Shared Services Connected Ltd

Paul Blomfield Excerpts

Wednesday 9th April 2014 Westminster Hall

[Paul Blomfield (Sheffield Central) (Lab)]

It is a pleasure to open this debate with you in the Chair, Mr Owen.

I sought this debate on behalf of 239 Department for Work and Pensions staff at the Kings Court offices in the heart of my constituency, although the issue affects civil service staff more broadly.

I begin by citing the Prime Minister. Back in January, speaking at the World Economic Forum at Davos, he said that Britain had the potential to become the “reshore nation”. Talking about UK jobs lost abroad, through offshoring, he said,

“there is now an opportunity for the reverse…an opportunity for some of those jobs to come back.”

Should not the Government be taking a lead on this, setting the example through its own employment policies? Last week I received a letter from the Minister for the Cabinet Office and Paymaster General all but confirming that the work lost in my constituency was to be offshored to India, as I understand it.

Let me explain the background. Shared services are those parts of individual civil service departments, arm’s length bodies and agencies that provide corporate services for IT, human resources management, pay and payroll, procurement and finance to deliver their business outputs. In December 2012, the Cabinet Office set out its next generation shared services strategic plan to create five shared service centres. Two independent shared services centres, ISSC1 and ISSC2, would be formed for a number of departments and arm’s length bodies. The three remaining were to be stand-alone centres, based on the Ministry of Justice, the Ministry of Defence and Her Majesty’s Revenue and Customs.

The first of these independent shared service centres, ISSC1, based on the Department for Transport in Swansea, was outsourced to German multinational Arvato in June 2013. The Public and Commercial Services Union, representing the majority of staff, engaged positively in the transfer process to secure the best possible outcome. The consultation led to agreements, including one on no compulsory redundancy for at least a year and an agreement that staff would retain their civil service status.

ISSC2, which affects Sheffield, was to consist initially of the shared services functions of the Department for Work and Pensions, the Department for Environment, Food and Rural Affairs and the Environment Agency. This was turned into a joint venture company called Shared Services Connected Ltd, in which the Government retained 25% of the shares, with the French multinational Steria’s UK subsidiary owning and controlling 75%. The creation of SSCL involved civil service shared services sites in York, Alnwick, Cardiff, Blackpool and Newcastle, as well as the one in my constituency in Sheffield. SSCL became live in November 2013 and 1,000 civil servants were privatised and TUPE-ed over.

The PCS secured agreements with the Government on this process, including a six-month no compulsory redundancy agreement and a one-year guarantee of no site closures. However, on 4 March 2014, SSCL announced 500 job cuts, office closures and the offshoring of work, quite cynically timed to the minute the one-year guarantee against site closures ran out.

As well as the closure in Sheffield, by October 2014, the DWP office in Cardiff will close, with a loss of 105 staff, and the Environment Agency office in Leeds will close, with a loss of 68 staff.

[Jessica Morden (Newport East) (Lab)]

Can my hon. Friend understand the anxiety felt by staff at the Newport MOJ shared services centre—the situation is similar to the one in Sheffield that he is explaining—who understood that that was to be a stand-alone site, although it is now being considered for outsourcing to Arvato or Steria?

[Paul Blomfield]

I can indeed, and I will come to that issue. Closer to Newport than Sheffield, I met some staff from Cardiff last week. Like the staff in Sheffield, these are loyal civil servants who have contributed years of public service and, frankly, they feel betrayed by the decision and by the way that the decisions are being executed.

As well as job losses in Sheffield and Cardiff, 122 staff will go in SSCL offices in Blackpool, Newcastle, Peterborough and York. The DEFRA site in Alnwick has a temporary reprieve, but only until June 2015. The Government have not conducted economic impact assessments of the closure of these offices, although the loss of jobs will have a significant impact on local communities and economies. Indeed, in June 2013, Lynn Phillips, head of service improvement for DEFRA, wrote to the then Minister, the hon. Member for Somerton and Frome (Mr Heath), highlighting the plan’s

“incompatibility with UK growth objectives”

because of the

“loss of jobs in regional locations”.

Will the Minister assure us and say that the Government will conduct an economic impact assessment and, if so, when that is likely to happen?

[Mrs Mary Glindon (North Tyneside) (Lab)]

Specifically, on the DEFRA issue, does not my hon. Friend think that the fact that the Secretary of State raised concerns and asked for a standstill period shows how serious this offshoring is and that it will lead to dire consequences?

