Privatising while Rome burns: Why we need a moratorium on outsourcing

As the MoD launch plans to flog off their fire service, unions are warning another Carillion-style collapse could be round the corner.

Another day, another sell-off. The Carillion fiasco was a tragedy – but now it’s becoming a farce. 

Today – within weeks of Carillion going under – shares in another outsourcing giant, Capita, took a plunge. A 40% plunge, in fact, following a dramatic profit warning from the company.

Capita has some very significant public sector contracts – from tagging prisoners, to running the jobseekers allowance helpline and administering the teachers’ pension scheme. It runs London’s congestion charge and our BBC license fee.

As such, there would be major ramifications if it went under.

Whatever your issue with the public sector, we know one thing: it can’t really go under. It can’t go bankrupt, it won’t collapse, and there are real, guaranteed mechanisms of scrutiny and accountability – with everything from the National Audit Office to the Public Accounts Committee, the Freedom of Information Act to elections.

As we know, Carillion’s liquidation was preceded by several profit warnings – the first of which was in July 2017. So the warnings about Capita (or ‘Crapita’, as Private Eye deem them) are concerning to say the least.

More concerning though is that the company are going after more government contracts – with one in particular keen in its sights.

The Ministry of Defence are planning to privatise its firefighters and defence workers. The bidders? Serco and…you guessed it: Capita. 

As Unite the Union note, the MoD’s firefighters and defence workers are employed in both civilian and military roles, and are responsible for ensuring the safety of the UK’s military bases both in the UK and abroad. There are between 1,500-2,000 workers affected by the privatisation policies.

“The workforce provide 24 hour, seven day a week service, monitoring and protecting all the MoD’s sites, which includes nuclear submarine bases, airfields and ammunition and munition facilities,” say Unite.

Imagine the potential security risk – and bailout cost – if the organisation protecting these national assets went bust?

Capita aren’t the only risk factor in this sell-off. The other bidder, Serco, were previously barred from bidding for government contracts following a Serious Fraud Office investigation which found the company had wrongly billed the government for the electronic monitoring of prisoners who were dead or behind bars.

Unite assistant general secretary Gail Cartmail has slammed the sell-off:

“These workers undertake absolutely essential work in protecting MoD buildings, equipment and munitions. The prospect that these workers could swiftly find themselves in the same position as Carillion workers on outsourced public sector contracts does not bear contemplating.

“This is a contract which should never ever have been considered, let alone tendered. The primary motive of private companies is to make profits. This can only be achieved on this contract by cutting personnel, pay, workers’ conditions or reducing the level of cover for MoD sites. All of these options are entirely unacceptable.

“Rather than outsourcing essential public services the government should be bringing all its outsourced contracts back in-house.”

Unite are not alone in demanding this: the TUC have joined the government’s task force on Carillion – and say Carillion’s public-service contracts must be brought back in-house ‘to ensure consistent delivery and certainty for workers’.

But they are also demanding an urgent risk assessment on other large outsourcing firms to avoid another crisis – and a moratorium on future outsourcing.

Our public services are too important to be left to capricious market winds. Let’s call time on outsourcing – at least until we have stronger scrutiny mechanisms in place.

The dangers of carrying on as if everything is normal are too great to think about.

Josiah Mortimer is Editor of Left Foot Forward. Follow him on Twitter.

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5 Responses to “Privatising while Rome burns: Why we need a moratorium on outsourcing”

  1. Boffy

    The real issue is not outsourcing, or whether this work is conducted by the state, or by companies in the “private” sector. The real issue is over workers ownership and control. Let’s remember that the fact that the state can’t go bust, and that there is scrutiny and accountability did not stop the same right-wing executives who one day work in the “private” sector, and the next day work in the state sector, from implementing the same anti-working class policies, when it came to the activities of say Micheal Edwards at BL, or Iain McGregor at the NCB.

    In fact, the very fact that the state can’t go bust, meant that they could wait out a strike by workers more or less until the cows came home, in the way that a private company haemorrhaging profits during a strike cannot.

    What the example of those strikes, and our whole experience of state industries and services in the past, as well as the experience of Carillion shows, is not that we should get bogged down in trying to choose between a lesser evil of state capitalism as opposed to private capitalism, but that we should press forward the issue of workers control of those services and industries. There is no reason that shareholders, as mere money-lenders to companies should have a right to determine corporate policy, or to appoint executives, any more than other money-lenders such as bond holders or banks have that right.

    Companies are legal entities. The capital of the company belongs to the company not the shareholders, and it is the company – which can only mean its workers and managers (who in the case of day to day managers are themselves workers paid a wage) – that should determine how it is run, and how the capital is used. That means we have to have a whole reform of corporate governance laws, to remove the right of shareholders to exercise any control of the capital, and to make it a requirement that company Boards are elected by the workers, and company policy is determined on the basis of industrial democracy.

    In other words, we should simply extend the proposals of the Bullock Report from 1975, and of the German co-determination laws, and the EU’s Draft Fifth Directive on Company Law, which proposed having 50% of boards elected by workers.

    If the workers at Carillion or Capita or any of these other firms had been in control rather than shareholders, and their executives, these problems would not have arisen, just as had workers in the NCB been in control rather than Iain McGregor and his ilk, the 1984-5 Miners strike would never have happened, and we might still have had a functioning coal industry.

