08 December 2006
Ministers this week relented to pressure from a major contractor and allowed hundreds more public sector jobs to be outsourced to India.
Ed Balls, economic secretary to the Treasury, announced on December 6 that he had granted Siemens Business Services permission to move up to 240 posts at the state-owned National Savings & Investments to a subsidiary in India.
It follows lobbying from SBS, who wrote to the Treasury in October requesting the switch, which requires changes to the company's existing contract.
But his response letter to SBS vice-president Johannes Feldmayer, Balls insists the firm cannot impose compulsory redundancies, must fund UK staff retraining, and cannot re-locate personnel if they refuse.
'This is a substantial improvement in terms of future job security and job prospects for all staff currently servicing the NS&I account, and I believe it represents the best possible outcome for all those employed on the contract,' Balls claimed.
A senior Whitehall source said that the Treasury/SBS deal could become a blueprint for further agreements in 2007.But Balls' letter states that his acceptance of SBS's request this time around 'has no bearing on any future decisions.'
SBS had already relocated 250 NS&I posts to Chennai, in 2004.
The Treasury's deal with SBS reflects the growing pressure on ministers to allow contractors to move public sector work overseas, where low wages reduce operating costs and increase profit margins. Last month, Public Finance revealed that EDS, the US-based IT firm, intends to move 1,000 UK posts, including some public sector roles, to regional 'hubs' in India or eastern Europe.
But while ministers are eager to reduce the cost of government contracts, they are also under pressure to secure the futures of the public staff involved.
Siemens expects its offshoring to contribute to total contract savings of £540m.
PFdec2006
