

[Grahame M. Morris]

I agree that there are various interpretations of what constitutes public sector reform, and I will speak about academies in a few moments. I am grateful to my hon. Friend for her intervention.

On all three points illustrated in that detailed survey, the Government are out of step with the public on public service reform. Ordinary people want public services in public hands for the public good, but the Government seem to want public services outsourced to business for the good of private profit. Ordinary people want universalism, but the Government want to decentralise, to remove targets and to create local variations and postcode lotteries, so going against standardised and universal access. Ordinary people oppose rapid upheaval and fundamental reform to public services, and a case in point is the opposition to the NHS reforms.

The Government have run amok with the reorganisation of the health service and forged ahead with public service reform and outsourcing at breakneck speed. It is no surprise that when Ministers make speeches on public service reform, they do so to business leaders, never to public sector workers, service users or trade union groups who work in the public sector. I want to place on the record my support, sympathy and admiration for the front-line workers who are so often treated like pawns in a game of chess, facing constant change, reorganisation and regrading, often at the whim of political elites.

Workers across the public sector know that the latest policy move to the mass outsourcing of services and a free-for-all for business will be a last hurrah, because many of the changes will be irreversible. For people who work in the public service, it means an end to job security and to nationally determined pay, conditions and terms of service. Instead, national public services will become ever more fragmented, unstable and variable, offering short-term and risky employment not by the state, but by any fly-by-night private sector operator.

[Jackie Doyle-Price (Thurrock) (Con)]

The hon. Gentleman is making a passionate case, but it is framed as public versus private. The reality is that we are looking at any number of models to deliver our public services. We have social enterprises and co-operatives. Surely, we should look at the outcome and not the structure of delivery.

[Grahame M. Morris]

I thank the hon. Lady for her intervention, but there is a danger of fragmentation, even with some of the models that she mentions—for example, in the national health service and social care. If we are trying to promote integrated services, a plethora of private sector and even voluntary sector providers works against that ethos. That is a risk.

My argument is that public sector workers and service users know the difference between private profiteering and public services. Let us not forget that the key difference is that the first duty of a business is to its shareholders and the pursuit of profit.

The coalition Government are trying to do two things in developing their own brand of public service reform, which is quite distinct from what the Labour party did when in office. First, they are trying to tie down companies with more stringent contracts in the belief that setting targets will guarantee performance—ironically, the Government argued against targets in the national health service and wanted them to be ditched by public sector providers. Secondly, they believe that with stricter conditions for private sector providers, there should be no limits on where those providers should be allowed to tread within the public sector.

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[Grahame M. Morris]

There are many examples where the proposals for privatisation, outsourcing or whatever models are being piloted have not produced positive results. I do not have the opportunity to list them all owing to a shortage of time, but I am grateful to my hon. Friend for that example.

The Welfare Bill passed through Parliament in March and lays the foundations for billion-pound contracts of five years or more for private companies to run welfare-to-work programmes and the administration of the new benefits system. I believe that the rush to outsource the biggest spending Department—the Department for Work and Pensions—rather than develop a coherent strategy to create jobs and growth in the economy, is a dereliction of duty by the Government.

[Jackie Doyle-Price]

The hon. Gentleman draws attention to a good example of a contract that is working. In that contract, the burden of risk is pushed on to the private provider. If it does not deliver jobs, it does not get money. Surely, that is a good thing.

[Grahame M. Morris]

I am afraid that I do not agree with the hon. Lady. The issue was raised during questions to the DWP on Monday—by myself, I think—and the papers this weekend illustrated a number of examples of service failure. Service users feel huge dissatisfaction with Atos and A4e, and there has been a huge uproar about the quality of service provision in training or retraining ex-offenders.

The evidence base is littered with failures from the private sector, so it is difficult to hold up an example. If there is a good example, I suspect that it might be the exception rather than the rule. Most often, there is a negative impact for employees, with the prevalence of short-term contracts and the use of part-time and temporary staff who are often recruited through employment agencies. Indeed, Unison commissioned a report on the rise of the multi-billion-pound private public services industry and raised significant concerns about the increased dependency on private firms.

The privatisation of public services has already become a huge industry, through which the private sector receives more than £80 billion of taxpayers’ money every year, yet it has become characterised by increased cost, deteriorating quality, the loss of accountability and the greater risk of service failure. The reason why we had the birth of municipal provision in the great northern cities—Manchester, Bradford, Leeds and Wigan—was that the city fathers saw that public provision was more efficient and accountable than the existing private sector provision that was available at the time. Those arguments are not new in that respect.

