Government outsourcing failures risk becoming 'greatest advertisement for renationalisation'

Will Green is news editor of Supply Management
14 March 2014

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14 March 2014 | Will Green

MP Margaret Hodge has called for the “veil of secrecy” to be lifted from UK government outsourcing contracts.

Hodge, chairman of the Public Accounts Select Committee (PAC) and Labour MP, said Freedom of Information Act provisions should be written into contracts for public services being delivered by private firms.

She said outsourcing firms such as G4S, Serco, Atos and Capita were ready for this, but government departments used commercial confidentiality to hide poor performance.

“We are in danger of creating a shadow state that’s neither transparent or accountable to Parliament or the public,” she said.

The PAC, which has produced a report entitled Contracting out public services to the private sector, is also calling for open book accounting and for the National Audit Office to have access to “all information that’s relevant”, echoing recent similar calls from the CBI.

“The government has to improve its competence, they have to up their game,” said Hodge. “At the moment they have not got a grip. Time and time again when we see failures of service, it’s a failure of government.

“If the government don’t listen to this they will not be able to move forward on an agenda that is at the heart of what they want to achieve.”

However, she also said firms had to act more ethically. “If private companies are going to have a sustainable future in the public domain they have to develop ethical standards,” she said.

“Capita, in wanting to grow its share of public sector business, often buys smaller companies that have won contracts from government, and Serco, to enter new markets, tends to undercut and then finds they’ve undercut so much they have not got the resources to provide a quality service,” said Hodge.

She said BT, in its contract to provide rural broadband, promised 90 per cent coverage but “used their public subsidy to squeeze out fair competition from smaller companies”. At the same time the telecoms firm put confidentiality clauses into contracts with local authorities that prevented other councils “getting the best deal”.

“If you take the taxpayers’ pound you have to take responsibility for that,” said Hodge. “If you don’t want that you don’t have to enter this market.”

She said the Department for Work and Pensions was “in danger of meltdown” over its contracts with Atos, but errant firms were not punished sufficiently, with Capita receiving a fine for just £2,200 for its failures in a contract providing translation services to the courts.

“If this is the direction on which this government wishes to travel, and future governments will have to handle, transparency, tough competition, much tougher government capability in overseeing the market, and ethical standards by the private sector is absolutely crucial,” said Hodge.

“It has to be sorted out otherwise it will become the greatest advertisement for renationalisation.”

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