Insourcing can allow councils to transfer resources between service areas more easily in response to austerity, according to the Association for Public Service Excellence.
A report released by the networking organisation this week said outsourced contracts can “lock in” spending levels in particular service areas, making it harder to respond to changing demand and priorities.
Ironically, given the initial lure of outsourcing as a means of making savings, more and more councils are turning to insourcing to drive efficiency and improve services, the report claimed.
“Alongside austerity placing pressure on budgets a further realisation, particularly amongst elected councillors, is that their choice over resource allocation is stymied by payments locked into contracts,” the report said.
“The capacity to recalibrate services to cope with budget pressures is restored by insourcing, alongside control on service quality and frequency or scope.”
A case study concerning the Highland Council found councillors were prevented from reducing its public amenities budget, valued at £3.3m a year, because the services were outsourced.
“Following the services being insourced arrangements are now in place to deliver significant savings by re-profiling the service,” the report said.
The report cited figures that more Labour (42.22%) than Conservative (35.56%) councils are insourcing but said that this does not suggest insourcing is party-political.
“When every penny counts contracts that suck in more resources are no longer tolerated,” the report said.
Last year a report by the New Local Government Network found that local government leaders are losing their appetite for outsourcing.
However, it warned against taking a binary approach to the issue.
Adam Lent, director of the think tank, said: “The Conservative Government takes a business as usual approach to outsourcing, while the Labour Party advocates taking everything back in house.
“Our research finds that it is not a question of more or fewer partnerships, but establishing better ones.”
‘No escape from neoliberalism’
This week’s APSE report also said that councils would still be bound by “neo-liberal” rules limiting their ability to bail out failing outsourced services in the event of a no-deal Brexit.
It claimed insourcing services from the private sector can save councils money and reap income from running services commercially themselves.
The report warned that continued outsourcing puts public services at the mercy of market-driven approaches to delivery, while European Union rules reduce the ability of the public sector to step back in.
It said that, currently, “if an outsourced arrangement starts to fail, interventions in the public service provision is potentially then still subject to compliance with EU regulations.
“Arguably therefore…[the EU]…is a proxy for neoliberal values when a member determines to place public contracts out to tender.”
The report said that any on-going trade relationship with Europe after Brexit would be likely to include rules governing public service contracts and free markets.
On any potential no-deal Brexit, it added: “In any event the World Trade Organisation (WTO) rules still add a non-domestic consideration to outsourcing of public services.
“Once outsourcing is agreed the governance of the process is generally thus abdicated to non-UK interests.”
The report said that the current prevalence of outsourced contracts is often blamed on the European Union “as an extension of a neo-liberal agenda”.
In March, the Labour Party proposed new laws requiring councils to bring back services in house if the service “involves significant contact with ‘at risk’ groups, exercise of coercive powers, or risk of infringement of people’s rights”.
This week, London Borough of Enfield outlined proposals to bring its housing repairs service back in house, saying the move could reduce costs over time by improving the quality of work.
The council’s cabinet is set to consider the idea, which officers say would see an upfront cost to the housing revenue account of £1.2m and ongoing yearly costs within the £4.8m spending envelope for the current outsourced service.
A report prepared by council officers proposed the authority continues to outsource compliance, cyclical maintenance and major works contracts, but might consider bringing them back in-house in future.
