Suffolk County Council summoned up the ghost of Nicholas Ridley yesterday when it announced its plan to contract out almost all its service provision to external organisations. Older readers may remember Mr Ridley’s vision of local government – a council meeting once a year “to award all the council service contracts to private firms”.
In the late 80s and early 90s, with compulsory competitive tendering in full flow, it looked as though his vision might become a reality. I was working in local government at the time and I attended a number of conferences where a graphic similar to the one below was presented by enthusiastic advocates of the minimalist council. The centre circle represents the functions still carried out directly by the council. This would include all governmental functions, such as policy, local bylaws and emergency planning. At the end of each spoke there would also be a contract manager; an expert who would act as the council’s informed client for each of the outsourced services. All the other activities would be carried out by external contractors, represented by the outer circles. No council staff would be directly involved in any service delivery.
Despite all the gung-ho enthusiasm, it never happened. Even Wandsworth, the Tory flagship borough, didn’t try it in the end. Part of the reason was the change in the law in 1993, brought about by pressure from public sector unions and the European Commission, which made TUPE rules apply to the public sector. Until then, councils would simply make staff redundant when activities were outsourced. It was then up to the contractors whether they wanted to re-employ the staff or not. Under the new rules, contractors were obliged to employ some or all of the councils’ employees on similar terms and conditions, which reduced their appetite for taking on some of the contracts.
But now the Ridley vision is on the agenda again. Severe spending cuts mean that councils are searching for ways to cut costs. Handing services over to people who claim to be able to deliver them more cheaply is one way of reducing annual costs and longer-term staff costs. It’s attractive because, at first glance, it looks as though it can be done quickly.
The reality, though, will be more difficult. As Patrick Butler says, change on this scale is hugely expensive and councils could find themselves locked into costly underperforming contracts. To successfully manage an outsourcing programme of this size and complexity, a council will need good subject matter experts, skilled contract negotiators and highly capable project managers. The last two are in short supply in the local government sector. In the end, just as in the 1990s, it may be TUPE that sinks the whole idea. As I discussed in yesterday’s post, pensions liabilities could make council contracts look unattractive to private or third sector providers.
Whether or not Suffolk’s proposal is the shape of things to come for local government remains to be seen. In the event, it may not even be the shape of thing to come for Suffolk if the reality of implementing it proves messier than the original concept. It has, however, resurrected an idea that has been dormant for the last fifteen years or so. I wonder how long it will be before we see that diagram reappearing at public sector conferences.
Update: The Daily Mash: “Suffolk Council is to put 9,000 of its malingering, overpaid functions out to private tender.” Laugh-out-loud funny!
Update 2: Age of Austerity goes into some of the detail, explaining why outsourcing everything might not be as easy as it sounds.