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CAPITA issued a profit warning this week that set alarm bells ringing across both Whitehall and the country. It was the third major outsourcing company in the last month to issue profit warnings.
The news regarding Capita was yet another illustration of how the Tory obsession with privatisation and outsourcing is failing, coming only weeks after the collapse of Carillion.
As Labour’s Jon Trickett MP said this week, “we cannot afford another Carillion. The government must take serious steps to oversee the activities of Capita.”
What happened with regards to Carillion has put not only put thousands of jobs at risk and seen pensioners gravely concerned about their futures. It has also put our vital public services in danger, meaning that the overwhelming majority could face even higher bills and lower living standards as a result of the collapse.
The immediate causes of the collapse have been widely reported, but attention must also be drawn to the fundamental underlying cause — the disastrous love affair successive governments have had with the private sector.
This has involved outsourcing, failed privatisation after failed privatisation and private finance initiative (PFI) contracts that would better be described as extortion.
It was this growth of outsourcing, privatisation and PFI that saw Carillion expand so rapidly, hoovering up as many of these companies as possible that benefited from the public sector hand-outs represented in these different neoliberal policies.
At the same time, the terms and conditions of staff were often reduced and corners cut in a bid to boost profits.
It was then the austerity policies we have seen since 2010 under the Conservative-Lib Dem (ConDem) coalition and the Tories that saw this “model” come crashing down.
Revenues flattened between 2010 and 2016 due to the government’s slashing of investment in infrastructure, transport and housing, alongside cuts to current spending on public services such as the NHS and education.
As the blog Socialist Economic Bulletin put it, “the pace of new privatisations and PFI since 2010 was not enough to top up the bucket with a big hole marked austerity.”
This is why Labour leader Jeremy Corbyn was right to argue not only that Carillion’s vital public service contracts must be brought in house but, more widely, that the collapse of Carillion needs to be a turning point and an end to the fiasco that has been privatisation.
To put it simply, the Carillion scandal must bury the rip-off privatisation dogma, including outsourcing and PFI, for good.
A growing pile of evidence shows that the Tories’ dogmatic commitment to outsourcing and privatisation is all about ideology and not about what works.
Their approach is certainly not good value for money for the taxpayer. According to a recent report, some PFI contracts cost 40 per cent more than would have been the case had they been funded directly by public spending and taxpayers will pay nearly £200 billion to contractors under PFI deals for at least 25 years.
For this reason, public servants union PCS general secretary Mark Serwotka recently summed up privatisation as “a corrupt process where a merry-go-round of sham bidding and the awarding of contracts, false accounting and political sleight of hand, shunts money from the public purse to big company executives and shareholders.”
Additionally, putting profit before vital public services and workers’ rights has seen privateers walk away from failing contracts in many parts of our public services with the taxpayer having to pick up the mess they leave behind.
Continuing with this privatisation dogma risks lurching our public services from crisis to crisis, threatening jobs and taxpayers’ money, plus leaving the majority of people without the services they need.
The myth that the private sector is intrinsically a more efficient provider of services and goods — exposed as a lie again and again in recent years — must die with Carillion.
Instead, we need a totally new approach to the provision of our public services.
Since Jeremy Corbyn became leader of the Labour Party, he has put wholehearted opposition to outsourcing and PFI at the centre of Labour’s programme, saying the party would sign no new PFI deals when in government.
Additionally shadow chancellor John McDonnell announced at Labour conference last September that he would act to bring existing deals in-house by taking ownership of the special purpose vehicles to deliver savings for the taxpayer.
And shadow communities secretary Andrew Gwynne has said that delivering local services in-house would be the default option for the next Labour government.
It’s time for this alternative and a Corbyn-led Labour government that will have the priority of putting the public interest first. If the Tories won’t wake up to the reality of the changing economic landscape and the failure of austerity and neoliberal dogma, it’s time they stood aside.
You can follow Ken at twitter.com/Ken4London and facebook.com/KenLivingstoneOfficial.
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