Outsourcing: Government Departments

Jeremy Wright Excerpts

Wednesday 29th January 2025 Westminster Hall

[Several hon. Members rose—]

[Sir Jeremy Wright (in the Chair)]

Order. It will be obvious to everyone that there is considerable interest in this debate. May I ask all Members to bob if you wish to speak, and to continue to do that so that we can see you still wish to speak? I hope that if everyone can restrict themselves to about four minutes, we will get everybody in. I want to start calling the Front Benchers at 10.30 am.

--- Later in debate ---

[Steve Witherden (Montgomeryshire and Glyndŵr) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Jeremy. I congratulate my hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald) on securing this crucial debate. I have had the privilege of standing in solidarity with the facilities management staff and speaking at the PCS pickets that have been mentioned by others in this debate. Their demands could not be clearer: fair pay, better working conditions and an end to outsourcing in Government Departments. While delivering vital services such as cleaning, catering and security to keep civil service Departments running effectively, those employed on outsourced contracts are treated as second-class employees compared with their in-house counterparts. The result is a two-tier system with a sharp racial divide. BAME and migrant workers are disproportionately employed in these roles.

Last year we saw the long and hard-fought dispute between the Department for Education and its outsourced cleaners come to an end. Reports of those workers being overworked, treated “like rats” and denied the London living wage were truly appalling. Unfortunately, such treatment is common practice when it comes to the subcontracting of Government services to private firms. Many workers on outsourced contracts struggle to make ends meet, especially during the ongoing cost of living crisis, as their wages are often limited to the national minimum or living wage. In some Government Departments and agency workplaces, PCS members have even resorted to establishing food banks to support low-paid staff. Adding to their economic insecurity, those workers are also excluded from access to decent pension schemes.

The current outsourcing model weakens the Government’s ability to hold companies accountable. Basic protections for outsourced workers, such as company sick pay, are shirked, often forcing employees to continue working while unwell as they cannot afford to take time off. These outsourcing practices propagate the exploitation of employees. The companies behind them can easily avoid taking responsibility for poor pay and conditions, and the quality and fairness of essential public services are being compromised all the while. Will the Government honour the welcome promise of

“the biggest wave of insourcing…for a generation”?

Will they bring services back in-house where they belong and show their loyalty to the cleaners, the security staff and all the other undervalued workers who keep this country running, not the profiteering directors of outsourcing companies? Diolch yn fawr.

[Sir Jeremy Wright (in the Chair)]

Within your four minutes—thank you very much.

--- Later in debate ---

[Jim Shannon]

My hon. Friend is right. We are all trying to ensure that the programmes and services are delivered and that, more importantly, the rights of workers are protected. He has hit that nail on the head.

The outsourcing of services can never be a no-brainer; it must always be a decision that is thought through from beginning to end, and with more than the financial bottom line as a guide. The hon. Member for Middlesbrough and Thornaby East referred to it not being about profit margins. It should never be about profit margins; it should be about ensuring that the service is right. I agree with him.

We need to be sure that outsourcing companies behave in an ethical way when it comes to issues such as zero-hour contracts. That is made more difficult by the changes to national insurance, the blame for which lies with the Government. The group that runs Ards and North Down borough council’s Bangor leisure centre is concerned about £20 million in extra labour costs due to the changes to national insurance contributions and the minimum wage in the October Budget.

As always, that will affect profits, and I am concerned that the loser will be the low-paid worker with minimal rights. This is the key issue that must be taken into consideration in the context of outsourcing. The Government make decisions and say that businesses will have to swallow the cost, but too often the reality is that the staff have to. It is the wee man and the wee woman in the street who will pay, through the goods that they buy. Some companies that provided paid morning and afternoon coffee breaks are now saying that they can afford to do only the bare legal minimum. That is the unintended consequence of decisions made in this place.

At the same time, there is a time and a place for outsourcing, where expertise demands it. For major capital projects, the niche work must often be outsourced, rather than hiring in for short-term purposes. If there is to be a moving of the goalposts regarding outsourcing, we must retain the ability to get necessary work done in a short space of time.

In times of emergency, such as that currently happening at home with the after-effects of the storm, it is clear that outsourcing must always be on the table. Our road service, Transport NI, does not have the capacity to clear and make roads safe. The ability to hire contractors is vital, and it needs to be able to be done quickly. Those who wish to see an end to outsourcing need to be careful. Providing services in-house, with greater control, is better, but one size does not fit all. It may be beneficial to lean towards doing things in-house, but any decisions must be well considered and weighted, as I know the Minister’s will be.

[Sir Jeremy Wright (in the Chair)]

Order. I gently remind all Members that we must get to four minutes each voluntarily or I will have to impose something less voluntary. I call Jon Trickett.

--- Later in debate ---

[Several hon. Members rose—]

[Sir Jeremy Wright (in the Chair)]

Order. We have 10 minutes left, and I hope to bring three more people in, so I ask colleagues to restrict themselves accordingly.

