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Public Services: Private Sector Companies

Volume 748: debated on Monday 28 October 2013


Asked by

To ask Her Majesty’s Government what assessment they have made of the reliability and value for money of public services provided by private companies.

My Lords, the Government’s overarching principle in procuring public services in the private sector is to secure the best quality and value for money for the taxpayer over the life of the contract. On coming to power in 2010, the Government found that public sector procurement was fragmented, bureaucratic, protracted and expensive, both for bidders and for procurers. The procurement reforms we have introduced since 2010 have made the way we do business more competitive, more transparent, better value and far simpler than before.

Does the Minister agree with me that blaming the past for our problems in the present does not actually get us very far? Does he also agree with virtually everybody else that we are being ripped off by these companies, not only on energy prices but also in the Work Programme and in health assessments and rail fares? We learnt from the Financial Times only this morning that the Government are concerned that we are being ripped off by the water companies. What steps are the Government taking to rebuild public trust, and hold down the cost of living, by giving social obligations a higher priority and encouraging an attitude of public service?

My Lords, I hope you will accept that there is, to some extent, a difference between the relationship that the Government have with water companies and energy suppliers, which have regulators, and the direct contracts that the Government have with particular suppliers such as Serco and G4S. The concerns that we have at present over Serco and G4S are widely known. The Government are conducting a review of contracts with Serco and G4S across the board.

Does my noble friend recall that, prior to 1979, hundreds of local authorities had direct labour departments building council homes and carrying out maintenance at a massive loss of billions of pounds to the local ratepayers and the taxpayer in general? In 1979, very early on, those councils were prevented from doing that and the private sector construction industry was brought in to build those flats. Is that not a better way forward, and has that not been proven over the years?

My Lords, I think we have discovered yet again that there is no perfect way of providing goods and services and that each model has its own advantages and disadvantages. The Government are currently doing their best to encourage the development of mutuals. Some weeks ago I went round the mutual housing association operating in Bradford, and it was doing a superb job, in particular in training apprentices. But of course there are good examples and bad examples in almost every sector.

My Lords, does the Minister agree that transparency can only improve the delivery of public services by private sector companies? If he does, can he explain exactly why the Government continue to resist the extension of the Freedom of Information Act to the provision of public services by private sector companies?

My Lords, that is a familiar question. There are, of course, problems of commercial confidentiality, as the noble Lord well knows. I will take it back and write to him yet again on the subject.

In the light of the recent criticisms of past exercises in public procurement, can the Minister give the House an absolute assurance that the Government will in future ensure that in every such procurement the reasons and objectives are clearly laid out so that delivery can be monitored and success assessed; that a realistic and workable alternative is available so that the Government do not in the last hours find themselves negotiating over a barrel; and, lastly, that the Government are clear about which risks they will keep and, when they want to allocate those risks to the operator, how that will be achieved?

My Lords, I wish that every potential risk was clear before one ever signed a contract, as that is part of the problem. The Government are aware that part of the problem with public procurement is that it has proved easier to contract with very large-scale providers which then very often subcontract to other suppliers. We are moving towards the target of 25% of contracts going to small and medium-sized suppliers so that there are direct relations with those who are actually on the ground providing the service in the regions and the localities. That is one of the things that we hope will improve the quality.

My Lords, does the Minister agree that the original concept of hiring commercial enterprise to conduct the business of the Government was meant to gain better efficiency and value for money? Does he agree that this has failed in the sense that most of these private contractors actually spend most of their time enhancing their profit margins instead of looking after the service that they are supposed to be providing? Serco, as he has already mentioned, is the classic example where, I believe, there are allegations of fraudulent activities.

My Lords, in the case of Serco, the noble Lord will have seen that a number of senior executives have resigned in recent weeks. We welcome that and see it as a positive first step in the process of corporate renewal. Across the board, however, I am not sure that I would wish to blacken every company providing services for the state in the way that the noble Lord has perhaps suggested.

My Lords, I declare my interests as set out in the register. Does my noble friend the Minister accept that there are millions of privately employed workers delivering public services who go to work every day completely dedicated to the quality of services that they deliver to the public? Does he recognise that, in tribute to their efforts, we should be clear that you do not have to be a public sector employee in order to be a public sector servant?

My Lords, one of the reasons why the Government are attempting to encourage more mutuals in this area is that there is considerable evidence that people who work for mutuals have a much stronger sense of service, job satisfaction and co-operative working.

My Lords, the Minister referred to one of the earlier questions as familiar. Does he accept that questions would become less familiar on the Order Paper if they were answered?

My Lords, can the Government explain why, on the recently announced east coast main line franchise, they have allowed the state railways of the Netherlands, Germany and France to bid but not the directly operated railways that are owned by this Government? What is the difference?

My Lords, that is a little bit on the edge of this Question. However, as a frequent user of the east coast railway line, I know exactly where the noble Lord is coming from.