Local government seems set to be a big loser in the 2015 Spending Review.
It will have to be innovative and resolute in its response.
It must act strategically with a long term focus.
The Government is seemingly placing great store by more outsourcing of public services to the business sector as a means of reducing expenditure and closing the deficit.
Should local government follow suit?
It would seem that the Government wishes to extend outsourcing across ever more public services and to do so without any comprehensive analytical evidence of the impact of this policy and practice.
This is not a good basis for promoting policy and practice especially in sensitive and critical public services.
It may also be less than wise to do when public expenditure is as constrained as it currently is, and as it will be as a result of the Spending Review.
Anecdotal evidence suggests that outsourcing has had a very mixed set of results and that to be successful requires a number of factors to be in place.
These include a competent client able to draw up a specification, understand the supply by TicTaCoupon” href=”http://www.themj.co.uk/Agents-of-change/201349#34555869″> accountability; the ability to manage and allocate risk effectively; and certainty of demand for the services to be outsourced.
Most public procurement of complex services takes a considerable time and comes with significant by TicTaCoupon” href=”http://www.themj.co.uk/Agents-of-change/201349#14218105″> competition.
This is exacerbated by the fact that the public sector has a poor track record of opening up market opportunities to new entrants, especially from the social and charity sectors and small and medium sized companies (SMEs).
We also know that the next five years (and probably more) are going to be characterised by three conditions across the public sector – less by TicTaCoupon” href=”http://www.themj.co.uk/Agents-of-change/201349#41434178″> offer greater choice for service users.
The current government driver seems to be cost reduction.
To gain the most financially from public service outsourcing, the temptation is usually to agree to be locked into long term contracts.
The downside is that such contracts typically offer little scope for flexibility or innovation, and are of a size that makes it very difficult if not impossible for smaller providers from all sectors to bid.
Inevitably, then, the likelihood is of a public sector becoming even more reliant on a few major providers, which in turn and like the banks, become “too big and too strategic to fail”.
At this point, the public sector may find itself bearing more risks than it would otherwise have done by retaining the services in the public sector.
It is probably also going to end up bearing the risks of changing demand – upwards or downwards.
If the drive to outsource is more about cost savings than service improvement, then there is going to be less incentive to build the pursuit of social value and wider public interest goals into contracts that many public bodies especially local authorities have recently been doing – for example, requiring the payment of the Living Wage and/or local sourcing of goods and services.
The Spending Review would appear to be driven as much if not more by political considerations than by wider economic and social ones.
It would seem that there is an ideological commitment to reduce the role of the state both as funder of public services but also as a provider.
This is not the best way to secure effective outsourcing with partnership and collaboration between business sector providers and their public sector clients.
Indeed, it creates a real sense of déjà vu based on the ghost of compulsory competitive tendering in the 1980s and 1990s.
I know that most progressive and responsible business sector providers have no wish to return to such an approach but the reality is that there will always be providers who are ready to bid with unrealistic service promises and too low prices.
Responsible business outsourcing companies campaigned and argued, both individually and collectively, to end compulsory competitive tendering (CCT) and what some commentators colourfully described as ‘bargain basement shopping for public services’.
They should speak up again today as much as they did in the 1990s and 2000s.
I wonder if the authors of the Spending Review prospectus have studied the impact of CCT and similar low price driven public procurement practices in other jurisdictions?
There are many alternative means of improving efficiency and reducing costs other than outsourcing.
These include: service redesign, with service users and staff co-designing the changes; shared services within the public sector; greater devolution of budgets and responsibilities to places (building on the Labour government’s Total Place approach and the current government’s decentralisation and localism programme); collaborating with the social, voluntary and community sectors, and using grant aid rather than contracts; and many more.
Local government should respect and recognise the voluntary and community sector as partner with a voice for and representation role for communities.
An emphasis on outsourcing can weaken such partnerships and lead to the voluntary and community sector only been regarded as a service provider and contractor.
This is detrimental to community wellbeing.
Outsourcing can play a role – but only when the conditions and the objectives are right.
As a means of driving down price (and presumably, given the level of people costs in most public services, too often this will mean worsening staff terms and conditions) – outsourcing is rarely the answer.
In considering whether or not to outsource a local authority must consider the wider social and economic consequences, for example, of redundancies and reduced local wages and spending power.
There are many sound economic, social and financial reasons for challenging the premise, policies and ideology on which the Spending Review are based.
I truly believe that it would be a fundamental mistake for the Government’s current and seemingly obsessive and single-minded determination to drive ever more outsourcing to the business sector not to be challenged by the opposition parties, trade unions, local authority leaders and all those of us, who want reliable, innovative and affordable public services.