Public Services, Private Profits – How Outsourcing Took Over Government
As we endure a second lockdown, Isaac Bettridge examines one peculiar aspect of the government’s pandemic response, its over-reliance on private sector outsourcing, and what this tells us about modern British government.
The coronavirus pandemic has resulted in a massive increase in government spending across the board as the economy craters and the state steps in to support it. Not all of this money has been going to furloughed workers or Nightingale hospitals however: a Financial Times report has found that the government has awarded around £10bn worth of contracts to private sector firms to handle various aspects of the pandemic response, most of which were awarded without a competitive tender and many of which are entirely unsuited to the task (a £108mn contract to provide PPE was awarded to PestFix, a 16-employee pest control company with net assets of around £18,000).
That this large-scale outsourcing of government function to the private sector has occurred at the same time as the government’s increased hostility towards the civil service and its most senior members (six permanent secretaries have resigned in the past year citing hostile work environments, including head of the civil service and cabinet secretary Mark Sedwill) is no coincidence. Rather, it reflects a long-standing trend of the hollowing out of public sector expertise to make way for privatisation and contracting, and in such dire circumstances where above all we need effective government action, it is worth taking a look at where this trend comes from and how damaging it has been.
As with so many of the problems plaguing Britain today, this began under Thatcher. One of the core tenets of neoliberalism, the ideology of which she and Reagan were devoted disciples, is a belief in the inefficiency of the government – which must balance political concerns, bureaucratic directives and all sorts of other factors – as compared to the private sector, which supposedly is concerned only with maximising profit by creating the most efficient and cost-effective service.
This was the rationale behind the large-scale privatisations of the 1980s, involving state-run companies such as BT and British Airways, and later behind Cameron’s sale of the Royal Mail, but privatisation goes beyond simply selling off state assets. What has also become apparent is how this ideology has led to the systematic gutting of the public services that have not been privatised, losing staff and resources, and the introduction of private contractors and companies to take their place, at great cost to the taxpayer and the public.
Thatcher was famous for her privatisation, but the welcoming of the private sector into public services really accelerated under New Labour from 1997 onwards. Private finance initiatives (PFIs) and public-private partnerships (PPPs), originally Major-era initiatives where the government contracts private companies to manage government projects, were adopted as Blair and Brown’s ‘middle ground’ solution to correct previous Tory underinvestment in public services without raising taxes, with Health Secretary Alan Milburn declaring that ‘when there is a limited amount of public sector capital available… it’s PFI or bust.’
This approach was justified with reference to the supposed superiority of private sector management as understood by Thatcher, but in recent years the overuse of PFIs has come to be recognised as a costly blunder. A 2011 National Audit Office report found that PFI ‘has the effect of increasing the cost of finance for public investments relative to what would be available if the government borrowed on its own account’, and in the NHS the cost of repaying PFI debt has bled money from essential services: Peter Dixon, former chair of the UCL Hospitals NHS Trust, wrote in a 2009 Guardian piece that ‘its very existence distorts whatever else needs to happen in this part of London and beyond’.
Under Cameron, their unpopularity ensured PFIs were wound down but outsourcing continued, bolstered by an ideological commitment to austerity and the slashing of the state- most famously, private security firm G4S received multiple contracts despite a series of scandals ranging from failing to provide security for the Olympics to the death of Angolan refugee Jimmy Mubenga in their custody.
This leads us to the present day, where the promise that privatisation and private sector outsourcing would lead to more efficient operations and less grift rings untrue when one examines which companies have been hired as part of the coronavirus response. One of the many companies contracted to help run the shambolic Test and Trace scheme is Serco, who just last year were fined £19.2mn for defrauding the Ministry of Justice and has been accused of covering up sexual abuse of immigrants at Yarl’s Wood Detention Centre.
What is needed here is nothing less than a fundamental rethink of how public services run
Despite the test and trace system it is involved in having accidentally leaked the personal details of 300 of its contact-tracers and reaching on estimate only 60% of close contacts (this compared to the 90% reached by a council-run team in Blackburn), it retains several multi-million pound contracts with the government, and its contracts are but a few of the many that have been awarded without competitive tender or bidding.
Much has been made of the fact that Serco is run by Rupert Soames, brother of former Tory grandee Nicholas Soames, but this is not the only suspiciously close link between the government and its business partners: several companies run by associates of chief government adviser Dominic Cummings have been awarded non-competitive multi-million pound contracts, such as research agency Public First which was hired by Ofqual to provide ‘urgent communications support’ in the midst of the summer exam crisis. For all the government’s rhetoric about how we’re ‘all in this together’ during the worst economic downturn since the 1920s, it’s made a select group of people very rich indeed.
What is needed here is nothing less than a fundamental rethink of how public services run. It is clear now that ideological distrust of the state and its operations has engendered a deadly feedback loop: politicians elected on messages about distrusting government slash public services, which results in them becoming more ineffective, which creates public discontent with government, which leads to the election of more state-slashing politicians.
The pandemic, hopefully, will put an end to this cycle by reminding the public just how much we rely on state services and government-funded operations, obviously our NHS but also the civil service, public transport, emergency services and many more. One of the common trends among countries that have handled the coronavirus effectively has been a commitment to using public services for public good, utilising the expertise of civil servants, local government and trained professionals. If the government invested more money into them rather than Serco, we might be having a much better year.