I want to give another couple of examples. I mentioned A4e, and it would be remiss not to mention the Southern Cross care homes debacle. Other scandals in relation to welfare have also raised such issues and brought this agenda to the fore. That will happen more often as more services are passed over to the private sector. There is also a risk that we will lose control over our public services altogether. Indeed, in 2007, the Local Government Association warned that the amount of local authority spending on external private sector contracts and the ability of local government to make efficiency savings when it has already signed contracts without further damaging services was not realistic.

The Government’s central argument in favour of the increased commercialisation and privatisation of public services rests on the importance of consumer choice as a driver for increased efficiency, accountability and value for money. However, again, that is not supported by the evidence contained in the public surveys that have been carried out. One area that features genuine consumer choice is the provision of utilities. In most parts of the United Kingdom, people can choose a provider of gas or electricity from a handful of companies. However, is that a good example? There is massive public concern that prices have increased way above inflation and that the profits of the energy companies have soared. So the panacea of private-led competition is not everything that the coalition would have us believe it is.

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[Mr Hurd]

I am delighted to move on to the substance of the debate. I have tried my best to respond to various interventions from Opposition Members. The hon. Member for Easington referred to open public services. [Interruption.] With respect to the hon. Gentleman, I am trying to answer the meat of his argument, which is whether it is good to create a situation in which those buying on behalf of the taxpayer have choice about where they buy services on our behalf. He is actually arguing for no choice and for protection of the status quo. The Government’s open public services White Paper makes it clear—we expect a political argument about this—that we want to switch the default setting away from in-house delivery to commissioning services from a diverse range of providers where that would improve services or reduce costs.

The hon. Gentleman made it clear that he was hostile to the for-profits sector. My hon. Friend the Member for Thurrock made a valuable point that the Government are agnostic about who delivers the service. We are particularly keen—it is a coalition Government commitment —to make it easier for charities and social enterprises to participate in public services. They are not driven by a profit motive. By definition, they are driven by a desire to deliver a better outcome for the people whom they support and care about.

[Jackie Doyle-Price]

The hon. Member for Easington (Grahame M. Morris) referred to academies in his speech. Perhaps I should remind my hon. Friend about the Public Accounts Committee’s inquiry into academies, which showed that they delivered not only better outcomes for the taxpayer but better value for money. Is that not a perfect example of how changing provision and getting away from uniform provision delivers better outcomes?

[Mr Hurd]

Yes, I absolutely agree. I also agree with what my hon. Friend said when the hon. Member for Easington kept saying, “Where’s the evidence?” There is plenty of evidence for the value of competition—if we need it, because we know it in our daily lives. Academic research suggests that competitively tendering public services typically produces savings of between 10% and 30% while maintaining or improving standards. I refer the hon. Member for Easington to the “Public Services Industry Review” of July 2008 by Dr DeAnne Julius, but there is no shortage of evidence for the value of tendering and introducing competition into the system.

Dr Julius also talked about the payment-by-results regime, which the Opposition do not like at all, although the situation we inherited was that those buying on our behalf were extraordinarily complacent about whether we got anything for the money. Such a regime is not appropriate in every case, but we are moving towards a requirement for commissioners—those buying on our behalf—to think much harder about what they are buying and the outcomes against which they will be measured in a new transparent world where there will be nowhere to hide. Yes, we will introduce payment by results where that is appropriate, because it introduces some basic, common-sense discipline into how we spend taxpayers’ money. For most of my constituents, that makes plain common sense—after all, it is their money.

Finally, we are also keen to encourage the development of mutuals, employee ownership and organisations in which employees are in charge. One such model in which ownership is shared between employees, Government and private sector partners is the innovative pathfinder mutual joint venture, My Civil Service Pension, which provides pension administration for civil servants. Likewise, I go around the country and meet some of the mutual spin-outs from the NHS, where the hon. Gentleman used to work, and the difference when one walks through the door into those organisations is tangible.

Our programme of reform is focused on the citizen and is already cutting out unnecessary cost to help protect front-line priorities. Outsourcing remains an interesting option and one that will offer the best deal in many situations, but it is not the only one, and we are judging every case on its merits.