We can’t always rely on the private sector, present Chancellor warned in 2012

Janet Downs's picture

It’s over five years since the Olympic Games security saga.  The army had to be hauled in because private contractor G4S didn’t provide enough security guards.

This prompted the present Chancellor Philip Hammond, then Defence Secretary, to question outsourcing public sector work to private companies.  In an interview with the Independent, Hammond admitted the G4S fiasco had ‘caused him to rethink his scepticism towards the public sector’.  Hammond said:

I came into the MoD with a prejudice that we have to look at the way the private sector does things to know how we should do things in Government, but the story of G4S and the military rescue is quite informative.’

Unfortunately, Hammond forgot his own warning.  A year later he announced a ‘step change’ in how the UK procured military equipment.  This was despite warnings from former military leaders about possible conflicts of interest and concerns that taxpayers would be worse off if the contract was poorly negotiated. 

Hammond wasn’t the only one to ignore misgiving about outsourcing public services to private companies.  Other ministers had the same cloth ears and unseeing eyes when red flags waved:

March 2011: Channel 4’s ‘Dispatches (Britain’s Secret Fat Cats)’ revealed how private companies such as Serco were making a lot of money from outsourcing but not necessarily providing adequate services. 

June 2011Southern Cross Healthcare collapses putting 750 care homes at risk.  Dame Joan Bakewell said this is what can happen when essential services are run by any willing provider.

October 2011: the chair of the Public Accounts Committee told the BBC she feared ‘due diligence’ was missing in the pressure to reduce costs by outsourcing.  Tim Banfield of the National Audit Office (NAO) told the same programme that outsourced contracts could look good on paper but ‘the reality might be quite different’.  

November 2012: the NAO said there were risks as well as opportunities in the Coalition’s stated policy of delivering public services via user choice and competition.   Private provision, the NAO wrote, can bring efficiency but it doesn’t ‘naturally provide universal services or equity of provision’.

November 2013: the NAO warned that while outsourcing was ‘a fast-growing and important part of delivering public services’ there was nevertheless ‘a crisis of confidence at present, caused by some worrying examples of contractors not appearing to treat the public sector fairly, and of departments themselves not being on top of things.’ 

None of these alarms stopped ministers continuing to award outsourcing contracts to an increasingly small number of private companies: eg Serco, G4S. Atos, Capita and Carillion.

It wasn’t just ministers in the Coalition or subsequent Conservative governments who are responsible for this.  Labour ministers in the Blair years awarded many of the contracts which are now costing taxpayers dearly.  And when these companies collapse or contracts go wrong, public services are at risk and taxpayers end up bailing them out.  

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