Channel Four News – Outsourcing in Councils

Here’s more on the Channel  Four News recent series on outsourcing in the public sector. I contributed a video appearance in which I talked about the history of outsourcing in different sectors, and also gave some thoughts on key issues.

Today, local authorities.

To summarise my contribution...  Outsourcing goes back in the local council world to the days of compulsory competitive tendering in the 80s – designed by the Thatcher Government to bring some competitive pressure and a more service focused mentality to (primarily) local council services. Breaking the power of the public sector unions may also have been on the agenda! And there have been positives as a result of outsourcing.

It also hasn’t been a one way street since then. Whilst generally outsourcing has increased steadily, some councils have even moved in the other direction in certain areas. Kent County Council started their own bus company for example because they felt there wasn’t enough genuine competition in the market.

We’ve also seen the private sector get into sensitive areas of service provision. The case of the young girl abused by a gang of men in Rochdale highlighted how private firms charge huge amounts of money for (supposedly) caring for vulnerable children. At the other end of life, the collapse of Southern Cross, the largest provider in the UK of care homes for older people, caused councils considerable problems.

Whilst that Rochdale example really caused me to question the whole ethos of using the private sector for such services, I can’t see any halt to the trend of further outsourcing. Councils will be under intense cost pressure it appears for years to come. The cost of employing staff directly is high in councils – largely because of pensions – and that gives service providers an arbitrage opportunity.

So the onus is on councils, including procurement people and budget holders, to get better at engaging and managing these suppliers in key service areas. That's the big challenge for the future.

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