Questions are swirling about the British government’s apparently lax oversight of its major outsourcing contractor Carillion before it collapsed last week, leaving thousands of British private-sector workers unpaid. Up to 30,000 small firms are thought to be owed money by the sprawling company. It has emerged that in the three months leading up to its liquidation Carillion was not overseen by a crown representative, which usually happens when a government supplier has financial difficulties. The Cabinet Office minister, David Lidington, has told parliament the government will continue to pay those among Carillion’s 19,500 UK staff working in public-sector jobs, such as NHS cleaners and school catering, but thousands more in the private sector face being cut loose. Jeremy Corbyn says Carillion’s collapse proves it is “time to put an end to the rip-off privatisation policies that have done serious damage to our public services and fleeced the public of billions of pounds”. Vince Cable, the Lib Dem leader, said: “The government has mismanaged contracts so that fat cat bosses are able to get away with millions, hedge funds are able to make millions, while their jobs are at risk.” (The Guardian, Jan 16, 2018)
The National Audit Office has looked at 700 existing public-private projects and concluded that there was little evidence that any of them have delivered any financial benefits. They are generally 40% more costly than if they had continued in government management. There are currently 716 operational private finance deals with a capital value of 60 billion pounds. Annual charges for these deals amounted to 10.3bn pounds in 2016-17,and even if no new ones are entered into the existing ones are due to continue until the 2040s, costing nearly 200 billion pounds.
Privatisation is gospel to “conservative” politicians, whose conservation seems to be restricted to conserving pally relationships with Big Money and (are we allowed to guess?) reaping just rewards for their pains? Privatisation is window-dressing at best; at worst it is jobs for the boys, well paid ones, too. The British taxpayer has been ripped off for too long.
It’s important to see the distinction between contracting government run services to private companies and selling off state assets. The two are completely different, yet the media constantly refers to both as ‘privatisation’.
In some cases, contracting government run services makes sense. It is far better to have construction projects run by experienced firms than by civil servants who don’t know what they were doing. In other instances, it is cheaper for the government to run these services themselves. The main reason why contractors like Carillion and Capita have face financial trouble is because they have overbid for contracts, underestimating costs and overestimating profits. An austerity driven government is always going to maximise value for money, so many of these firms operate on low profit margins.
Genuine privatisation is another matter entirely. Some privatisations, like telecoms or aeroplanes, have been runaway success stories. Energy privatisation has a mixed record. Compared with the rest of Europe, energy prices are low and the system is more eco friendly. But there isn’t enough competition due to the dominance of the Big Six.
Overall I agree with you that the government’s handling of contracts won by the private sector has been poor. But I don’t think it’s fair for Corbyn to use this to say everything should be run by the public sector. Private companies can deliver, we just need to be better at knowing when.