Book Review: What a Waste – Outsourcing and how it Goes Wrong

In this book review, CURAs Dr. Heather Connolly shares her thoughts on the recent book by Researchers at Manchester Capitalism “What a Waste”. This blog was originally published on the Sheffield Political Economy Research Institute’s website.

With increasing numbers of failures and fiascos of outsourced contracts hitting the headlines, the question ‘when will governments ever learn?’ springs readily to mind.  A hard-hitting new book, by researchers at CRESC/Manchester Capitalism, entitled What a Waste: Outsourcing and how it goes wrong have criticised the ‘disastrous’ practice of UK government outsourcing, but argue that the failures and fiascos are effectively pre-designed.  The authors state that ‘there is an overall logic to the process which costs citizens because outsourcing is what happens at the intersection between the political convenience of the (central state) and the opportunism of outsourcing companies and investors’. Outsourcing allows the shift of blame to private sector providers, and government abdicates responsibility for providing underfunded services and ‘toxic activities’ (border control, for example) in favour of private firms with poor management control.

‘The franchise state which exists to award and monitor contracts at the same time strips itself of institutional resources and intelligence previously used to deliver goods and services.  As outsourcing proceeds, the (central and local) state is increasingly disabled in that it no longer has the capability to deliver public services.’

This situation means that giant contractors and the state become bound together in a form of co-dependence and when it goes wrong the blame can easily be laid on outsourcing contractors or the individual public servants who wrote the contract, rather than the government.  Contracts typically cover mundane activities which too often allow profit taking at the expense of the tax payer and the workforce by outsourcers who do not make capital investment or take market risk.

In the last few months there have been a number of failures and fiascos in public sector outsourcing contracts.  In December 2015 a £160m contract between Cornwall County Council and corporate giant BT was scrapped following a High Court ruling.  The 10-year deal, signed in March 2013, was for BT to run IT, human resources and other services for the council. BT tried to fight the Council’s decision to end the contract after only two years but a ruling was made against them stating BT did not provide ‘the service it had promised to the standard it had promised’.  Again in December 2015 an £800million older people’s care contract in Cambridgeshire ended after just eight months because it was ‘no longer financially sustainable’.  These are some of the more ‘mundane’ failures that tend to slip under the radar, not to mention some of the more controversial outsourcing fiascos such as the recent G4S ‘red doors’ for refugees in Middlesbrough or the Clearsprings ‘coloured bands’ for asylum seekers in Cardiff.

What a Waste points out that there have been various experiments around outsourcing in local councils, notably in Birmingham and Barnet.  Barnet was labelled ‘easyCouncil’ by critics that complained services resembled low-cost, no frills airlines such as easyJet.  Other councils, such as Essex, Southampton City, Suffolk and Staffordshire have also taken up the outsourcing model.  However, as they allude to in the book, Northampton County Council (NCC) is taking the process a step further by transferring 3,850 of its 4,000 employees to 4 new dividend-paying service providers which would deliver all the council’s services, including social care for the elderly.  The Chief Executive is pushing through with plans to begin outsourcing the services in a move which he says will make a £148m saving by 2020, though some fear the plan is a step towards privatisation.  Under EU Procurement Law these contracts will have to go out to tender after 3 years, so fears of effective privatisation are well-founded.

The ‘commission-only’ model being adopted by NCC is likely to be increasingly replicated in Conservative-controlled shires and urban areas.  The fact that there is no real reflection as to how these activities will function under this ‘next generation’ council model is evidence to support many of the arguments in What a Waste.

‘The democratic tragedy of the franchise state is that today’s mainstream politicians are not protesting (or even examining) the outcomes of outsourcing but are planning to grant ever more local monopolies from which organised money can take profits (in many cases without the capital investment or revenue risk which legitimate capitalist profit)’.

In a context of austerity, TINA (There Is No Alternative) is brought to the fore in discussions around the need for cuts to local services, and therefore resistance feels muted.  The authors argue that there is an urgent need for resistance around outsourcing as it is spreading though to sectors which should remain under some form of state control:

‘the failure of politicians and policy makers to protest outsourcing has become an urgent matter because the state has outsourced or is now outsourcing services which are part of what we call the ‘foundational economy’ in health, adult care, welfare and security.  Many of these services are or will be used by most families or individuals because the foundational economy is the basis of material security and the infrastructure of civilised life for the whole population’.

