Monday, 22 January 2018

Against Outsourcing

Love him or loathe him, John McTernan is a useful fella because he's one of the few commentators the Labour right have got who plainly, and sometimes bluntly, states their collective position on an issue. No shilly-shallying, no fudging. That doesn't mean he's right, as his latest piece in outsourcing demonstrates. What John demonstrates is the managerial/technocratic approach to politics as opposed to, um, a political approach to politics. Que? Let's look at his argument.

For John, there are three great things about outsourcing to companies like Carillion. Private companies can deliver public services well, the risk of failure is privatised, and public services are delivered cheaply. It doesn't really matter if these companies fail because contracts can be transferred over, shareholder value is lost and we lose a cadre of suits - big deal. As for jobs lost, while this is "disruptive" John points out we are seeing the tightest labour market since the 1970s, the implication being there are opportunities enough out there. The wider point is when you set it against other big government departments that don't practice outsourcing on a huge scale (he cites the Home Office and the bungling of Universal Credit), you have multiple inefficiencies and failure. Contracting out introduces accountability into the system.

In its contact with reality, John's argument falls to bits. The claim Private Finance Initiative schemes - the sort Carillion were heavily involved with - are cheaper and better quality is simply not true. According to the National Audit Office, schools and hospitals built using PFI schemes are more expensive than if the state borrowed the cash and built it itself. On accountability, well one might suggest there is a better way to keep companies (and state institutions) honest than market signals, and blatant conflicts of interest. And as for the privatisation of risk, what risk? When the state is a guaranteed customer, where is the risk? Again, as with so many claims made for market efficiencies, they're not based on fact. Indeed, they're refuted by fact. Instead it's supposition, the idea that profit making makes enterprises lean and efficient is stated as if its true, a piece of hocus pocus no amount of corporate failure seems able to dispel.

More dangerous, however, is the politics. John treats outsourcing like a management exercise, but it is not. When anything is outsourced to a private provider, they take up the contract because they're in the business of making profits. And this usually means cutting costs. Often, this involves taking on new staff on worse pay and conditions (despite TUPE), skimping on the service provided, using cheaper and shoddier materials, and increasing the casualisation of labour. For example, before my mum retired she was a home help for the county council. In the last couple of years the way she and other workers went about their tasks changed. Out went time to sit with and talk to pensioners receiving the help, and in came the well known (and well reviled) telephone check-in system. As soon as the job was done, she'd ring the number, walk to and ring in at the next client. Meanwhile, the care was partly outsourced to a private provider. The remaining staff were still employed by the council, but new starters were taken on by the company at minimum wage, which was much less than what mum received.

For John and the outsourcing cheerleaders, this is fine and dandy. Money saved, yes? No. Lower wages for the new staff meant higher rates of top up via the benefits system. The imposition of clock tyranny brought with it micro management by the providers, which meant higher staff turnover and a diminution of the care ethic. No time to chat to the clients, who were often house-bound elderly people who otherwise see someone once in a blue moon, meant they too were alienated from the care and suffered the consequences of increased loneliness - something the government now pays lip service to. This doesn't save money. For a few thousand here, a few thousand there off the council's care bill we find costs displaced onto social security and, given the rise of mental health problems among the elderly, is no doubt a contributor to the (manufactured) strain on the NHS.

And what about the political costs? Outsourcing is absolutely corrosive of the social solidarities the Labour Party depends on. If you're an old person receiving poor quality care from a young woman on the minimum wage, are you likely to feel sympathy with their difficulties? If you're a young woman shuttling from grumbling pensioner to grumbling pensioner for pittance pay, are you going to pay any mind to problems affecting the elderly? It's all very unlikely, isn't it? And neither are going to thank the Labour council ultimately responsible for this state of affairs. Now imagine this writ large. What do you suppose outsourcing has done to our communities? Think about the declining quality of jobs, the casualisation that means Britons have to work longer, on average, than our European counterparts. Think about the atomisation, the fraying of communal bonds at work and in the community decades of these practices are responsible for. That is why, rightly, trade unions and the left are opposed to outsourcing, because it makes life harder and damages our interests, which makes selling our politics that much harder.

