Cooking up a storm

19 Aug 05
PETER WILBY | Most coverage of the British Airways ‘wildcat strike’ concentrated on the plight of delayed holidaymakers and the anger of catering workers at Gate Gourmet whose dispute led to the walkout.

Most coverage of the British Airways ‘wildcat strike’ concentrated on the plight of delayed holidaymakers and the anger of catering workers at Gate Gourmet whose dispute led to the walkout.

What few considered was the phenomenon behind the dispute: outsourcing. This has become so familiar, in both the public and private sectors, that we forget it is a relatively recent development. Just as, for much of the twentieth century, we thought the Fordist factory assembly line and nationalised industry bureaucracy had always been there and always would be, so we now think of outsourcing.

Public-private partnership schemes are just outsourcing writ large, and nobody can see any end to them. Yet outsourcing in the public sector, applied as a consistent principle, is barely two decades old and, in the private sector, not much older.

Before that, ‘vertical integration’ was the buzz phrase in the business world, with, for example, car firms trying to set up their own tyre and metal companies.

The argument for vertical integration was that it ensured stable supply and consistent product quality. You can see how that might apply to BA. If it still had its own catering operation, it could control the meals served to passengers without worrying about bad industrial relations in a US-owned company. You can also see the downside: its costs would inevitably rise and the company might end up with even worse industrial relations problems.

It was technically unlawful for the BA baggage handlers to walk out in sympathy with workers employed by a different company, and their union had to distance itself from the action. If catering had been in house, a sympathy strike would have been lawful.

In the public sector, the pace at which services are outsourced shows no sign of slowing. Private bodies, particularly charities, increasingly run social services. IT projects are almost invariably contracted out. The whole thrust of the government’s NHS and school reforms is to outsource what were once regarded as ‘core’ operations - employing doctors, nurses and teachers - to private companies. Yet even as this trend grows, the results are increasingly questioned.

When celebrity chef Jamie Oliver highlighted the state of school meals, many local authorities and schools pointed out that, since the services were contracted out, they had no direct control over them. Moreover, competition rules made it hard to favour local firms that used locally grown produce. Then there was the MRSA ‘superbug’, widely blamed on filthy hospitals. Cleaning, critics said, had been contracted out to agencies that operated on margins too narrow for a proper job.

I suspect resistance to outsourcing will grow from two quarters. The first is consumers. Everybody has a story about the frustrations of getting information or making a complaint. Enquire about  train times and you might be put through to a call centre in India. If your meter hasn’t been read properly, it’s nothing to do with your power company because meter reading has been outsourced.

We used to grumble about how we were passed around different departments in the same company. Now we are passed between different companies. And still it’s not their job.

The second resistance could come from employees of companies to which work is outsourced. As we saw at Gate Gourmet, these are often ethnic minority or migrant women on very low wages. The same sort of people do most of the country’s cleaning. But as they become more established here, their expectations will surely rise. They will at least resist pay cuts and arbitrary sackings, as the Gate Gourmet workers did. Will outsourcing seem so attractive to firms such as BA if service suppliers have to pay decent wages?

A couple of years ago, the government agreed that workers in contracted-out public services should receive ‘no less favourable’ terms  than equivalent staff in the public sector itself. It is too early to assess the results, since the new rules apply only as contracts come up for renewal and they mainly apply to local government services, not the NHS.

But instead of relying on cheap, sweated labour to deliver the savings that local government seeks, the service suppliers will eventually have to fall back on the fabled management brilliance of the private sector. Does that really exist? Although it is given as the reason for public sector outsourcing, it cannot apply to BA’s contracts as it is already in the private sector.

Outsourcing, whether by the public or the private sector, is driven almost entirely by the imperative to cut costs, and these are usually labour costs. It might now be close to the limits of what it can achieve.

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