But what\’s wrong with outsourcing public services?

What happens when these firms, with their inexorable expansionist logic, bite off more than they can chew? We pay anyway. We paid G4S; we will pay it again when its prisons catch fire. We will pay A4e when it finds no jobs, we will pay Serco when its probation services fail. We will pay because even when they\’re not delivered by the public sector, these are still public services, and the ones that aren\’t too big to fail are too important. What any government creates with massive-scale outsourcing is not \”new efficiency\”, it is a shadow state; we can\’t pin it down any more than we can vote it out. All we can do is watch.

The thing is, those near perfect social democratic states, the Nordics, outsource just about everything they can. Fire services and ambulances for example.

Seems to work pretty well too.

Indeed, there\’s a strong argument that if you want to have a large state then you\’ve also got to have an efficient one. If said state is 25% of the economy then you can, arguably, get away with it being featherbedded and bureaucratic. It\’s only 25% of the economy, after all. When it\’s 40, 50% of the economy such inefficiency would be too much of a drag on general living standards. Thus the more you ask the state to do, to pay for and organise, ensure the existence of, the more you need to contract it out in the name of efficiency.

As, err, the Nordics that we are advised to emulate indeed do.

21 comments on “But what\’s wrong with outsourcing public services?

  1. Can we fire the NHS for killing 3,000 people prematurely ? Nope. But we can fire G4E if they do a bad job.

  2. Yeah, fair ’nuff, Tim. But then then the private companies the State outsources to should behave like private companies. Like they’re providing a service we, the customers, are paying for. Too often they behave as if they’re part of the State apparatus.
    This is exactly the position of a GP, isn’t it? Outsourced medical provision. But a hell of a lot of GP’s seem to take the attitude, we’re there to provide a service to them. And there’s very little you can do about it. Not easy to take your custom elsewhere when the discretion whether to accept you is there’s & you have to pay for it irrespective. And the fount your money flows to them, through, the NHS, does very little to help.

  3. Nothing. So long as any efficiency savings gained from a private provider are greater than the cost of having to provide a profit to its shareholders and contracts are flexible. My understanding is that PFI contracts have often failed to meet these criteria and it then ends up as a simple transfer of public money to private companies: crony capitalism writ large.. also a lack of transparency. lots of cooking of books etc..

    Can anyone tell me how Gordon Brown ever had a reputation for being prudent?!

  4. Bloke in Spain is exactly right. The system is fascism (without the more colourful trappings–so far). These companies are part of the state. They get the contracts by schmoozing political/bureaucratic scum-if not by various forms of bribery. These firms do not serve the people who use their services but the political scum. A useless firm (and I mean very useless, ordinary crap won’t do it) might get fired –they hired some clowns to do HMRC’s payroll a few years ago and had to fire them as they made such a mess.
    The “private” sector as a stooge of state is more effective than the state–if the govt was building its own computers there would be a factory somewhere still making valves–but they are still a mess. Witness the state’s various run-ins with IT. Every govt dept has hired private firms to produce their IT and every system has been crap. HMRC notably so and worst of all the NHS.
    We do not need a middleman who skims vast sums off the top and hires whatever bullshiters have his ear. End govt “services” and let people purchase what they need on a free market. And spying/snooping on us is not a service.

  5. In Chile the fire services were totally voluntary organisation. Members of the public volunteered to serve in the Bombaderos and were called out to man the fire fighting equipment whenever there was a need to fight a fire. I was told that fighting fires is a voluntary service in most Spanish speaking countries of South America.

    I can understand the logic that when you are at war, and have bombs falling out of the sky all over the place, to have a central and governmental involvement in fighting fires.But, the continued governmental role in fire fighting services in peace time is baffling to me.

    But then, we can be thankful the air raid wardens have been disbanded, have they, or are we still paying like suckers for guys to peer at the sky?

  6. In Austria the fire brigades outside of the big cities are all voluntary. The ambulance services are run by outside organisations, which are often charities (a bit like the RNLI ) but they rely on kids who opt out of their military service.
    What happens with outsourcing in the UK is that the company takes on the management and staff of the public service, which means it retains any incompetencies already in the system and then lays an extra layer of incompetency with their own management.
    Seen it, been there.

  7. “But then, we can be thankful the air raid wardens have been disbanded, have they, or are we still paying like suckers for guys to peer at the sky?”
    Both centralised & expanded. For the sky watching bit, Fylingdales isn’t it? For the humble bloke in the white tin hat, used to come round with an “Oi! Put that light out!” do you really want a list of all the people empowered to tell us what to do in every conceivable area of our lives?