[Paul Blomfield]

My hon. Friend is right. I am coming to that point. Clearly, this issue has led to concerns being raised, even at Cabinet level. Yet, extraordinarily, the offshoring is being rushed through.

The speed at which SSCL intends to cut the 500 jobs is unprecedented. It aims to have all redundancies dealt with by the end of October. This does not allow enough time for staff to be re-employed or reinstated back into the civil service and means that compulsory redundancies are likely. Indeed, staff in Sheffield and in Cardiff, whom I met last week, told me that the redeployment opportunities have been limited, because there is no joined-up approach across Government. I find it extraordinary that most other Departments are not offering vacancies to those loyal civil servants who are losing their jobs. Do the Government think that this is the right way to treat any staff, particularly those who have given decades of public service? It sets a bad standard for employers throughout the country. I should like the Minister to reassure us on this issue. Will the Government commit to providing redeployment opportunities across all Departments? That would provide a lifeline for at least some staff. The limited opportunities that have been made available to date are inaccessible to many of those in Sheffield, and those at other sites, too.

SSCL is not acting in accordance with the special commitments given to staff before transfer, which stated that transformation would take place over two years and that everything would be done to avoid compulsory redundancies. The Government have a 25% stake in SSCL. At the very least, should they not use that position to challenge the speed of job cuts, to allow a thorough, ongoing programme of redeployment of staff? I should like the Minister to respond to that question.

There is also the issue of the data being handled. These sites handle the personal data of tens of thousands of civil servants. They also deal with commercially sensitive information relating to Government contracts and tendering. Despite the sensitivity of the data, when the Cabinet Office advertised for bidders to become majority partners in SSCL in April 2013, the selected bidders all had a significant element of offshoring functions as part of their bid.

Concerns about offshoring are not restricted to Opposition Members or their staff; they have, as my hon. Friend the Member for North Tyneside (Mrs Glindon) pointed out, been expressed at Cabinet level. The Secretary of State for Environment, Food and Rural Affairs wrote to the Minister for the Cabinet Office last July, expressing concerns about DEFRA joining ISSC2 and a “possible staff exodus”. The Secretary of State asked specifically for a standstill period on “estates and off-shoring” and expressed concerns about data security. The head of service improvement for DEFRA wrote in her letter to the hon. Member for Somerton and Frome that the DEFRA executive committee considered

“significant (or any) element of off-shoring”

to be unacceptable and that there was a

“significantly increased risk to service continuity from loss of current expertise”

on transfer. She also raised concerns about

“employee and detailed financial data transmitted, stored and processed outside the UK”.

Why are the Government sanctioning the offshoring of sensitive personal data and commercially sensitive information, on which objections have been raised at the highest level of the civil service and by members of the Cabinet?

[Jessica Morden]

Does my hon. Friend agree that it is breathtaking hypocrisy for the Prime Minister to have been talking just weeks ago about Britain becoming the reshoring nation while the Cabinet Office pursues contracts that are explicitly relaxed about offshoring jobs, such as those at the shared services centre in Newport?

[Paul Blomfield]

My hon. Friend is absolutely right and again anticipates a point I will make. Before I do, I make one point about the remaining three shared service centres. Originally, they were to stand alone, but I understand that the strategic plan has been fundamentally revised. Peter Swann, who heads the Crown oversight function of the shared services agenda, has confirmed that the Ministry of Justice is considering transferring its shared services to one of the outsourced ISSCs instead.

I understand the concerns of the staff involved. If the MOJ was to join one of the already outsourced ISSC contracts, the sensitive data the staff handle, including criminal records and details of the police, the judiciary and security service personnel, could also be privatised and offshored. Why has the strategic plan been changed?

Finally, taking on board the point made by my hon. Friend the Member for Newport East (Jessica Morden), I return to my opening point. What makes the cuts so much harder for the staff to swallow is that so much of the work for the three sites under threat of closure has been earmarked for offshoring. Indeed, the PCS told me that SSCL has explicitly said that a determining factor in deciding which sites are to close is the potential for the work to be offshored. Offshoring is the driver for decisions on closure and job losses.

As my hon. Friend said, how does that fit in with the Prime Minister’s assertion at the World Economic Forum that he wants the UK to become “the reshoring nation”? At Davos, he underlined that ambition by announcing the establishment of a new body, Reshore UK, which will sit within the Department for Business, Innovation and Skills. The Prime Minister clearly places great weight on that body in developing his reshoring strategy. Will the Minister commit to arranging for Reshore UK to meet with SSCL and the Cabinet Office with the aim of considering how the jobs they plan to offshore can stay in the UK? If not, does he accept that the Prime Minister’s statement at Davos will be seen as nothing more than empty words?