--- Later in debate ---

[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]

I really need to make progress so that the Minister can respond.

It is particularly troubling that Labour has refused to clarify exactly how the new procurement rules will work in practice. The NPPS, which is meant to lay out the Government’s plans, has yet to be published, leaving businesses uncertain about the future landscape of public contracts. The previous version was published nearly six months before the Procurement Act was due to commence. It is now less than four weeks before the date the Minister indicated that the Act will commence. There is no sign of what the new rules will be, and yet businesses will be expected to adapt.

Furthermore, it is essential to recognise that the regulatory burden placed on firms seeking Government contracts will have a chilling effect on investment, innovation and the growth that I understand the Chancellor is speaking of this morning. If businesses perceive that public procurement is more about politics than performance, they will simply withdraw from bidding for contracts. That will leave fewer providers and make us more reliant on a small number of mega-contractors, reducing competitive pressure to drive efficiencies. That would be disastrous for taxpayers, who deserve the best services at the lowest cost.

The previous Government recognised the need for reform and took decisive action to improve procurement. This Government, on the other hand, are undoing that work by creating a system in which trade unions hold the keys to public contracts and require businesses to comply with unnecessary and costly obligations that do nothing to improve service delivery.

Public procurement should be about securing the best services at the best price for the taxpayer, not about enforcing an ideological agenda. Labour’s approach will lead to inefficiency and waste, and will reduce competition —all at the expense of businesses and the public, who rely on well-managed services. If the Government continue down this path, they risk severely damaging the UK’s ability to run a fair and efficient public procurement system.

I have a number of questions that I hope the Minister will address. When will the Government next update their model services contract guidance and the outsourcing playbook? Are Departments still on track to save £550 million this financial year, as the Government promised they would in November? What steps are the Government taking to ensure that microbusinesses and SMEs are not excluded from bidding for, or engaging with, public sector outsourcing opportunities? What contact has the Minister had with the Business Services Association regarding any updates to the Government’s outsourcing policies? What discussions have she and her colleagues had with colleagues at the Crown Commercial Service regarding the operation of the RM6277 framework? Finally, do the Government still expect the Procurement Act to commence on 24 February? If they do, does the Minister think the very short time that businesses have to adapt between the publication of the policy statement and the commencement of the Act is acceptable?

Outsourcing and public procurement are a real test for this Government. Will they fall back on the ideology of the past or represent the interests of the public going forward? Are they working in the interests of those who use and pay for services, or in the interests of union paymasters?

[Sir Jeremy Wright (in the Chair)]

I will now call the Minister to respond. If there is any time left before 11 o’clock, I will invite Andy McDonald to wind up, if he wishes to.

[The Parliamentary Secretary, Cabinet Office (Georgia Gould)]

This is my first time responding to a Westminster Hall debate, and it is an honour to serve under your chairmanship, Sir Jeremy. I join many Members in expressing my thanks to my hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald) for his contribution, and I echo the comments that have been made about his constructive and thoughtful work on this issue.

Many Members had only a short time to set out their views. My hon. Friend the Member for Normanton and Hemsworth (Jon Trickett) said that four minutes was not quite enough, given his 29 years’ experience. That far surpasses my few months, so I would welcome the opportunity to have further discussions with any colleagues across the House. Critical issues were raised about a whole range of public services, and I would welcome the opportunity to sit down with Members ahead of putting forward the new national procurement policy statement.

I join many Members in paying tribute to the work of outsourced staff—the security guards, cleaners and catering teams—who play a vital role in supporting Government and who allow all of us to do our jobs. They serve the public and the public sector, and are, in the case of the security teams, the front door to Government. Whether staff are directly employed or contracted, they are engaging in vital public services, and these should be decent jobs with progression routes, as we have heard.

My hon. Friend the Member for Middlesbrough and Thornaby East is right to raise the topic of outsourcing. As the Government set out in our plan to make work pay, we need to learn the lessons from the collapse of Carillion and more effectively manage markets to ensure the right mix of provision. That means ending the previous Administration’s dogmatic drive to privatise our public services.

I was interested to hear the comments about ideology, having watched for the last 14 years as an ideologically driven approach led to waste, poor value for money and, in some cases, poor public services—for example, the hon. Member for Kingswinford and South Staffordshire (Mike Wood) referenced the failed outsourcing of probation services. We must ensure that all contracts are transparent and accountable and provide value for money for the British taxpayer.

I was surprised to hear the comments about progress. Like the right hon. Member for Hayes and Harlington (John McDonnell), I have a background in local government—I think we both have a background at Camden council. While I was in local government, I saw billions wasted on PPE, and I saw the waste of the test and trace contract, when those of us in local government knew that public health officials and housing staff were ready to go out and do that work. Yet, so much money went to private providers, and I saw the ballooning cost of consultants.