The authors of What a Waste argue that government outsourcing should be curbed by politically agreed prohibitions on outsourcing which is not in the public interest.  In an interview for the book one of the authors, Professor Karel Williams, put forward three principles for public sector outsourcing: firstly, no large scale outsourcing in local government where officers and members do not have the expertise to negotiate contracts; secondly, no outsourcing of ‘politically toxic’ services like border controls because government should take responsibility for what it does; and thirdly, no total outsourcing of any important service like provision of care homes because the public sector needs its own expertise.  It seems unlikely that the current government will take heed of any of these principles.

What this book does not offer is a comprehensive strategy for resistance and the ways in which organised groups against outsourcing can fight the plans.  Past experience shows that even where campaigns have had wide levels of support and have made small gains, they have not been sufficient to block major outsourcing plans from going ahead.  A strategy of resistance needs a co-ordinated approach involving multiple groups which means drawing on the different sources of power both in and outside workplaces, organising in the community and through media campaigning and political lobbying.  Two key challenges for building resistance are first, the willingness to act, particularly among local government workers, where a culture of fear may be developed around whose job is ‘at risk’ as a result of outsourcing.  Second, with such campaigns comes the question about the alternatives to outsourcing.  Labour branded its approach to running Lambeth as the ‘John Lewis’ council operating on the basis of mutual and co-operative values. Is this the ‘least worst’ alternative that could be fought for at a local level?

Dr Heather Connolly is Senior Lecturer at the Leicester Business School at DMU, and a core member of the CURA team.

Taking Power Back: Review by CURA

Professor Jonathan Davies and Dr Adrian Bua from CURA respond to Simon Parker’s  previous  blog where he explained the argument of his recent book ‘Taking Power Back‘. This blog will be followed over the next few weeks with a reply by Simon.

Taking Power Back is written as a provocation – a manifesto for change – at a moment when the ruthlessly centralising tradition of British politics is under greater critical scrutiny than ever before. As Simon Parker explains in his blog post, current levels of centralisation in British politics are unsustainable and the call for radical decentralisation, driven by the social action of place-based individuals and communities is timely.  Moreover, Simon argues that with the end of austerity nowhere in sight, the halcyon days of the welfare state are in any case well and truly over. Something has to be done.

Simon’s alternative is encapsulated in the idea of ‘commonism’, a new kind of society based on self-help and mutual aid enabled by a more local, relational and supportive state, rather than the over-bearing centralised behemoth developed since the post war era. Simon thinks that we are moving into a conjuncture more favourable to commonism, as experiments proliferate and the state slowly and reluctantly begins to show awareness of its limitations. In his analysis, the push for devolution and localism is more than a mere straw in the wind.   The wave of city deals, with the Greater Manchester Combined Authority at the forefront (which Simon discusses at length) signals an opportunity to develop the ‘commonist’ agenda and forge a path to a more decentralised and democratic polity.  Taking Power Back is at once resolutely pragmatic and visionary.  Commonism is not communism, a system that envisions the entire system of production, distribution and exchange socialised and democratised.  Rather, the practices of commoning sit in a nebulous and uneasy relationship with state and market.  It rests tacitly on re-working the classic state-market-civil society triad.

However, preoccupation with the critique of statism means the triad is never adequately discussed.  For example, Simon is very reticent about markets, corporations and economic crises. Contemporary political economy tells us that states and markets are deeply inter-dependent. Much of what states do in the 21st century is about extending the reach of the profit economy.  Take austerity, a policy regime Simon tends to take for granted: it undermines the resources of localism in ways that seem destined to shrivel the commons.  First, we know that cuts in state funding drive local community organisations to the wall.  Second, government contracts are deeply biased towards corporate contractors and large extra-local civil society organisations (the so-called “primes”), and against local organisations.  Third, austerity welfare and its extraordinarily punitive sanctioning regime so envelops and bureaucratises the lives of millions of unemployed and working poor citizens, that it is hard to envisage them finding the time or cognitive space to do any volunteering or commoning.

These deeply reactionary trends arguably diminish the space for commoning, but perhaps more importantly they point to a huge oversight in Simon’s analysis.  Taking Power Back will not be accomplished by going with the flow, it can only be a deeply conflictual process oriented to reversing malign trends in our society – the expansion of markets and corporations, the boa-constrictor of state regulation and the predatory character of civil society “primes”, all of which conspire to corrode the local and the democratic. Simon’s call for a universal wage (or basic income) to unlock commoning capacity is an acceptance that sharpening inequalities need to be addressed.  Yet, it is hard to see how this can be accomplished without, at the very least, reversing austerity and in the process taking on recalcitrant interests throughout the state, market and corporatised civil society sectors.

