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Labour must challenge the canard: public sector bad, private sector good

Nothing shows more starkly the relentless grip on the public consciousness (and above all the politicians) that the corporate sector has secured than the absurd fixation with outsourcing. It is automatically assumed to be more efficient, more innovative, more dynamic. Sometimes it is, sometimes it all ends in tears and the State has to pick up the bits: privatising the gains, socialising the losses.

G4S is only the last in a long line of fiascos including Whitehall IT (£12bn loss to the taxpayer), Stats testing, the Rural Payments Agency disaster, the London tube maintenance PPI collapse (cost to the Taxpayer £2-3bn), numerous health PFIs, the Child Support Agency debacle, etc. – and not forgetting the banks (bailout costs to the taxpayer £70bn, wider costs in guaranteed loans, special liquidity devices, asset support schemes, around £850bn). The banks were before the crash paying £25bn a year in corporation tax to the Exchequer, but paying back the bailout and follow-on costs at that tax revenue rate (if ever recovered) would take 60 years. Not a great deal for the taxpayer.

What makes this experience so daunting is that Cameron has now institutionalised it through his Open Public Services policy of opening up the entire public sector to ‘any qualified provider’. G4S will now become regular practice. There is no check on whether it provides value for money (the NAO found that Jobcentre Plus was far more effective at getting people into work than the private welfare-to-work firms, but the fat contract still went to A4E and the rest), no check on performance unless it leads to disaster (why don’t Freedom of Information laws cover private companies when they’re undertaking important public services?), and no adequate penalties for catastrophic failure. Is G4S to be forced to hand back the absurdly bloated £284m of taxpayers’ money it received for its contract to provide 13,700 guards when it only provided 4,000?

Nobody should suggest the opposite myth, that private sector is bad and public sector is good. It largely depends on the integrity of management and the quality of training and industrial relations. There are also areas where universality, equity, accountability, professionalism should prevail (particularly NHS, education, adult social care) rather than pure unfeeling competitiveness. But private sector failures now are becoming so frequent and so damaging that any idea that a supposedly self-regulating market can be left to its own devices and all will be well, has become risible.

There are many strategic areas where a major public involvement is now vitally needed (including banking, house-building, pensions, energy supply) and even where that may not be appropriate, there is an urgent need too for regular assessments of major private companies to ensure they meet high employment standards, fair remuneration for employees at all levels, behave as good corporate citizens, and properly observe environmental goals. It’s time the Labour Party called for this loud and clear.

One Comment

  1. John Simon says:

    Interesting piece and of course important to ensure that the mantra of private sector good, public bad is challenged.

    I must wondered about people’s thought on the 3rd Sector – charities/not-for-profit – receiving Govt contracts is?

    Certainly a specialist charity in say, mental health, is probably going to have better knowledge of how to run MH services than a generalist public sector body.

    Should they be considered private sector or encouraged? Or does this just play into Cameron’s Big Society nonsense?

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