Britain’s outsourcing scandal

The Johnson government oversaw one of the world’s worst initial responses to the pandemic, with the United Kingdom suffering from the fifth highest death toll in the world. Despite this, and despite understaffing, under-resourcing and successive generations of destructive legislation, the National Health Service (NHS) has come to the nation’s rescue. The UK shot to the top of the vaccination league table as the state turned to public sector tools that had survived decades of atrophy. It is not just that tens of millions of jabs were rolled out by the NHS; it is also that hospitals were speedily transformed to deal with critical Covid-19 patients on top of cancer, cardiac care and other treatment. A service already stretched to breaking point has risen spectacularly to the challenge of an enormous extra workload.

The resilience of this great public institution demonstrates the potential of public planning, if the political will exists to enable it. Can this provide a lesson for political leaders and planners, after 40 years of undermining the UK’s public sector?

The story of Britain’s neoliberal experiment in mass privatisation is well documented. From the early 1980s onwards, crucial strategic industries – often created at great public expense – were hived off at cut-price rates in an ideological drive to shrink the state and disenfranchise the collective interest in favour of private capital.

The experiment was justified in the name of ‘shareholder democracy’, by which the nation of shopkeepers would be modernised into a nation of small capitalists. The actual result, similar to what took place during the privatisations in the former Soviet Union, was that public assets were quickly devoured by massive investors. Former household names like British Railways and British Steel were broken down overnight, leaving chaos and unemployment in their wake. Social housing estates – particularly in London – have not given way to flourishing private ownership, but are now subject to social cleansing at the hands of big, unaccountable development firms, while our cities remain gripped by housing crises and rent traps.

Less visible than the destruction of national industries is the way the core functions of state are no longer actually performed by the state itself.

During the 2012 Olympics, Britain was confronted with the spectacle of G4S, a private contractor, unable to perform the security functions with which it should never have been entrusted in the first place. Later, in 2018, the outsourcing giant Carillion collapsed suddenly, leaving many public sector construction projects, including NHS hospitals and high-profile transport projects like Crossrail, in dire straits.

Despite these clear warning signs, the dismemberment of state capacity continued. A 2019 report by Tussell, a market intelligence company, revealed that in one year over £4.2 billion had been handed out to a small group of private companies deemed ‘strategic suppliers’ of crucial services on behalf of the government. These included ATOS, at the centre of continuous scandals and accused of driving disability benefit claimants to suicide, as well as companies providing prison services and border policing, such as the notorious Yarl’s Wood detention centre, where outsourcing firm Serco stands accused of overseeing repeated sexual assaults on inmates.

More and deeper privatisation

Outsourcing is distinct from privatisation inasmuch as the state remains ultimately responsible for the services that the private companies are providing. The state retains the right to put contracts out to tender and accountability supposedly enters the system through competition for this lucrative access to public money. However, as the Tussell report demonstrates, a de facto cartel of corporations specialising in this bidding process has sprung up around the outsourcing machinery.

Additionally, when it comes to highly specialised functions like railway operations or healthcare, there are only a limited range of suitable providers, which means competition is necessarily limited. Often the public sector has the capacity to provide these services cheaper and better, but is forced into the tendering process by legislation hostile to direct public sector provision, including the 1990 internal market and the 2011/12 Lansley reforms in the NHS.

At the macroeconomic level, the outsourcing racket acts as a direct conduit for taxpayer money to be redistributed to private corporations. The ‘efficiency savings’ that this supposedly produces equate to a downward squeeze on wages, the dissolution of trade union rights (aided by some of the most severe anti-union legislation in the developed world) and cost-cutting at the level of procurement. The only area where savings are not made is in the bureaucracy, which often spirals out of control as whole new administrative departments are created to manage contracts and ensure compliance.

Further down the value chain, outsourcing takes on a more repressive function.

As privatised or outsourced industries further outsource their own lower level functions — particularly ancillary roles like cleaning — outsourcing’s role in enforcing labour discipline becomes more apparent.

Groups of workers that once claimed robust protections, as well as some measure of social mobility, are fenced off and trapped in their outsourced jobs. This strategy is combined with union de-recognition and highly radicalised practices of hiring and managing staff. It is not necessarily cheaper to run cleaning services this way, and it certainly does nothing to improve quality, but it does create a structural disadvantage for labour organising.

Things fall apart

In 2008 the British state bailed out banks deemed ‘too big to fail’ to the tune of billions of pounds. Wealth was redistributed to asset holders by successive waves of quantitative easing, in which public money was used to buy up bad debt and inflate the price of financial assets generally. The message was simple: in times of major crisis, the state will shoulder the burden of financial responsibility. More shockingly, in the years that followed the massive public debts incurred were not recovered from accumulated capital, either directly through taxation or indirectly through inflation, but from the pockets of ordinary citizens. This was through a massive programme of austerity that cut back public services and froze public sector pay.

The result was a slow, unstable recovery, which ultimately failed to address the structural economic weaknesses that rendered the system crisis prone in the first place. Thus, when a major external shock – the Coronavirus pandemic – triggered the next economic breakdown, state intervention had to be rolled out again on an even more unprecedented scale. The steady continuation of the outsourcing regime after 2008 had hobbled the state’s direct capacity to act, further expanding the role of private capital in ensuring the most basic public functions continued to operate.

