‘The gravy train needs to end – public services should be just that; public,’ said the GMB union on Tuesday, in response to a damning report into government outsourcing.
The House of Commons Public Administration and Constitutional Affairs Committee found there are fundamental flaws in the way the government awards contracts. Tim Roache, GMB General Secretary, said: ‘This report is utterly damning. It shows the government is trying to provide public services on the cheap, a perfect example of knowing the cost of everything but the value of nothing.
‘Privatising public services hasn’t met any measure of success.
‘It ultimately costs the taxpayer, causes chaos when things go wrong, puts the market at the centre of services that should be about people rather than profit, and drives down pay, terms and conditions of hardworking public servants. ‘The gravy train needs to end – public services should be just that; public.’
The House of Commons Public Administration and Constitutional Affairs Committee found that the Tory government’s overriding priority for outsourcing is to spend ‘as little money as possible’ while making contractors take on ‘unacceptable’ levels of financial risks. The collapse of outsourcing giant Carillion has exposed fundamental flaws in the government’s approach to contracting, said the report.
As a result of the government’s preoccupation with cost, the MPs found that it has had to renegotiate over £120m of contracts since the beginning of 2016 to ensure public services would continue.
Bernard Jenkin MP said: ‘It is staggering that the government has attempted to push risks that it does not understand onto contractors, and has so misunderstood its costs.’ He added: ‘It has accepted bids below what it costs to provide the service, so that the contract has had to be renegotiated.’
Carillion, which employed 19,000 staff in the UK at the time of its demise in January, had 420 public sector contracts. The committee warned that Carillion’s collapse has ‘badly shaken public confidence in outsourcing.’
The committee’s report said the Tory government’s approach to outsourcing has been made ‘more damaging by the fact that the information’ used to inform the outsourcing process can be ‘either incomplete or simply incorrect.’
This has meant the government has written contracts that force contractors to pay out when it gets its own data wrong and has been known to forego performance penalties in the initial phases of contracts. ‘Ultimately, this has led to worse public services as companies have been sent a clear signal that cost, rather than quality of services, is the government’s consistent priority,’ the committee’s report said.
It added: ‘Contractors told us that the government was known to prioritise cost over all other factors in procurements, driving prices down to below the cost of the services they were asking firms to provide. ‘Worse, the government was unable to provide significant evidence for the basic assertion behind outsourcing: that it provides better services for less public money, or a rationale for why or how it decides to outsource a service.
‘This was especially true for PFI (Public Finance Initiative). Shockingly, the government admitted to the committee that the “entire (PFI) structure is to keep the debt of the balance sheet”.’ Activists from We Own It (a campaign group for public services) and trade unions Unison and Unite took part in a ‘splash mob’ to highlight the huge payouts going to water company directors and shareholders – while prices rise for the the public.
We Own It director Cat Hobbs said: ‘Water belongs to us in the first place and should never have been privatised. 83 per cent of us want to take our water back. The only question is when and how.’
Hobbs added: ‘We’re not asking them to return the tax they’ve dodged. We’re not asking them to compensate us for the damage they’ve done to our rivers and wildlife. We’re not asking them to pay us back for increasing our bills by 40 per cent. We’ll settle for zero compensation. ‘The ownership of the water supply was privatised by the Thatcher government in 1989, making England’s most vital utility a source of private profit.
‘Since then water companies have increased prices by 40 per cent in real terms and made billions of pounds in profit. ‘It is estimated that public ownership of water would save each household in England £100 a year. ‘The market value of water industry shares in England is estimated to be around £37 billion. ‘Water privatisation has failed. For nearly 30 years, the privatised water companies have ripped us off, polluted our rivers, dodged taxes and let our water drain away through leaky pipes.
‘Right now, communities around the world are taking control of their water and the same thing can happen in England. ‘It’s time to take back the control of the water industry and turn them into democratically accountable, regional organisations that put people before profit.’ ‘The tap gushing excessive pay for water company bosses should be turned off,’ said Unite last Thursday, 5th July, the eve of the demonstration to mark the 29th anniversary of the ‘misguided’ privatisation of the industry.
Unite said it backed the London event staged by the campaigning organisation, We Own It on Friday 6th July. The demonstration at Gabriel’s Wharf, near the Oxo Tower came in the week that the industry watchdog Ofwat said that excessive pay-outs for water company bosses and shareholders had damaged customer trust and could be curbed in future.
Unite acting national officer for utilities Peter McIntosh said: ‘Unite fully supports We Own It and its campaign to bring back the water companies into public ownership which will bring to an end the obscene payments being made to directors and shareholders alike. ‘We need to turn off the tap of excessive pay awards to water company bosses and put the interests of the hard-pressed consumer first.
‘Thames Water has been in the news recently about the outrageous bonus package of its chief executive Steve Robertson. ‘It is clear that the floodgates of public disapproval at excessive payments for top water industry executives are at bursting point. ‘The reservoir of corporate greed in the water industry needs to be drained as a matter of urgency and we believe that Ofwat needs to be much tougher on this issue.
‘Water is essential for the maintenance of life and should not be used as a pool for private profit. It was a misguided and flawed right-wing ideology that saw the water industry privatised under Margaret Thatcher.’ In England and Wales, the provision of water and wastewater services was moved from the public to the private sector in 1989 as part of the Tories’ government’s large-scale privatisation.
