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John McDonnell: Labour will end the outsourcing racket

A “STRING of high-profile failures” in public-sector outsourcing are not one-offs but are part of a 40-year “failed experiment,” John McDonnell has said in response to a new report.

And Labour’s shadow chancellor vowed if his party is in government it will end the outsourcing “racket.”

Mr McDonnell was responding to a report released tonight by independent think tank the Institute for Government (IFG).

The study says public support for renationalising services would increase as a result of “repeated failures” and reports that the supposed cost savings that outsourcing is supposed to deliver are heavily exaggerated.

Politicians regularly cite headline savings of up to 30 per cent but recent evidence shows any savings are more typically around 5 to 10 per cent, the report says.

There is also evidence showing that these smaller sums are achieved primarily by employing fewer staff, the IFG said — to the detriment of public safety, service users and front-line workers.

Higher rates of MRSA infection (28 per cent higher incidence) were found in hospitals which had outsourced cleaning to companies that often employ fewer staff, the IFS said.

Private prisons also tend to pay prison officers and support staff considerably less than in public prisons (by 15 and 22 per cent respectively) while paying managers and directors more, the report found.

General union GMB national secretary Rehana Azam told the Star: “All too often the apparent ‘savings’ from outsourcing take the form of cutting wages, terms and conditions and pensions.

“PFI projects have already left public bodies with a staggering £180 billion of debt.

“We need to rebuild our public services and return them to public and democratic ownership, serving citizens and their communities not the shareholders of big business.

“The recent scandals of [outsourcing giants] Carillion and Interserve should serve as a wake-up call.”

The IFS also says privatisation of probation services has been “unacceptably poor” and “failed on every measure.”

Around 150,000 low to medium-risk ex-offenders were let down across 21 privately run Community Rehabilitation Centres (CRCs), leading the Ministry of Justice to announce in May that it would renationalise the services by 2021.

Public financing initiatives (PFI) of buildings such as schools and hospitals were also cited in the report as an area of major concern.

The NHS will have spent £80bn by the time all these contracts are paid off, in return for just £13bn of initial investment, the IPPR think tank revealed last week.

Mr McDonnell said: “We’re at a crossroads on outsourcing, as the Institute for Government says, and it’s staggering to look back at the last 40 years of this failed experiment and see so little strong evidence that it works.”

Cat Hobbs of public ownership campaign group We Own It told the Star that the report should serve as a “wake-up call” and that she was “not surprised” over its findings.

She said: “When councils bring services back in-house they save money, improve quality and have more control over the services.

“It doesn’t make sense to hand over crucial services to companies that are motivated to make a profit rather than serve the communities.”


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