As part of the initial government response to the pandemic, several new ‘Nightingale’ hospitals were constructed apparently overnight. However, following decades of systematic decimation of NHS resources, there were simply not enough staff available to cover the existing hospitals, let alone supply staff and equipment to the massive new facilities. The hospitals, which cost £530 million, were barely used. An already chronic understaffing issue was compounded by the monstrously short-sighted decision in 2017 to end the bursary for training new NHS nurses, which resulted in at least 500 fewer nurses being trained the following year.

It must be stressed that, given decades of sustained abuse by successive governments, the ability of the NHS to absorb unprecedented volumes of new patients was nothing short of a miracle, facilitated entirely by a heroic body of staff completely dedicated to the principle of the NHS as a universal public service.

Further, the inability of the government to manufacture or procure even the most basic Personal Protective Equipment (PPE) became another national scandal. The willingness of government ministers to simply hand public money to unreliable and unscrupulous private providers was exposed as nearly half a million unusable medical gowns were flown in with great fanfare from Turkey. This could be passed off as a mistake made under high pressure conditions, if it didn’t so closely resemble the 2019 decision to award a massive £13.8 million contract to run passenger ferries to a company that did not, in fact, own any ferries. Health Secretary Matt Hancock, who has since come under considerable scrutiny for the unlawful way in which these contracts have been dished out, has defended himself on the grounds that the urgency of the situation required expedited tendering. For most, it appears that the pandemic has been used as cover for naked corruption, especially after the close personal links between private providers and government ministers like Hancock were revealed.

The inability of private contractors to shoulder the responsibility for essential public health measures did not stop the ideologically motivated drive to hand more and more public money to those selfsame companies. As a direct result of the pro-market reforms in the NHS, accounting firm Deloitte was tasked with running Covid-19 testing centres, which it was singularly unable to do. Even more dramatically, the outsourcing giant Serco was placed in charge of developing the NHS’s ‘Test and Trace’ app — again, with disastrous results and at an incredible cost to the public purse. This did not stop Serco announcing profits of £160 million as a direct result of coronavirus related contracts, with these excess profits distributed directly to shareholders.

The incident which most emphatically captured a horrified public’s attention to outsourcing was the revelation that Chartwells, the company providing deliveries of free school meals to impoverished children undergoing home-schooling, was appropriating an estimated £25 out of every £30 assigned for each family’s weekly food parcel. This cosy relationship between private companies and government, leveraging a national crisis to facilitate an accelerated transfer of wealth from public to private, can only be given one name: corruption.

God save the NHS

The National Health Service is the last remaining bastion of socialism in Britain, created in the wake of the Second World War as part of the regime of public planning inaugurated by Clement Attlee’s 1945-51 Labour government. Unlike in other countries, where universal healthcare is premised on publicly funded insurance, the NHS began life as a gigantic, centrally planned public asset. It was created after Aneurin Bevin, the post-war Minister for Health and Housing, oversaw the mass nationalisation of all country’s hospitals, integrating them into one comprehensive service in 1947.

As well as being the guarantor of the health of the nation, the NHS plays an important role as the most progressive pillar of Britain’s political self-image. One of Britain’s most important national symbols, it is also the UK’s largest single employer, an economic lifeline for millions. Because of the enormous public attachment to this objectively successful example of socialism in practice, it has been subject to constant attack from successive governments determined to punish the public sector for giving the lie to their anarchic free market ideologies.

Despite former Health Secretary Jeremy Hunt’s infamous book arguing for the full privatisation of the NHS, the immense popularity, efficiency and necessity of the health service has made its outright dissolution a political and practical impossibility. As such, outsourcing has been used to subject its internal mechanisms to simulated market forces, particularly through the forced separation of procurement and provisioning, with bureaucracy-intensive tendering processes crowbarred into the breach.

The NHS brand can be kept, but as a distributor of public money, not as a provider of a public service. This creates a perverse allocation of resources, in which private providers snap up ‘cost-effective’ minor ailments, but the NHS is left to deal with complex and expensive long-term issues.

The pandemic has also exposed the injustice of outsourcing low paid workers such as cleaners. Great Ormond Street Children’s Hospital, which attracts hundreds of millions in private donations every year, recently caved in to cleaners’ (almost all racialised and migrant workers) demands to be brought in-house from outsourcer OCS, after they balloted for union recognition. If nothing else, this demonstrates how fundamentally the outsourcing model is premised on the undercutting of trade unions, and how untenable it becomes once workers begin to organise.

It is now clear that the era of state intervention is back, but there are dangerous signs that the next phase of Britain’s economic model will rely on a constant flow of public subsidies to a close circle of politically favoured corporate giants. There is a risk that large sections of the British economy will be given the same treatment as the banks in 2008 – the nationalisation of losses with decision-making and profit-making capabilities remaining in private hands, the worst of all possible worlds. While the free market model of public service provision is totally discredited, there is every chance it will be kept on life-support indefinitely.

This article was originally published by Le Monde diplomatique and is republished here with the permission of Agence Global.