Privatised good, nationalised bad? Think again

The NHS has about 1,700,000 UK workers:

“In December 2016, NHS Improvement forecast that NHS trusts would end 2016/17 with a potential deficit of £750–£850 million.”

https://www.kingsfund.org.uk/projects/nhs-in-a-nutshell/trusts-deficit

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Carrillion has about 48,500 UK workers:

Shares in the beleaguered Carillion construction group, which is working on the HS2 London to Birmingham rail line and the vast Battersea Power Station project, plunged by 20% on Friday after the company issued its second profit warning in two months.

Carillion reported a first-half loss of £1.15bn and said its full-year performance would be worse than previously expected. It described the loss as “disappointing”. The shares, which were changing hands at 190p little more than three months ago, closed at 51p.

The company is struggling with a large debt pile and badly-performing contracts. It said it would write down £200m on 23 support services contracts, and was taking a £134m charge relating to its UK and Canadian construction businesses. …”

https://www.theguardian.com/business/2017/sep/29/hs2-contractor-carillion-profit-loss-construction-debt

2 thoughts on “Privatised good, nationalised bad? Think again

  1. Nationalised, managed properly and sensibly is always, always good.
    Employees feel more engaged with their work.
    There are no Tories creaming off the profits as they do elsewhere and whenever they can.
    Win win every time!

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  2. It is not a universal truth that public services are better than privatised services.

    In essence the best services is that which operates most efficiently – providing good quality services, quickly at the lowest price for the service provided. Over an extended period – short-term solutions do not count.

    However, privatised public services start with a VERY large disadvantage. If you start with an existing public service and privatise / outsource it then your starting point is:

    Existing costs for staff, equipment, premises etc. to deliver the same service
    Plus costs for private company to manage the contract (say 15%)
    Plus costs for public body to manage the contract (say 15%)
    Plus profit margin of private company (say 20%)

    So before you have started making efficiency savings, your overhead costs are c. 50% – and you need to make efficiency savings of 50% on the costs of providing the services just to get back to where you started.

    Now if the public service really IS so inefficient that cost savings of 50% can actually be achieved, then getting 30% savings should be a doddle. And if that is so, why bother privatising in the first place!!!

    I have seen literally 10s of privatisation and outsourcing deals first hand, having worked on both the buyer and provider sides of the fence. I have worked for a company on their 3rd and 4th generation outsourcing deals – so you would have thought that they might have learned something about outsourcing.

    And in those 10s of outsourcing deals I worked on, and in all the public privatisation deals I have seen as a member of the public, there is NOT A SINGLE ONE that I consider has been a long term success for the customer / public. Probably because the overheads are so high.

    Now the overheads of running the “NHS market” using CCGs etc. is estimated to be between £10bn and £30bn PER YEAR – and that is just the public body costs – suggesting that the total overheads of privatising the NHS are between £70bn and £200bn per year. And that is £70bn – £200bn that is NOT being used to provide front line services.

    So let me make the same challenge I have made before – for someone to point to a single privatisation or outsourcing deal which has been beneficial in the long run… does anyone have any suggestions?

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