  2. Elizabeth Chell

    The disasters that are Carillion, Capita, G4S and Serco to mention the largest have behaved as the worst private sector companies; creaming off profits, paying huge salaries and bonuses to executives, greasing the hands of shareholders, paying low wages, and ignoring the difficulties that the company was in. All this has spelt disaster and now the chickens are coming home to roost. Shame on them and on this Govt that has kept on shovelling £m’s of tax payer’s money in their direction. For what? Ideological reasons. Well it’s all back-fired! Time to call a halt on privatisation of public services now!

  3. Joe henry

    I used to work for Capita as part of an outsourced local government planning service and I agree that outsourcing is not necessary the solution to provide more efficient services – there was no need to outsource the services if the leadership within the Council had a better vision and were willing to take some risks rather than the same old risk averse attitude.

    The reason why outsourcing is so common is because the “in-house” model is often; not fit for purpose, overly bureacratic, lacks leadership, lacks commercial acumen and lacks vision. So its all well and good saying bring back services “in-house” but the house is often not in any fit shape to properly deliver.

  4. Boffy

    @Elizabeth Chell.

    1. The government undoubtedly did let out these contracts for ideological purposes, as did the previous Labour governments. It is the conservative social democratic ideology that the private sector can run things more efficiently than the state sector. A progressive social-democracy would recognise that its not whether what is, in both cases, state and large scale private, socialised rather than privately owned capital, is in the state or private sector that counts, but who exercises control over it. Prior the 1945 Labour government, there were cooperatively owned coal mines that were also nationalised. That was a retrograde step, as the workers in those mines lost control over them, and suffered the same attacks on their pay and conditions that all other miners suffered, following nationalisation.

    2. The decision to let out contracts is not purely ideology for ideologies sake. In 1997, Labour faced interest rates of 7.5% on 10 Year Government bonds, compared to only 1.5% today, and the experience of government projects having huge cost overruns put all that risk in the government. Throughout the whole of human industry, the experience has been that productivity, the social surplus and living standards are driven up by the division of labour, and capitalism took that process to its logical conclusion making what were once component parts of a commodity into separate commodities produced specifically by individual firms. Its what has created global supply chains. The development of technology and communications in the 1980’s, enabled that process to expand significantly. During that period, all large companies engaged in the outsourcing of their non-core activities. They didn’t do it for ideological reasons, but for clear economic reasons, of driving up their efficiency.

    3. As a Marxist, I am really not bothered whether the bureaucrats, like Michael Edwards or Iain McGregor, who make those decisions within a nationalised company, on behalf of the interests of the capitalist class in general, get those decisions right or wrong, any more than I am bothered whether those same bureaucrats when they are working as executives representing the interests of some particular group of shareholders get those decisions right or wrong. Only when workers themselves have control of the means of production am I bothered about where the facts lie in relation to that more efficient allocation of resources. In the meantime I will continue to point out that the bureaucrats who run state industries and services are the same bureaucrats who the nest day are running those large “private” companies, and in neither case do they do so in the interests of the working-class.

    4. If we look at the experience of public services run by the state, it is far from a happy one. Take workers pensions. For decades, workers paid into a National Insurance Scheme, the funds from which have always gone to fund other government activities such as fighting wars. For decades, the workers who paid into those schemes had no potential to live long enough even to receive any pension payment from them. When workers have started to live long enough to start getting a modest pension, the state changes the rules. And, that can be seen with all the other services that workers pay NI and Taxes to buy from the state collectively. Whenever the capitalist state feels the need to save money to meet the needs of capital in general, it cuts back on NHS spending, or on schools spending and so on, and we have absolutely no control over it doing so.

    Even where its not a matter of spending being cut back the lack of control by workers, and the fact that things like the NHS are run from the top by the same bureaucrats who interchange with the same jobs in large private companies means that the same kinds of excesses occur. A look at the experience of Stafford Hospital is emblematic of the same problems that exist on a much wider scale. Thatcher was able to get support for the sale of Council Houses, because workers experience of the bureaucratism, and poor nature of council housing provision gave them no reason to defend it.

    5. There is no reason for workers to see privatisation as a solution to the poor provision of public services, as Carillion et al demonstrate, but all experience also shows that there is no reason for them to believe that provision of those services by the capitalist state will be any better. The only thing they can expect is that the capitalist state might attempt to run things in the interests of the capitalist class in general, whereas those same bureaucrats, when they are employed as executives in a private company will only act in the interests of those specific shareholders. But, for the same reason they can expect that as with the 1984-5 Miners Strike, those bureaucrats will use the full power of the capitalist state to defeat the workers in the interests of the capitalist class as a whole.

    For a long time, it was not even possible to seek redress against a lack of service or other injustice in the courts, because the state claimed Crown immunity. Handing over huge monopolistic and monopsonistic power to the capitalist state is a very bad idea, in the absence of real day to day democratic control by workers over those industries and services, as workers in Eastern Europe, Cuba and China discovered.

    In fact, if a Labour government changed the laws on corporate governance, as I have suggested above, it would be far better to have goods and services produced by those large socialised capitals in the “private” sector, where workers would then have control, than by the state, where there is no likelihood they would, because the state would always claim to be acting in the interests of “society” in general – meaning actually capital in general – and would thereby claim a superior democratic mandate.

  5. Misha Carder

    Has anyone asked for Freedom of Information to find out how many MPs and especially the Cabinet are heavily invested in these big companies- who continue to get contracts even when they are clearly sub-standard and wrecking the state?

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