“Outsourcing of public services began in the 1980s, a central feature of the drive to roll back what neoliberalism casts as a bureaucratic, inefficient state. Its proponents claimed the involvement of private providers would increase cost-savings and efficiency, and improve responsiveness to the “consumers” of public services. Thirty years later, the value of these contracts is enormous – more than £120bn worth of government business was awarded to private companies between 2011 and 2016, and their number is increasing rapidly. At least 30% of all public outsourcing contracts are with local authorities.
Unlike government, private companies have no duty to provide for any public interest; the laws of the market mean their primary motive must be to maximise returns for shareholders. Questions have been raised about whether corruption or “misuse of public office for private gain” contributed to the Grenfell disaster; but the nature of outsourcing public services means that even the most well-meaning politicians can enter into contracts that result in severe detriment to the public, in both financial and human terms, without any crime having been committed.
The relationship between local councils and companies bidding for contracts is usually highly unequal. Local government funding cuts have caused a reduction in resources dedicated to providing scrutiny and oversight. The Audit Commission, previously responsible for scrutinising local authority contracts, has been abolished. The private companies involved, often huge multinationals, have significant advantage over local authorities in terms of technical knowledge and negotiating experience.
If it’s hard for councillors to evaluate and oversee these contracts it is nigh on impossible for the people using and experiencing services to apply scrutiny to the contracts governing their delivery. “Commercial confidentiality” is frequently cited as a reason for not disclosing the information necessary to assess contract content – and services, when delivered by the private sector, are not subject to the rules on freedom of information that apply to local government.
Attempting to use opportunities promised in legislation when the Audit Commission was abolished, residents in Lambeth, London, recently undertook a “peoples’ audit” of the councils accounts. The resident audit group included highly experienced finance professionals, who spent hundreds of hours chasing information requests and working their way through poor quality data. The published report claims to have identified numerous instances of inadequate governance of contracts, including questionable valuations of council property and land, systematic overcharging and billing for work that wasn’t carried out. The report calculates financial losses that run into millions.
In the London borough of Haringey, council leaders are planning the highest value local government-private sector contract in history. It was never presented in any manifesto on which voters could express their opinions or make their voices heard. The deal involves placing £2bn worth of council homes, property and land into a new “development vehicle” that will demolish and rebuild vast swaths of the area. This new entity will be 50% owned by private company Lendlease, a multinational property company with a turnover of billions of dollars.
Lendlease has form when it comes to contracts with the public sector. Its redevelopment of the Heygate estate in Southwark initially promised 500 social homes, that number reduced to just 82 in the final plan – only 20 have so far been built. It has made millions of pounds from its contracts with Southwark council.
Five years ago the company admitted fraud in government contracts in the US. Three years ago an Australian local government deal resulted in the authority being hundreds of millions of dollars out of pocket. In 2016, the company was named in an investigation into noncompliance with building regulations in Melbourne, Victoria, for using highly flammable cladding on a public hospital construction project, although subsequently Lendlease has offered to replace the cladding in the spring at no charge to the taxpayer, and says test panels were successfully installed in May.
In Haringey, local campaigners have found it almost impossible to examine the content of the Lendlease contract. Senior councillors have ignored the overview and scrutiny committee’s advice against the deal, and campaigners now plan to challenge it via judicial review. Although the councillors responsible for agreeing the deal may no longer be in power come next May’s local elections, its consequences will outlive many political careers. Any future council wanting to reverse the deal will be breaking the terms of the contract, and that is likely to incur financial penalties which will impact heavily on all the borough’s residents. So where is the accountability?
Less than 90 years after the right to vote was extended to all men and women in the UK regardless of wealth, the practice of outsourcing government services to private companies is rendering democracy ineffective, particularly for those most affected. While we could attempt again to insert more transparency and accountability into these opaque agreements, it may just be simpler, and more cost-effective, to return responsibility for government provision where it belongs – back in-house – with the people elected to represent us.”