It should be basic labour movement politics, really. If there is anyone who lays claim to the left and lays claim to the Labour Party while advocating this nonsense, you would be wise to think "with friends like these ...".


Alan Story said...


How about a piece on Sheffield Labour and its PFI tree massacres...which taps into a much bigger issue about Labour-controlled councils.

A good selection of backgrounders here:

Corbyn petition on nearly 11,000 names:


Simon Gray said...

I am not an expert in how the state borrows and builds a project itself. I understand that the state can borrow on more beneficial terms than a private source. In fact the state can borrow at nearly zero cost if it can create the money with no inflation consequences. My query relates to the delivery mechanism of the project. Does the state use private constructors to build the project in which case the project over runs and related costs are incurred by the state anyway or does the state set up a nationalised construction company to carry out its infrastructure projects in which case the state has to take on the management of the project in a pseudo capitalistic way in order to maximise efficiencies of cost and delivery of the project. I presume in the ideal scenario the state has a national infrastructure company. I wonder what is the best way for this to be set up in order to deliver projects effectively?

Boffy said...

All more or less true, but it needs to be balanced by the fact that as socialists, as opposed to social-democrats, we don't see state capitalism as any better either. After all, the state in Eastern Europe, Cuba, and elsewhere, did a pretty appalling job not only of providing services and commodities to workers, but of treating them appallingly as workers too, as well as depriving society in general of their civil and human rights.

The outsourcing of services etc. is not the solution, but that does not mean there is not a problem with state capitalist provision. Those of us old enough remember all of the problems that existed with large monolithic, nationalised enterprises, not just in their inefficiency, but in the way they treated workers, as witnessed by the year long Miners Strike of 1984-5.

Why would anyone think a state capitalist firm would be actually any different to a large private capitalist firm? After all, the top executives Ian McGregor, et al, interchange on a regular basis between running those state companies and large private companies. And, the ethos is often worse. The drive to make profit may not be so open, but its there just hidden, in the requirement to "reduce costs". In fact, often the ethos within a state run company or service is worse. They function on the basis of a crude hierarchical authoritarianism, and bureaucratic privilege. Remember the bit in "The Spirit of 45" where the woman who had been waiting for a Council related how, in the end, she provided what the Housing Manager needed, behind a closed door?

In the 1980's, large companies themselves outsourced all of their non-core activities. They didn't do it for ideological reasons. They did it because it wa more efficient. But, generally they outsourced to a range of smaller companies they could dominate, and force to compete amongst each other. The problem with outsourcing to huge companies like Carillion, by the state is that the state becomes a guaranteed buyer. Its why prescription drugs in Britain are generally more expensive than the same drugs sold in the rest of Europe.

The answer is not whether the goods and services are provided by state capital or private capital, but whether workers have control themselves over that capital. Had workers rather than shareholders exercised control over Carillion's capital the problem would not have arisen, any more than the 1984-5 Miners Strike, would have arisen had workers actually controlled the Mines, and anymore than the repeated crises in the NHS would happen, if it really was "Our NHS", and under the control of workers rather than the capitalist state.

Shai Masot said...

John is just a bitter Blairite who has lost more elections than I've had hot dinners. He's wrong about Universal Credit too. Completely wrong.

Has he forgotten that much of the trouble with UC is actually caused by target-driven outsourced health assessments? Has he forgotten the A4e scandal that involved big fat bogus payments for job placements that never happened? Does he think the outsourced PIP assessments work well, and offer value for money? Does he think the outsourced call centres that charge people on meagre benefits ££££s to sort out their claims are a good idea.

No, John isn't just a harmless Tory-lite troll He's an idiot.

Lidl_Janus said...

"John is just a bitter Blairite who has lost more elections than I've had hot dinners."

Agreed, actually - it's staggering just how much he's called wrong. Wikipedia says he bet $100 on a Clinton victory, and I wouldn't be surprised if him doing so caused the whole universe to swing against it.

Then again, Wikipedia also claims he's joined Momentum, so... I might've opposed it, but Corbyn's leadership was interesting whilst it lasted.