“Essential public services should be run for the public, not to make a profit for shareholders – and insourcing can demonstrate that”
By Andy McDonald MP
In a speech in 2021, the now Chancellor Rachel Reeves said that, “under Keir Starmer’s Labour government we will see the biggest wave of insourcing of public services for a generation.”
I believe now with the government established and a need to go further and faster in demonstrating its delivery of change, it is now time to see evidence of that wave of insourcing.
I believe there is a prevailing view on the Government Benches that essential public services should be run for the public, not to make a profit for shareholders – and insourcing can demonstrate that.
Since 1979, under the Conservatives, there has been a huge growth of private business involvement in public service delivery. That has resulted in more fragmented, poorer-quality services run by companies seeking to renegotiate contract terms, with staff—often women and minority ethnic employees—the subject of squeezed terms and salaries.
The last Labour Government invested in public services but did not slow the growth of outsourcing. That allowed the coalition to expand it further, with austerity encouraging public bodies to turn to outsourcing as a means of reducing costs, while ideologically driving it through a White Paper, “Open Public Services”, which argued that few services should be exempt from outsourcing. That is where we were in the run-up to the recent general election, before which Labour set out a clear message on outsourcing.
In February 2021, the now Chancellor said in her speech:
“Outsourced services are not integrated into the fabric of our communities. Unlike our public services and providers, like charities, many of which offer vital frontline services, outsourced companies have not built up trust over time and lack the vital local knowledge and flexibility required.”
This accorded with the arguments of those from unions and campaigns over recent decades. An emphasis on competition and markets has undermined the public service ethos associated with public services and has too often worked against the public interest.
The whole premise of outsourcing has been to reduce costs, and that is visited on the workforce in terms of pay and other terms and conditions, with the disproportionate impact that he describes, which I will come on to shortly.
In the civil service, the Public and Commercial Services Union have shown that the two-tier gap between directly employed and outsourced workers is widening as pay and terms and conditions for the latter erode, with civil servants reliant on universal credit and workplace food banks.
Here the Labour Government have come into office with numerous disputes having recently taken place, or currently taking place, between outsourced service contractors and their employees. In the dispute involving G4S, it has resulted in Department for Work and Pensions buildings, including job centres, closing for several days. The DWP has been asked to intervene in the dispute and to set out the sanctions it has issued to G4S for failing to deliver its contractual responsibilities. Not many months ago, I was on a picket line outside our jobcentre in Middlesbrough with G4S security guards who were expected to put food on the table at £11.40 per hour—but their employer was not the DWP but G4S. We have to ask whether that is a legitimate and moral way to organise our public services.
In the Prison and Probation Service we need to insource facilities and estates management, which are coming up for renewal in the coming months, rather than increasing the profits of private companies. This could be done with a return to full works departments in every establishment. This week, the Prisons Minister told MPs that the Government still have an open mind on maintenance contracts – I hope they do and reach the right conclusion.
And on the railways, the RMT says that outsourced workers struggle to make ends meet, and it directly attributes that to outsourcing firms profiting from low pay. Many outsourced workers’ wages are anchored to the minimum wage, and they do not have the right to occupational sick pay and decent pay schemes.
This story is repeated across public bodies including the health service and local government.
The task before the Government is twofold. First, in the civil service, the Government must intervene in industrial disputes and ensure that public services are not disrupted by contractors prioritising profit over public service and at the expense of public servants’ livelihoods.
I agree with the PCS proposal to “seek an agreement on a programme of civil service insourcing and rights for contractor staff” and that, “whilst services remain outsourced the PCS seek an agreement on union recognition for all facilities management workers and selected outsourced staff.”
Secondly, I urge the Government not to enter into any further outsourced contract arrangements in the civil service or elsewhere before a review into the costs and impact of the outsourcing is complete, and before a new strategy setting out the case for a new wave of insourcing has been published.
Unison has set out its concern that “Any decisions by public bodies to outsource any services should have to pass a key public interest test” and that, “the test should be applied to contracts coming up for renewal whilst providing services in-house should become the default position.” I wholeheartedly agree with that notion.
In her speech in 2021, the Chancellor said that “under Keir Starmer’s Labour government we will see the biggest wave of insourcing of public services for a generation.”
Andy McDonald is the Labour MP for Middlesbrough & Thornaby East. You can follow him on Twitter/X, Facebook and Blues.
It is now time to deliver just that.
- Andy McDonald is the Labour MP for Middlesbrough & Thornaby East. You can follow him on Twitter/X, Facebook and Bluesky.
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