PF’s round table on outsourcing discussed burning issues for the future of public services. But it barely touched on insourcing, an option that more and more councils are considering in these difficult times
If one thing is apparent in these turbulent times, it is that principles we have had for decades are no longer sacrosanct. If the government can bail out banks following catastrophic market failure and introduce a £20bn Keynesian-style fiscal stimulus seemingly overnight, market-based public service models that have been adopted unquestioningly must surely be reconsidered. And fast.
I was one of the participants in the recent Public Finance round table debate on outsourcing, which opened up burning issues for the future of public service delivery. As the account of the event (‘Better out than in?’ January 9–15) reflects, the discussion questioned whether the financial crisis has turned on its head 30 years of conventional wisdom that the private sector knows best.
Just a few months ago, outsourcing was the prevailing public service paradigm, with DeAnne Julius’s review of the £79bn ‘public service industry’ recommending yet more of the same. But access to capital has now silted up and mergers and acquisitions mean a few big players will exert a vice-like grip as smaller contractors go to the wall. As times get tough, evidence of the failure of the market to meet public service needs is apparent.
And yet one word was all too conspicuous by its absence from the round table debate. That is ‘insourcing’. Amid all the contemplation and desperation, there has been scant acknowledgment of the obvious solution of returning services in-house to meet the unprecedented challenges the public sector faces. And yet, evidence shows that it makes a great deal of sense.
Resident satisfaction ratings with the London Borough of Southwark’s street and estate cleaning services have rocketed from 30% to 70% since they were brought back in-house four years ago. Oldham Metropolitan Borough Council’s insourcing of its waste services has enabled them to be combined with parks and street cleansing and to achieve a closer link between service provision and major targets, such as those in Local Area Agreements.
Grounds maintenance services in Maidstone Borough Council have become more resource-efficient as a result of insourcing. These are but a few of the many examples that mean local communities are receiving higher quality services at better value for money as a result of insourcing.
Research by the Association for Public Service Excellence, to be published this month, charts the growing phenomenon of bringing council services back in-house. Focusing on more than 50 examples, it has found benefits including greater accountability, enhanced performance, more flexibility and increased public satisfaction.
Insourcing can also enable services to be joined up more coherently and for provision to be linked with wider strategic goals, such as tackling climate change, involving local people in decision-making and maximising local employment, training and economic development opportunities.
Bringing services back in-house also means funds are circulated in the local economy, rather than leaking out in the form of profits to shareholders elsewhere.
Apse’s earlier study of the ‘local economic footprint’ of public services, conducted in partnership with the Centre for Local Economic Strategies and published last September, showed that for every £1 of taxpayers’ money, direct provision can generate £1.64 in the local economy through strong employment and supply chains.
What’s more, our new research shows the decision to bring services back in-house is being taken for pragmatic rather than ideological reasons. Insourcing is occurring regardless of political orientation. Reasons cited included it being a way of tackling poor performance, being more responsive to changing policy agendas, making efficiency savings and achieving greater synergy.
Risk can never truly be transferred to private contractors because local authorities are ultimately accountable to voters, who rely on them to sweep their streets, empty their bins, care for elderly and vulnerable people and ensure a host of other essential services are provided. People will continue to need public services even if cash to provide them is in short supply. As a way of making scarce resources go further, in our view, insourcing is likely to increase.
We are not suggesting in-house provision should be the only game in town. But the unquestioning belief that the private sector knows best should be questioned very loudly. At the very least, ‘insourcing’ should now take its rightful place in the public service lexicon.
With so much at stake and previously unthinkable ideas up for grabs, it would be tragic for an option that could help meet some of the awesome challenges we now face to be overlooked.
Paul O’Brien is chief executive of the Association for Public Service Excellence. Insourcing: a guide to bringing local authority services back in-house, will be available from Mo Baines on [email protected]
