News | Published July 28 2019

Labour pledges to end privatisation of council services

The Labour party has revealed plans for legislation aimed at ending the private contracting of local services in anticipation of a general election in the autumn.

Shadow chancellor John McDonnell said that the privatisation of council services will be reversed and a new partnership between local and central government will be established.

Plans included in the party’s Democratising Local Public Services: A Plan for Twenty-First Century Insourcing policy document include bringing contracts on matters such as school meals, cleaning and building maintenance back under the control of local authorities.

The introduction of a Local Public Services Act would see councils assume control of services by default when existing private contracts expire, which would bring an end to the existing practice of lapsed contracts going out to tender.

Social care contracts which require specialist provision will be excluded from this reckoning.

The Local Government Act of 1988 introduced the current tendering process which is compulsory and began the drive toward outsourcing services.

The current public sector contracting market is worth over £100 billion according to the Business Services Association.

Councils under current regulations also need to comply with the "Best Value" regulation outlined in the Local Government Act of 1999 to give out contracts which, in turn, allowed charities to bid for business but also enabled councils to set up their own companies.

Councils outsourcing en masse has since brought about a rise in market failure.

The National Audit Office issued a report in 2013 which concluded that four major companies accounted for the majority of services contracts. All had been reported to have performed poorly.

Labour are now seeking an end to a model which the party feels is not providing services to the required standard.

The party is looking to elevate standards and improve local economies and has set out a model contract which sets a minimum standard, implements a structure to monitor performance and ensures that staff receive recognition from trade unions.

Councils that wish to continue outsourcing services will have to make a case as to why, as well as allowing local residents to question their motives. Commercial confidentiality will not be permitted in these circumstances.

McDonnell said: “It’s time to end the outsourcing scandal which has seen private companies rip off the taxpayer, degrade our public services and put people at risk whilst remaining wholly unaccountable to the people who rely on and fund these services.”

The largest public sector trade union, Unison, was supportive of the proposals.

Its general secretary Dave Prentis said: “This report is a welcome first step on the road to ending the scourge of public service privatisation. For the first time in 20 years we’re seeing positive signs that Labour understands the damage that outsourcing has caused and is developing a plan to reverse it.”

Even without compulsory legislation, widespread insourcing of services is already taking place.

A report carried out by the Association for Public Service Excellence revealed 77 per cent of councils had brought services back under their control in 2018. It also found that 78 per cent of local authorities believed retaking control of services gave them more flexibility over provision.

Liverpool City Council has already saved an estimated £30 million by insourcing IT provision.

Declining standards of performance from private services providers has been a major trigger for insourcing alongside austerity.

The APSE says that: "the scale of insourcing appears to be increasing as local councils grapple with on-going austerity.”

Local government finance leaders warn that councils need the skills and experience to deliver on contracts should insourcing become compulsory.

Joanne Pitt, the local government policy manager of the Chartered Institute of Public Finance and Accountancy, said that: “Irrespective of which bodies deliver public services, it’s important that councils continue to review available options and use their resources effectively and in the best interests of their citizens."

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Authored by

Scott Challinor
Business Editor
July 28 2019

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