The Green Paper

The government recently published a Green Paper on public procurement that sets out some substantial reforms to the UK’s system for awarding government contracts.

These proposals come in the wake of a report by the National Audit Office into government procurement during the Covid-19 pandemic, which exposed conflicts of interest, a lack of proper checks in the awarding of contracts, and significant waste of public money.

Some of the proposals in their Green Paper are to be welcomed. A commitment to ‘transparency by default’ throughout the contracting process, a new debarment regime, a unit to oversee procurement, and the exclusion of bidders who don’t declare their beneficiary owners would all go some way in clamping down on cronyism.

It is unlikely the government would’ve put these proposals forward if it wasn’t for the dedicated work of campaigners and investigative journalists who have shone a light on this issue.

The UK Anti-Corruption Coalition has made a number of useful suggestions for how the government can ensure the proposals are implemented effectively. Politicians and campaigners must hold the government’s feet to the fire over the coming months to ensure they follow through with the proposals.

On the Labour benches we should also be pushing the government to include further measures aimed at increasing workers’ rights, environmental standards, and tax compliance. For example, companies who fail to recognise trade unions, who contribute to high levels of pollution, or who game the system to avoid paying their fair share of tax should not be awarded public contracts. These companies rely on public money, and that should come with clear social responsibilities.

But even if the government delivers on their proposed reforms, fundamental problems will still remain with the whole system of government procurement, particularly in regard to services. The problems go a lot deeper than cronyism.

The Outsourcing Problem

Over the last four decades, we’ve seen the gradual extension of outsourcing to the private sector throughout all areas of government. The Thatcherite ideological dogma that private sector competition was the most effective way of delivering public services took hold. The law has been sculpted by successive governments to induce outsourcing, particularly in local government where there was considerable resistance.

The effects of this failed experiment are everywhere to see. Across the country there’s been widespread performance failures by private contractors. The collapse of Carillion in 2018 is just one high-profile example of the failure of giant outsourcing companies to deliver. Most local authorities will have their own stories of scandals and mismanagement.

Companies bidding for contracts will compete for who can offer the lowest price. By nature, they are incentivised to reduce costs in order to maximise their profit margins. This leads to the cutting of corners in service provision and a race to the bottom in workers’ pay and conditions, which drives down standards and contributes to increased in-work poverty.

It creates a false economy: savings to the taxpayer are picked up as costs in other areas due to a lower tax base, increased demand for social security, and the greater care and health burden that comes with higher levels of deprivation.

Nothing has better illustrated the failure of outsourcing logic than the free school meals scandal. Rather than providing money or vouchers to the parents of children who would usually receive free school meals while schools are closed, the government hired a private company, Chartwells—which has links to the Conservative Party—to make and deliver food parcels to these families. Images of the derisory quantities and poor quality of the food provided were met with widespread disgust on social media and the promise of an urgent investigation by the government.

Although Chartwells rightfully deserve condemnation, the problem runs deeper than the wrongdoing of any particular company. The responsibility for feeding these children should never have been outsourced in the first place. Childhood hunger should not be lining private pockets: end of story. It should not be a surprise that private companies prioritise profit maximisation over the wellbeing of the children. We know that poverty and hunger, particularly in early years, damages children’s physical and mental development. The public picks up the social and financial cost of this damage in the long run.

The Coverup

When public services are outsourced, they are removed from any meaningful democratic control, leaving service users without a say in how they are run. The government’s refusal to extend Freedom of Information to private companies under public contract means that we can’t even ask questions about services being run on behalf of the public. This is a system in which working people have little control over the decisions that shape their lives.

Research by the LSE has found the UK is a world leader in political-corporate connections. 46 percent of the top 50 corporations have connections with a serving MP, and connected companies form 39 percent of market capitalisation. The same figures for the United States, a country known for its corporate donor culture, are only 6 percent and 4 percent respectively. The only countries with a higher percentage than the UK are Russia and Thailand. The research also found that companies with MPs as Directors or Consultants experienced a larger gain in value over time than companies which did not.

The revolving door between business and government also extends beyond MPs. Senior civil servants move freely between working in government and the private sector, where they use their knowledge of government to secure contracts and legislative changes that are beneficial to their employer. This produces the absurd situation where a former senior member of the government’s ‘Test and Trace’ operation will be able to lobby her former Whitehall bosses after just four months in her new corporate job.

Our public services have been treated as a resource for corporations to plunder rather than the essential infrastructure of everyday life. As a result, the state’s capacities have been seriously diminished and the public’s trust in government has collapsed. It is not a mere coincidence that trust in government has fallen from 40 percent to 12 percent since 1986, when Thatcher’s privatisation and outsourcing revolution had started taking shape.

The disastrous consequences can be seen in the government’s slow and dysfunctional response to Covid-19. Faced with an unprecedented public health crisis, our public services were underprepared and ill-equipped.

We now know there are more private sector consultants working on the Test and Trace programme than there are civil servants in the entire UK Treasury. Although this astounding figure highlights the shameful way the government is using the pandemic to funnel public money into private pockets, it’s also illustrative of a state that no longer functions. Hollowed out by a decade of cuts and decades of privatisation and outsourcing, the British state simply doesn’t have the capacity to perform vital functions anymore – so the government turns to management consultants to do a patch-up job, at exorbitant cost to the public purse.

Addressing this decline in government capacity has been a major priority for Labour in recent years. At the last election, Labour proposed a new framework for public procurement that would facilitate an insourcing revolution. This meant that where possible public services would be delivered in-house.

In the wake of the pandemic, reversing the trend of outsourcing has become of even greater importance. You only need to look at the success of local NHS health teams with contact tracing when compared to the failures of the government’s outsourced Test and Trace system to see the immediate impact a different approach could have.

We must ensure there is real transparency and a proper system of checks and balances in place to prevent the sort of cronyism in government procurement that we’ve seen in recent months. But we must put an alternative to outsourcing at the heart of Labour’s plans for government, in order to deal with the structural problems with our public services that the pandemic has exposed.