With speculation of an autumn general election mounting, the Labour Party has announced details of proposed legislation to reverse decades of contracting out for local services.
The party’s shadow chancellor, John McDonnell, promised to end privatisation of council services and create a new partnership between local government and central government.
Policy plans were set out in detail in its policy document, Democratising Local Public Services: A Plan for Twenty-First Century Insourcing.
The party wants to bring back under council control, contracts such as school meals, cleaning and building maintenance.
Labour said it would legislate with a Local Public Services Act to create a presumption that councils automatically would take control of services when a contract ends.
This would reverse current laws forcing contracts to go out to tender.
The principle will be that other than social care contracts which require specialist provision, when contracts reach the end of their expiry period, or when they are lawfully terminated, services will be taken over by the council.
2nd Housing & Regeneration Finance Summit
County Hall, October 31st, 2019
Labour plans include a model contract that sets minimum standards, performance monitoring structures and trade union recognition for staff. Labour said the move would boost local economies and drive up standards.
Councils that want to continue contracting out will have to go through a framework justifying why and will be subject to new Freedom of Information rules so that residents can question why this option has been chosen.
Commercial confidentiality would not be allowed as a defence.
McDonnell said: “It’s time to end the outsourcing scandal which has seen private companies rip off the taxpayer, degrade our public services and put people at risk whilst remaining wholly unaccountable to the people who rely on and fund these services.”
Unison, the country’s biggest public sector trade union, gave an enthusiastic response.
UNISON general secretary, Dave Prentis, said: “This report is a welcome first step on the road to ending the scourge of public service privatisation. For the first time in 20 years we’re seeing positive signs that Labour understands the damage that outsourcing has caused – and is developing a plan to reverse it.”
The party’s plans were also given weight by a report from the Association for Public Service Excellence (APSE) which revealed 77% of councils had brought services back under their control last year.
It included a survey that found 78% of local authorities believed insourcing gave them more flexibility over service provision.
Labour’s policy announcement was part of a wider political strategy and as a result has an element of triangulation in it – appealing to people who want well-run public services by arguing they can have them by taking back control.
McDonnell is helped by the fact that councils of all colours are already doing it; the party highlighted that Liverpool City Council has saved £30m by bring IT provision back in house.
Conservative-run Barnet Council has also taken back control of key services from Capita.
The evidence from the APSE report – and from council leaders – is that austerity budget cuts have been the biggest driver as well as dissatisfaction with performance.
Cllr John Kerr-Brown APSE national chair, said: “Over-simplification of public service delivery into commodified units, capable of being delivered by the market, has led to increasing market failure.”
Central government, too, is also changing direction – Cabinet Office permanent secretary, John Manzoni, has raised concern over outsourced jobs in transformation IT projects where a lack of skills has resulted in expensive failure.
The driver for outsourcing is compulsory competitive tendering which was introduced in the Local Government Act 1988.
Currently, councils must use the “Best Value” regime under the Local Government Act 1999 to award contracts.
This allowed for charities to bid for business but also opened the door for councils to set up companies.
In the austerity era, there is a strong business case for councils.
The Business Services Association says the public sector contracting market is worth more than £100bn.
Market failure is a significant issue: a report in 2013 by the National Audit Office found four major players accounted for the bulk of business. But it also found poor performance and misreporting.
So, Labour is following the direction of travel with a commitment to end a tendering process that is not delivering.
Concerns have been raised, however, that the policy would reduce options for councils that may not have the capacity to deliver.
The knock-on effect could be that charities, co-operatives and organisations such as housing associations that fill the gap could remain squeezed out after years of being beaten by corporate contract bidding teams.
This has been a long-standing concern for the National Council for Voluntary Organisations (NCVO).
Its chief executive, Sir Stuart Etherington, warned earlier this year: “For the best outcomes for people using public services, we need a system that allows a range of organisations to flourish and deliver high quality services.”
Local government finance leaders argue that councils need a range of options to achieve best performance. Having the skills and experience to deliver is just as important as the contract.
Joanne Pitt, CIPFA local government policy manager said: “Irrespective of which bodies deliver public services, it’s important that councils continue to review available options and use their resources effectively and in the best interests of their citizens.”
But with austerity demanding that councils increasingly need to generate revenue, services being brought inhouse looks set to continue even without new legislation.
APSE said: “The scale of insourcing appears to be increasing as local councils grapple with on-going austerity.”