--- Later in debate ---

[Mr Hurd]

I was putting the debate into a wider context, which I hope the hon. Member for Sheffield Central would welcome, of vibrant job generation in this country. It does not just matter for statistics; it offers hope and security for people across the country. When the Prime Minister talks about jobs coming back, he means it. The issue is about restoring the means by which this country can secure its long-term future and competitiveness. The fact that that was entirely absent from the debate is regrettable.

[Paul Blomfield]

On that specific point, will the Minister note the regional imbalance in the creation of private sector jobs? He might have seen the report two or three weeks ago from the Centre for Cities, which pointed out that so many of the jobs being created are in London and the south-east, sucked away from the rest of the country. I think it said that there have been 217,000 new private sector jobs in London, with a net decline in private sector jobs of 7,500 in my city of Sheffield. The Government have a particular responsibility to address that regional imbalance and not take more jobs away.

[Mr Hurd]

That is a fair point, which the Chancellor has addressed directly by saying, “Yes, there is some very good news on job creation, but we still face a stubborn underlying challenge on the imbalance in the economy.” That is a fact, reality and challenge that the Government are addressing.

It would nice if we heard some voices from the Opposition Benches that recognised that these problems have been entrenched for a long time and were substantially not addressed by the previous Administration. I am trying to make the point that the broader context is one where the country is beginning to generate jobs again after some difficult years. Part of the reason why we have been able to create jobs is that at the core of the long-term economic plan is a plan to pay down the deficit. It would be nice to have a reality check on the Opposition Benches: that is the environment in which this Government have to work and in which the next Government will have to work, whatever their political colour.

--- Later in debate ---

[Mr Hurd]

I am trying to stress to the hon. Member for North Tyneside (Mrs Glindon) that the bigger context is job creation throughout the country, which I hope she welcomes and is evidenced in her constituency as well. She makes a valid point about offshoring, to which I will return, because it was at the core of the speech of the hon. Member for Sheffield Central.

My point was that we are in the place where we are in terms of vibrant job creation around the country partly because of the confidence in the business community that there is a plan for economic recovery and that, at the heart of the plan, is a determination to get on top of the public finances. Simply put, that will be the reality for whoever is in power after the next general election, which is acknowledged by the people at the top of the Labour party. The Government therefore have to get serious about where they find savings and efficiencies. For a long time now, including under the previous Government, as highlighted in 2004 by the Gershon review, there has been consistent advocacy for the need and opportunity to consolidate back-office functions throughout government. The belief is that we can deliver between £400 million and £600 million per annum in savings for the taxpayer in such a process, while freeing the civil service to concentrate on its core role of delivering exceptional public services.

Significant public gain is to be had through the pursuit of efficiency, which the previous Administration did not pursue rigorously, despite the words. If any evidence were needed, the Efficiency and Reform Group in the Cabinet Office last year was able to realise £10 billion in savings to the taxpayer through our process. That is £10 billion that does not have to come in cuts to front-line services. It tells us a lot about the attitude of the previous Government to efficiency in the public finances.

[Paul Blomfield]

Does the Minister acknowledge that that is stretching the definition of efficiency a little? We are simply talking about taking jobs done in proper working conditions by loyal civil servants in the UK and putting them into a cheap labour market in India. That is not efficiency; that is exploiting the labour force.

[Mr Hurd]

I would like to see some recognition that it is not in the interests of the British taxpayer for there to be duplication or inefficiency in how services are delivered. For some time, and under the previous Administration, there has been widespread acceptance of the opportunity to share services such as HR, procurement, finance and payroll functions, and of the need to consolidate where those services are shared, given the number of centres that were in place. Obviously, in that process there is an ability to deliver efficiency, cost-effectiveness and, I hope, a better service.

There is no dispute about the opportunity—as I said, the debate has been going on for a long time—but the question is whether anyone is prepared to do something about it, and we are. We are delighted that the National Audit Office recognises our progress and, in a report of 31 March, considers that the programme is

“on track with the first shared service centre being outsourced by its target date of March 2013 and the second having a joint venture partner in place before its target date of March 2014.”

It also found

“no major issues with the services offered by”

either of the two independent shared service centres.

As the hon. Gentleman said, the second of the two centres was created in November 2013, when the Government signed an agreement with a private sector partner, Steria Ltd, to create a joint venture to deliver back-office services to 13 Government customers. The resulting company, known as Shared Services Connected Ltd, was formed from a consolidation of some existing shared service centres including the Department for Work and Pensions, the Department for Environment, Food and Rural Affairs and the Environment Agency. In addition, in-scope services delivered by UK Shared Business Services Ltd are expected to move across by 2015.