Viewed through this lens, the current devolution and localism agendas are deeply problematic, accentuating anti-democratic developments antithetical to ‘commonism’.

Simon acknowledges the anti-democratic manner in which “Devo Manc” was accomplished – a deal struck between local and central state elites. Moreover, greater local responsibility for allocating a shrinking budget presided over by boosterist metro-mayors is no basis for a flourishing municipal commons, particularly under a grossly punitive benefits regime over which the centre exercises an iron grip. This is compounded by declining standards in what researchers at ‘Manchester Capitalism’ have called the ‘foundational economy’. This consists precisely of those businesses and services to meet the basic needs that are the bread and butter of ‘commonism’, yet, the foundational is increasingly beset by casualised work, and operates as a cash cow for big business.

As Simon recognises, under capitalism, technological innovation and productivity do not usher in a world of leisure. They rather concentrate power in the hands of techno-elites and shrink the labour market.  Nowhere is the dystopian character of the digital age clearer than in San Francisco, where the predatory elites of Silicon Valley make the city unliveable for working class people and complain at having to look at the human refuse left in their wake.

We live in a world of confected scarcity (austerity) and ever-rising inequality in a highly precarious global economic conjuncture. Simon is right that a flourishing commons depends on greater equality, in a world of plenty.  But there is a vast gap between our world and the world of the Morrisonian commons.  Taking Power Back offers a welcome stimulus to those thinking about how a better world might come into being. Simon’s wager is that examples of commoning in action can be pedagogic in the sense of showcasing the virtues of “commonism” to all, at a time when elites seem a little more aware of their limitations.  Our concern is that these are not the most powerful trends in our society. It is hard to see the pursuit of social justice as anything other than an elemental struggle in the 21st century, without which new political economies of solidarity will remain confined to the margins.

Professor Jonathan Davies is director and Dr Adrian Bua a core member of the Centre for Urban Research on Austerity

Taking Power Back: Simon Parker

We are pleased to launch our book debates series with this blog by Simon Parker. Simon sets out the argument of his recent book ‘Taking Power Back’, where he makes the case for ‘commonism’ – a radical form of democratic decentralisation. Following this post, CURA members Professor Jonathan Davies and Dr Adrian Bua will share their thoughts on Simon’s work, after which Simon will publish a reply to our team’s commentary.

The British state stands poised at a moment of profound change. Caught between the demands of an ageing population and a limited public willingness to pay more tax, public services are under pressure as never before. Institutions from local government to the NHS are finding that their existing models of provision cannot cope with the strain. Something has to give.

Despite our self-image as swashbuckling Anglo-Saxon capitalists, the British are actually fairly statist. Until recently we had a large, highly centralised government machine which we expected to deliver the same outcomes to everyone across the country. We tend to see the world in terms of the market and state, without very much in between. The fact that both of these leviathans have let us down very badly in the recent past explains our national distrust of institutions.

And yet there is something in between state and market – a space for social activity that many people call ‘the commons’. Over the past decade or so we have seen this space being steadily filled by a remarkable flourishing of cooperatives and social enterprises. In my book, Taking Power Back, I argue that this vibrant realm of do-it-yourself social justice is vital to the way we should understand the future of government. We can already see examples of it in action. In my book I describe how initiatives in the UK and beyond such as Occupy Sandy, the extraordinary people-powered disaster relief operation in post-hurricane New York, are building on, and organising, people power to meet their needs and improve lives – without relying on the market or state action

The trends which the World Economic Forum bundles together in its concept of the Fourth Industrial Revolution will turbo-charge the commons over the next decade or two. This is partly because new technology is making it easier than ever to start to up small social organisations. The overhead costs of creating a company are falling, while the potential to create innovative networked business models is rising. The increasing automation of our jobs may create a world in which we spend less time working creating increased opportunities to transfer effort out of the realm of paid work and into the creative sphere of the commons.

It seems entirely credible that the space vacated by a retreating state could be filled at least partially by a surge in the creative commons. I the book I make the case for two very big changes that can facilitate this transition. First, we will need to support the commons by introducing a universal basic income, compensating people for the automation of work and giving them the time to contribute. Second, we need to radically devolve political power so it is closer citizens, giving individuals the opportunities and capacity they need to help build the civic commons in the places where they live.

It is a huge challenge, but the prize is a radical renewal of government and democracy, in Britain and beyond.

Simon Parker is director of the New Local Government Network and a leading expert in public policy, public services and government.