The hon. Member for Carshalton and Wallington (Bobby Dean) referenced children’s homes. The new Government have had to step in to end the exploitative practice of some private sector organisations making excessive profits from services for vulnerable children. Under the previous Government, we saw a significant increase in privately run children’s homes, with a Competition and Markets Authority report suggesting that the 15 largest children’s home providers make an average 23% profit per year. Is that value for money? This Government have shone a light on those profits, set a new cap and given Ofsted new powers to investigate and impose fines for exploitative practices.

As the leader of a council, I saw how insourced public services, when managed carefully over time, with robust assessment of benefits and outcomes, can deliver savings for taxpayers and better public services. During covid, I saw how our in-house repairs service immediately moved to delivering food, often volunteering to work long hours to support residents. I saw the pride and commitment that came from working for the council, and the greater flexibility and innovation that that could bring. I agree with the hon. Member for Carshalton and Wallington that there is huge innovation in the public sector.

As we saw under the previous Government, outsourced services can too often deliver a race to the bottom on quality and standards, and a self-defeating approach that harms taxpayers and value for money. This Government are determined to deliver good public services and better value for money. That includes making decisions about how to deliver services to avoid the waste we saw under the previous Government. We have already begun to deliver reform of the frameworks for outsourcing, with provisions in the Employment Rights Bill to strengthen and reinstate the two-tier code introduced under the last Labour Government. The new Procurement Act will come into effect next month, creating a simpler and more flexible procurement system underpinned by a new mission-focused national procurement policy statement.

I did not recognise the comments made about that work. I have engaged deeply with SMEs, businesses, the voluntary sector, social enterprise, contracting authorities, trade unions and a wide range of stakeholders to ensure that the NPPS delivers our missions for the country, with growth at the heart of what we want to achieve. The statement will set out the Government’s policy priorities, and contracting authorities will have to have regard to it when carrying out procurements. That will be the first step to ending the last Government’s ideological fixation with outsourcing. I am pleased to say that the statement is almost complete, as we continue to have those conversations, and I look forward to laying it before both Houses shortly.

I want to respond directly to the points made about outsourcing. I agree with the position of Christina McAnea and Unison, which was highlighted by my hon. Friend the Member for Middlesbrough and Thornaby East, that a public interest test should be in place before services are outsourced, to ensure value for money and the best outcomes. The NPPS will set out how we plan to make it easier for public authorities to test the best possible model to provide value for money and outcomes for the taxpayer, and end the ideological presumption on outsourcing.

Through these measures, the Government will achieve greater value for money for the people and businesses of this country, moving away from relying on a few large suppliers and being more open to investment across the country in the areas that need it most. Key to that is supporting SMEs. I hear so often from SMEs that they find engaging with Government procurement complex and burdensome. Part of the work we want to do involves diversifying the providers that come forward, whether that is SMEs, social enterprises or voluntary sector organisations.

We have also begun to assess the areas of Government that could be done more effectively in house, and where there may be compelling reasons for Government to develop their own capabilities and capacity to deliver good value for money and better public services. Again, I welcome a wider discussion of that. That work will recognise the practical hurdles to building Government capacity, particularly in a constrained fiscal environment, and when many public services are under huge strain. Having brought a number of services in house in local government, I know that it can be very powerful and save money, but it also takes time, planning and investment. The lead-in times on procurement are significant, and there is no quick fix. However, active work is happening on those critical issues.

We are clear that we will end the last Government’s tunnel vision on large-scale outsourcing and consider the best way to achieve our missions and the best outcomes for citizens. As I have set out, we want to see more diversity, including social enterprises, co-ops, mutuals, voluntary sector organisations and SMEs. We will use the measures in the Procurement Act to open up procurement to that more diverse supply base. Hon. Members spoke of ensuring that we have the right capacity to manage contracts, as well as transparency throughout the process, and that will be at the core of the work we are leading.

We are clear that public sector procurement is an important engine of growth for the economy and that there are purpose-driven businesses providing good-quality jobs. However, as we have heard from some surveys, there is poor practice across the economy. That is why we have introduced the Employment Rights Bill to increase standards and ensure there are decent jobs, not just as part of Government contracts, but across the economy. I do not have a huge amount of time, and I will not go through all the measures, but they address some of the questions put to me today. The provisions in the Employment Rights Bill will empower Ministers to reinstate and strengthen the two-tier code through regulations and a statutory code of practice, which is critical.

I end by thanking my hon. Friend the Member for Middlesbrough and Thornaby East for bringing forward this issue. As we work on the new NPPS, his insights and those of all those here are very welcome, and I am open to ideas from every part of the House. Close to £400 billion is spent on public procurement, which is a huge amount, and we need to ensure that it provides growth and opportunity across the country. We should use procurement to ensure that there are good jobs for our citizens in every community. Whenever we decide to spend taxpayers’ money, it is right that we make an assessment of what will deliver the best outcomes for citizens and value for money. Unlike the last Government, we will never put ideology before people.

[Sir Jeremy Wright (in the Chair)]

I thank the Minister for her debut performance in Westminster Hall.

Question put and agreed to.

Resolved,

That this House has considered outsourcing by Government departments.