Suffolk County Council is aiming to outsource almost all of its services in an effort to make budget savings of 30%. It has said that it wants ‘reduce its size, cost and bureaucracy and build community capacity to enable Suffolk citizens to take greater control of their lives’.
Outsourcing has been a growing industry both in the private and public sector but what is unusual about this initiative is the scale of savings that are targeted and the fact that virtually all activities are to be outsourced. Is it likely to be achievable?
Considerable savings from outsourcing standardised activities such as waste collection and maintenance have been identified over the years but not savings of the scale envisaged here. Furthermore, as more and more councils shift over to private suppliers there is some evidence that the gains from outsourcing are smaller, since the remaining traditional public delivery activities feel pressurised and are more efficient than in the past.
Also, as the PPP experience has shown, it is the basic stuff where the biggest gains have been identified. As outsourcing bites into more complex operations, cost cutting gains are likely to be harder to come by.
One of the advantages, or disadvantages depending on how you look at it, of outsourcing is that private supply with long run contracts cannot be switched off overnight. So PPP schools are all pristine because the contract says so, whereas state schools suffer from inadequate maintenance because it is an easy way to cut costs. But then private contracts ensure that promises are carried through, which is not the same thing as saving lots of money when needed.
So if Suffolk is going to get anywhere near the targeted savings I suspect it is going to have to shift over to volunteers in a very big way. It is not clear whether this can be done on a large scale and whether this will be sufficient to reduce cost by a third.
There is evidence that the idea of ‘social enterprise’ delivery sells well with the public compared to private delivery of public services but it is less clear that it is more efficient. There is also clear evidence that employees who ‘go the extra mile’ are far more common in third sector organisations than for–profit.
However, what evidence there is suggests that these employees are drawn to the third sector and that they ‘go the extra mile’ wherever they are. This may also be true for volunteers. If someone volunteers for the local library instead of going to the Oxfam shop, the local library is now cheaper but there is a cost for someone else, in this example for children in Africa.
It appears that Suffolk may have set itself an overly ambitious financial target.
Paul Grout is professor of political economy at the Centre for Market and Public Organisation at Bristol University. This post first appeared on the CMPO blog
