Local government must surely be up for a shift to insourcing

By John Tizard | 22 July 2019

Labour’s call for the ‘Democratisation of Local Public Services’ and its ‘plan for 21st century insourcing’ - http://labour.org.uk/wp-content/uploads/2019/07/Democratising-Local-Public-Services.pdf - should be of interest to local authorities of all political persuasions; and welcomed by most.

After four decades of outsourcing, more outsourcing, and even more outsourcing of public services, there are signs that local authorities are now beginning to question the efficacy of this service model and its underlying ideological and managerial drivers. Indeed, many are ‘insourcing’ services which were previously outsourced - and they include Conservative as well as Labour-led district, county, unitary and metropolitan councils.

For many years and for a variety of reasons, the default has generally been to outsource. Usually, there has been a belief that outsourcing, and more particularly competitive tendering, leads to reduced costs and improved quality. However, as local government has become more efficient and as austerity has severely reduced budgets, the scope for savings through outsourcing has been greatly reduced and was often exaggerated; and today, it is more commonly the case that significant savings are likely only to be achieved at the expense of service quality and/or the terms and conditions of staff with less flexibility and reduced accountability.

For their part, council leaders are aware of the litany of serious outsourcing failures and can see that public opinion is changing, with less overall trust in outsourcing (especially of personal services) and for the business sector more generally – and as politicians, they are sensitive to the fact that this shift in public opinion cannot simply be ignored. At a time of austerity and ever-changing public demand and expectations, they also want more flexibility - most long-term outsourcing contracts lock in budget allocations and can fossilise service designs.  And there is also a wish to place greater emphasis on the local economy with programmes such as community wealth building gaining traction and local integrated service systems, whereas the reality is that much outsourcing is inconsistent with such important considerations.

Labour is not simply arguing for a return to the early 1970s. Rather, it wants to reset the dial so that public services are more democratic and accountable and are more responsive to local place and local people. It is not arguing against service design change, improvement or efficiency.

Whilst ideally, the aim is to have eliminated nearly all local authority outsourcing within five years, I suspect that there will always be some outsourcing and Labour’s policy pragmatically recognises this too, but it will be severely limited. Some contracts will have much more than five years to run and some specialist provision may still be contracted.

The Labour Party has launched its policy on local government outsourcing and insourcing in the context of its wider commitment to local community wealth building. I do believe that a range of local authorities of all political hues are far more conscious than previously of the potential gains by procuring for local public benefit and the important contribution that public services make to community wellbeing. Public services should not, therefore, be seen as standalone activities, which can be delivered by any organisation in whatever way they wish.

As I have argued previously in The MJ, local authorities should adopt a clear policy on public services and their contribution to local community wellbeing, the local economy and the democratic system. Such a policy should include the authority’s stance on outsourcing and insourcing. And in line with Labour’s policy (and one that has been long advocated by myself and many others), ‘in-house’ service provision should be restored as the ‘default’ model. Labour will in government legislate to ensure that this is the case and in so doing will overturn decades on central government exaltation to outsource.

Local authorities should only outsource in very limited circumstances when there is a compelling public interest in doing so.  They should also consider alternative forms of social provision, including relational partnerships with the local voluntary and community sector, strategic use of co-operatives (service user and/or staff led), local social enterprises and socially driven SMEs.

Faced with a portfolio of existing contracts, a local authority should review the most significant ones to determine whether there are grounds for seeking early termination or allowing the contracts to run to term. Labour’s paper acknowledges that most services are likely to be insourced when existing contracts reach the end of their lives.  However, there may be social and financial economic benefits to terminating some contracts early - and significantly renegotiating others. This will require contract by contract analysis and decisions. And since such an approach will require resources and the capacity to manage the services in-house, it will need to be undertaken strategically.

If outsourcing contracts are let, Labour is proposing a model template of sensible contract conditions to: protect the public interest; ensure decent terms and conditions for staff and trade union recognition, and enhance democratic accountability. It is likely there will be few of these proposals that most progressive council leaders would not sign up to.

Council leaders will obviously need more information on the mechanics and legal issues involved with insourcing and shifting to more public interest focused outsourcing. Labour’s guidance comprehensively addresses this but we should never underestimate the innate pressure to maintain the status quo - nor the challenges. To move the outsourcing dial will require bold political leadership at national and local level across the country on this agenda. It will also require local authorities to have the necessary expertise, capacity and resources to make this shift successfully. This means that leaders will need to: be strategic in their thinking and planning; communicate, explain and take stakeholders with them; and focus on the long term gains over short term challenges.

In the introduction to Labour’s policy paper, Andrew Gwynne, MP, Shadow Minister for Local Government and Communities writes ‘Insourcing is an element of Labour’s radical plan – as a part of community wealth building – to rebuild local economies, renew faith in local services and deliver a renaissance of local government in communities right across Britain.’

I applaud this sentiment and believe that we genuinely do have an opportunity for a radical new era. At last, we can move on from the past four decades of marketisation, competitive tendering and contracting. We can shift the focus towards citizens, staff, social value, public service ethos, place and democracy. Local government must surely be up for this.

John Tizard is a strategic adviser, former council leader and former director of Capita

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Budgets and efficiency Local democracy Austerity Outsourcing