Politics has been dominated this week by the collapse of Carillion, a huge outsourcing behemoth from hospitals to housing support. Its collapse has called into question the whole ethos of ‘contracting out’ created in the 80s by the Thatcher government and continued as a broad matter of consensus under all three major parties. Until now. Jeremy Corbyn, who had made moves in this direction already, this week declared an end to the ‘outsourcing racket’ with a series of policies designed to shut down contracting out in future. Labour’s radicals took heart that Carillion’s collapse has had a hard effect on many smaller companies, meaning they and companies like them would welcome the idea of a giant nationalised body.
The question is whether or not contracting works for taxpayers, who have been protected from its collapse. Ironically, given Corbyn’s charge of private profiteering, part of Carillion’s difficulty was down to the fact that to win Government contracts, it kept going for the lowest possible bid, which left it vulnerable when some of those contracts began to overrun and costs escalated.
Part of the problem for the Tories was – as one Tory MP said to Field – was that they didn’t know until May stood up at PMQs if Carillion was an example of ‘good’ or ‘bad’ capitalism given recent Conservative equivocation on big business. This meant Corbyn and his supporters dominated the airwaves and their views largely carried the day, at least at the start of the week. With much of Carillion’s problems stemming from an excess of cheap debt used to smooth over underlying problems, there will be a renewed focus on large outsourcing and public private partnerships, particularly those with high levels of debt.
More broadly, the current model is not perfect – but neither was the public sector model that it replaced, which saw fairly consistent cost overruns in areas from building hospitals to road and rail upgrades. Outsourcing is a complex issue with pros and cons – but those who believe in it need to find a way to make a better case for it, and show how and why it benefits the public if it is to continue in the future as it has in the recent past.