Scrapping outsourcing will cost councils, Localis warns

30 Oct 18

Bringing public service contracts back in-house would saddle councils with a “mammoth” £30bn bill, a think-tank has warned.

Instead, there needs to be “reform on all sides” with private companies acting fairly and local authorities displaying greater transparency when drawing up contracts, according a report by Localis published today.

High-profile failures like the collapse of outsourcing giant Carillion have left the public service market in a “precarious” state, but Localis claimed the market was worth sustaining.

The think-tank estimated that moving all local services in-house would cost the public purse a “mammoth” £30bn.

The report Ethical Commercialism said the average outsourcing contract signed by councils in recent years has been worth £37.8m and will last 66 months.

Many of these contracts are multi-generational and have been delivered by the private sector for years, resulting in a loss of public sector expertise. If contracts were terminated early, local authorities would bear the cost.

Localis chief executive Jonathan Werran said: “A diverse, flexible and open market for local public services is one worth preserving for a very pragmatic reason, that being to keep going the countless thousands of vital services which millions of residents rely upon in their daily lives.

“Local government and the wider public sector simply can’t afford the rapid collapse of a mature and complex market. However, there needs to be a reform on all sides.”

Werran said private firms needed to act with “fairness and decency” while local authorities must draw up contracts that encourage “good commercial behaviour” and present their commercial dealings in a transparent way.

To do so, the think-tank put forward a raft of suggestions including local authorities employing relationship managers to help develop mutual trust.

Richard Harrison, managing director of CIPFA’s consultancy service C.Co, said: “Local residents, rightly expect high quality services delivered with integrity and transparency.

“We are seeing some excellent examples of new models emerging, which put ethical behaviour at the heart of service delivery. Wherever possible, we should be encouraging organisations which deliver social value, a they deliver greater benefits to our communities.” 

Localis also recommended that the Local Government Association oversee the development of a single platform for local government contracts data.

A recent study by the New Local Government Network think-tank found that 39% of council chiefs intended to outsource less over the next two years.

At the Labour Party conference in September, Jeremy Corbyn promised to end the “racket” of outsourcing in the public sector.

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