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Time to end the outsourcing and privatisation racket

The government has totally failed to learn the lessons of Carillion’s collapse last year, writes KEN LIVINGSTONE

THIS week saw the one-year anniversary of the collapse of Carillion and also the release of research by the trade union movement showing that there has been a further surge in outsourcing in the year since.

To recap, Carillion had managed major public-sector contracts to provide services such as prison maintenance and school dinners. 

Its collapse caused major delays to multimillion-pound hospital construction projects in Birmingham and Liverpool, and is estimated to have cost the taxpayer a staggering £150 million.

Additionally, thousands of workers and apprentices lost their jobs after Carillion went into liquidation with debts totalling nearly £7bn, while many small firms were also badly hit.

In the period prior to its collapse, despite poor financial health, Carillion continued to receive government contracts, yet inevitably the government then had to clean up the mess when it collapsed and was unable to fulfil these contracts.

Additionally, despite being cash-strapped, Carillion borrowed massively to pay ever increasing dividends to shareholders. This enriched directors holding shares and share options, but ended up leading to taxpayers footing the bill.

Rather than learn the lessons from the collapse of Carillion, instead the increasingly discredited Tory government is pumping even more money into outsourcing companies, without changing the ways these companies have to operate. 

This means there is a real risk of the tragedy of Carillion being repeated again, with the government still failing to make adequate checks on the finances of companies.

According to the GMB, the lifetime value of outsourcing contracts awarded in 2017-18 rocketed by 53 per cent from £62bn to £95bn.

Astonishingly, services company Capita received almost £1.4bn in works contracts.

This is despite the company being issued a profit warning for its volatile stock market pricing.

Similarly, Interserve, which has also been rocked by financial instability, gained £450 million in public contracts.

Interserve has seen its debt pile increase to £648m (as per the 2017 accounts) compared with £406m in 2015. 

The fundamental underlying cause of the collapse of Carillion was 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 the 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.

It was then the austerity policies we have seen since 2010 under the Conservative-Lib Dem 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.

In other words the pace of new privatisations and PFI since 2010 was not enough to top up the bucket with a big hole marked austerity.

As Jeremy Corbyn said at the time, the collapse of Carillion should have been a turning point and an end to the fiasco that has been privatisation, but this ideologically driven government has failed to learn the lessons.

This week’s revelations have added to the ever-growing pile of evidence which shows that the Tories’ dogmatic commitment to outsourcing and privatisation is all about ideology and not about what works.

It is also increasingly clear that their approach is certainly not good value for money for the taxpayer. Research shows that 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 £200bn to contractors under PFI deals for at least 25 years.

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 has now been fully discredited.

We must bury the rip-off privatisation dogma, including outsourcing and PFI, for good and instead we need a totally new approach to the provision of our public services.

Since 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.

It’s time for this alternative and a Corbyn-led Labour government that will have the priority of putting the public interest first. 

In stark contrast, the Tories simply won’t wake up to the reality of the changing economic landscape and the failure of austerity and neoliberal dogma. 

As other developments this week have proved more than ever, we need to keep up the pressure for a general election and to get them out.

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