  8. What’s wrong with outsourcing public services? The same thing that’s wrong with not outsourcing them. If the idiots in charge aren’t capable of running things in-house, what makes you think they’re capable of negotiating a satisfactory outsourcing contract? As we’ve seen with the PFI deals, they’re not.

    I’d note that I frequently see this in businesses as well. Companies decide to outsource their IT because they don’t have the resources in-house to do the job, but then get ripped-off by unscrupulous outsourcers because they don’t know anything about what they’ve contracted for.

  9. Read Chris Mullin’s Diaries (A Walk on Part) for a view of how even a socialist can see the benefits of outsourcing services i.e. state run prisons vs. privately run prisons (toured both as part of his role in the home affairs select committee). How dangerous dogma can be (in either direction): outcomes are all that count

  10. The inefficiencies and bureaucracies that blight the public sector are, I think, a function of size, not ownership. I’m unconvinced that outsourcing of large-scale functions to the usual cartel of mega-corps yields any great benefit to the taxpayer unless the taxpayer is smart enough to hedge his bets and buy shares in the cartel.

    Small-scale stuff (either wholesale, such a free school, or on a lower level contract-by-contract basis, such as NHS paying ‘company A’ to do an operation) seems more likely improve the quality of service and provide direct efficiency savings (though the process of award may often outweigh cost savings).

  11. Witness the state’s various run-ins with IT. Every govt dept has hired private firms to produce their IT and every system has been crap. HMRC notably so and worst of all the NHS.

    The common causes of IT project failure:

    Lack of clear link between the project and the organisation’s key strategic priorities, including agreed measures of success.
    Lack of clear senior management and Ministerial ownership and leadership.
    Lack of effective engagement with stakeholders.
    Lack of skills and proven approach to project management and risk management.
    Lack of understanding of and contact with the supply industry at senior levels in the organisation.
    Evaluation of proposals driven by initial price rather than long term value for money (especially securing delivery of business benefits).
    Too little attention to breaking development and implementation into manageable steps.
    Inadequate resources and skills to deliver the total portfolio.
    Source: Office of Government Commerce

  12. There asre a lot of volunteers fightingthe bush fires in Australia and yet the fires still burn.
    Volunteer seems to = cheap.

  13. Mr Ecks, back in the late 90s a new computer system was ordered for one agency, to deal with what was effectively cosmetic changes to the law the agency implemented. After signing contract with specifications, over 2,000 changes made by government and civil servants. Not suprisingly the system suffered delays.
    Then government announced it would go live on a certain date. And not suprisingly for a political decision the computer system had problems still.

    Doesn’t matter if the fees for changes run into billions, some people cannot resist meddling.

  14. Come to think of it, what is one of the more popular outsourcing the NHS does?

    Anyone guess?

    Local hospice.

    Often supported by local residents, usually only partly funded by the NHS (20% – 50% of the cost of running the hospice) and removes one of the heavier burdens the NHS has.

    Would anyone say their local hospice would be better run by the NHS?

    Or how about GP surgeries? Been years since I last saw an NHS employed GP, most for some years now have been local companies contracting with the local NHS trust to provide services. Have people noticed their GP isn’t an NHS employed one?

  15. “In Chile the fire services were totally voluntary organisation. Members of the public volunteered to serve in the Bombaderos and were called out to man the fire fighting equipment whenever there was a need to fight a fire. I was told that fighting fires is a voluntary service in most Spanish speaking countries of South America.”

    It’s the same with rural fire & emergency services in NZ & Aussie largely. A small core of professionals and the bulk being voluntary.

    Only the main cities have a fully professional force.

    When I was in the UK I recall one of the fire services advertising for 2 positions and they got 6,000 applications despite the supposedly poor pay. It’s a job men will do simply for the social benefits, you would never have a problem getting enough suitable volunteers.

  16. The problem is not outsourcing, nor privatisation. It’s the lack of competition.

    Because there is a single buyer, so long as the service provider doesn’t screw up royally and continues to schmooze the buyer (i.e. government), it might just as well be a state-run monopoly.

  17. Info from OECD on outsourcing in Nordic countries..

    In general, Nordic countries, as well as Switzerland and Estonia, rely less on non-profits or private institutions to provide services directly to end users. In these countries, over 75% of expenditures on outsourcing are for intermediate consumption

    http://www.oecd-ilibrary.org/sites/gov_glance-2011-en/11/01/index.html?contentType&itemId=%2Fcontent%2Fchapter%2Fgov_glance-2011-27-en&containerItemId=%2Fcontent%2Fserial%2F22214399&accessItemIds=%2Fcontent%2Fbook%2Fgov_glance-2011-en&mimeType=text%2Fhtml

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