It is important to keep in mind that the model is not a conventional outsourcing one. As the contracts are constructed, the bigger the volume, the lower the unit price goes, so it is in everyone’s interest, whether Government, private sector partners or employees, for the centres to win additional business from other Departments and from the private sector in the UK and overseas. If business grows, and there is an opportunity to grow the business and to recruit more jobs into it, public services can be delivered at lower cost. The taxpayer will share in the upside.

In order to develop SSCL as a world-class services organisation, it formally entered a transformation phase on 31 March 2014, which involves IT harmonisation, offshoring and the adoption of a centre of excellence model, which is considered good practice across the shared services sector. We believe that that will reduce costs, increase efficiency and deliver a consistent performance and an improved customer experience.

As the hon. Gentleman said, the centre of excellence consultation process commenced during March, and following discussions with employees, clients and trade unions, four of the existing eight core sites were selected as centres of excellence. Those are York, Peterborough, Blackpool and Newcastle. Initial proposals were to close the other five sites. However, after consultation and due diligence with clients and employees that was reduced to three—Sheffield, Cardiff and Leeds. Alnwick will remain open, although not as a centre of excellence. The sites selected as centres of excellence were the ones considered most likely to be able to serve existing customers, while also ensuring the sustainable future growth necessary to provide value for money to the taxpayer.

The core of the hon. Gentleman’s concern was exit and re-employment. I listened with concern to some of the points he made, and I undertake to write to those involved to make his concerns clear and seek assurances about the way in which some tough decisions on redundancy are being implemented. I will come back to the hon. Gentleman with my view on the quality of the information I get back.

We believe that SSCL has approached the centre of excellence strategy with some sensitivity to the impact that it will have across the business, sharing plans with employees at the earliest opportunity, undertaking roadshows to explain the implications directly, and briefing employees on the proposals for site closures and the associated consultation process. At the same time, SSCL launched a voluntary exit programme for affected employees. The window for expressions of interest closed on 24 March.

As part of the negotiations associated with the ISSC2 deal, the Cabinet Office and Steria agreed a re-employment protocol with the Department for Work and Pensions, the Department for Environment, Food and Rural Affairs, and Her Majesty’s Revenue and Customs, for those staff members who transferred to SSCL under TUPE arrangements from DWP and DEFRA. That was put in place to try to mitigate the impact of key redundancies associated with the move to the new target operating model. Although that was not mandatory, both parties felt it was important to try to support the staff with continued employment.

The Cabinet is also proactively negotiating re- employment protocols with further Departments and agencies, including the Department for Education and the Office for National Statistics, where there are suitable roles locally. We are confident that we are doing all that we can to support SSCL staff with re-employment, within the confines of TUPE law and Government policy. If I may, I should like to send the hon. Gentleman a follow-up letter with more detail about those processes, to put some assurances behind those words.

The next stage of the SSCL transformation programme is to establish the four centres of excellence. The Alnwick office, previously a DEFRA site, will not be a centre of excellence, but will remain open until June 2015. SSCL hopes to move some NHS shared business services actively to Alnwick, to retain it beyond 2015.

[Paul Blomfield]

I thank the Minister for his assurances about letters and initiatives. Will the Cabinet Office extend the intentions he outlined across all Departments, and move quickly? There is a limited window, before people lose their jobs, to ensure that there are proper redeployment opportunities across government.

[Mr Hurd]

We are certainly negotiating re-employment protocols with other Departments and agencies, including DFE and ONS, but perhaps I may clarify the detail in the letter I shall be sending. As the hon. Gentleman said, we all know that any job loss is a personal tragedy for the individual concerned and their family. We want to minimise insecurity connected with that. The process is clearly difficult, and we are as confident as we can be that it is being handled with appropriate sensitivity. However, if the Members of Parliament for the affected constituencies have substantial evidence that that is not the case, we want to know. We will follow up such evidence, because we understand the sensitivities and want to test the assurances we are given.

In this context there is no black and white world; offshoring has been a feature of many successful Government contracts signed during this and the previous Administration, including a joint venture involving NHS shared business services, which created jobs and expanded the number of its offices from two to 13 in the past 10 years. Offshoring is not in itself an absolutely bad thing. I shall certainly contact Reshore UK to make it aware of the hon. Gentleman’s concerns.