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External Private Contractors: Government Use and Employment

Volume 682: debated on Wednesday 21 October 2020

I beg to move,

That this House has considered Government use of external private contractors and effect on employment.

It is a pleasure to serve under your chairmanship, Mr Pritchard. The question before the House is the use of external private contractors and its effect on employment. I am grateful to hon. Members for participating in this important debate. The recent pandemic has shone a spotlight on public sector procurement and the awarding of contracts. Although it is incumbent on the Government to ensure value for money for the taxpayer and quality of service delivery, they also have a duty, whether they like it or not, to those workers tasked with delivering services on which both Government and public rely. I believe that, on all fronts, the Government are failing in their responsibilities in that regard and so are failing taxpayers and workers alike.

Recent examples include the likes of Serco, which has received beyond hefty sums of taxpayer cash to run a failed test and trace system. The revolving door of Government, ex-Ministers and outsourcing companies is pernicious in every sense and does little to instil public confidence in a method of service delivery that is fundamentally flawed. I hope that other Members will speak more on this Government failure as the debate progresses. They will no doubt highlight other examples of failed contracts worth hundreds of millions of pounds.

I have chosen to concentrate on the example of civil service facilities management work in this speech, but if we substituted for the civil service nearly every NHS trust, many councils and other public sector bodies, my observations would unfortunately still be valid. The experience of the civil service is generally the same as that across the public sector, but I particularly wanted to concentrate on the civil service, as I am hoping that Ministers will now start to consider the outsourcing model itself.

It goes without saying that if workers win improvements through union action, that immediately has an impact on the outsource company’s bottom line. Those companies, especially where there is no trade union recognition, then tend to try to recoup lost revenue by cutting staff or their working hours. There are natural limits to productivity gains made through cutting staff. Inherently, the model is unstable and leads to companies running into financial difficulties.

Let us look at the Mitie-Interserve merger. My argument is well illustrated by the announcement in June that Mitie and Interserve’s facilities management arm are to merge at the end of the year, subject to shareholders approving a £271 million share purchase. In reality, Mitie is taking over Interserve. Both companies hold a number of civil service and public sector contracts, worth more than £2 billion of public money. Mitie’s biggest contract is for the provision of in-country and overseas escorting for the Home Office. That contract is worth £514 million. Interserve’s biggest contract is the Department for Work and Pensions estate and facilities management contract, worth £225 million.

Interserve has clearly been in financial difficulty for some time. Last year, it went into pre-pack administration. At that time, the Labour party called for a temporary ban on Interserve bidding for public contracts, but that call was not heeded. We know that Interserve was awarded a five-year facilities management contract worth £670 million by the Foreign and Commonwealth Office in early August 2018. Shortly after that contract was awarded, Interserve moved to cut staff, and Public and Commercial Services Union members went into a long-running dispute over job cuts, pay, sick pay entitlement and trade union recognition. The company issued profit warnings in March 2015, then two more in 2016, and another as recently as 2018.

Mitie has been involved in multiple disputes with its employees: we can cite the Royal Opera House, the Houses of Parliament, First Great Western, London Underground, and various NHS hospitals. It was subject to an investigation into its MiHomecare business by Her Majesty’s Revenue and Customs for paying its employees less than the minimum wage. Industrial relations in Mitie are so bad that in March 2019, Unite the union said that it should be barred from acquiring contracts due to its woeful treatment of its workforce. That Unite warning is interesting, as even a few months ago it was clear that Mitie and Interserve were considering a deal.

This is where the similarities with Carillion might be interesting to consider, so what can we learn from the lessons of Carillion? The report of the joint inquiry by the Select Committees on Business, Energy and Industrial Strategy and on Work and Pensions recommended

“that the Government immediately reviews the role and responsibilities of its Crown Representatives in the light of the Carillion case. This review should consider whether devoting more resources to liaison with strategic suppliers would offer better value for the taxpayer.”

I do not know whether that recommendation was acted on in relation to facilities management contracts in the civil service, but it does not appear to have been exercised in this instance to scrutinise Mitie and Interserve.

Moving on to the issue of inequality in pay and employment terms, each civil service department has to comply with the public sector equality duty. The civil service does not have to award contracts where only the minimum wage is paid, statutory sick pay is given, and trade union recognition is not a right. It could choose to make the payment of the real living wage, full sick pay from day one, and trade union recognition a condition of the contract, as many local authorities have begun to do.

Research carried out by the PCS union shows that only two of the 23 ministerial Government Departments pay the real living wage to their facilities management outsourced workers, and no Department includes a policy of paying more than the statutory sick pay as a requirement of awarding a contract. Departments know that in their major urban areas, cleaners, security guards and so on are predominantly of black, Asian and minority ethnic origin, and nearly all cleaners are women regardless of where they work. From the observations of the PCS union, as relayed to me, senior managers and certainly Ministers believe that outsourcing work means they have no responsibility to those facilities management workers, whether in terms of pay, terms and conditions of employment, equality of treatment, or health and safety.

If we look at that indifference to health and safety obligations, we find that even though health and safety laws put clear obligations on civil service departments and facilities management companies working in the same buildings to co-operate and co-ordinate their health and safety at work—that is, regulation 11 of the Management of Health and Safety at Work Regulations 1999—in reality we have had immense difficulty in getting the civil service to comply with the law. That indifference leads to what we see as a grotesque admission by the Cabinet Office, which we take as a proxy for the civil service, that it does not know how many facilities management workers have died due to covid, let alone their ethnicity. We know that at least six facilities management outsourced staff have died owing to the virus, all of them of BAME origin.

Turning to the issue of sick pay, in a recent survey—again conducted by PCS—86% of outsourced facilities management workers who responded said that they had often continued to work when they had been unwell because they could not afford to take time off sick.

I thank my Unison comrade for giving way. To support that particular proposition, there is a Unison briefing that shows that in schools in England, many of the private companies are only paying statutory sick pay. Does the hon. Lady agree that this puts people in the position of having to choose between statutory sick pay and going into work, which is more likely to spread the virus?

Sadly, I concur with the hon. Gentleman’s observations. Covid-19 has brought into sharp focus the inequality between the sick pay provisions of civil servants and those of outsourced workers employed on civil service contracts.

Through PCS talks during covid-19, most civil service departments adopted a policy of paying their outsourced staff full pay for covid-19-related absences until the end of June 2020. From July 2020, Cabinet Office guidance was updated to allow the arrangement to continue where appropriate. As part of PCS’s campaign to defend and extend the right to full sick pay, it wrote to the Prime Minister in June, setting out the case for all outsourced Government workers to be paid full sick pay from day one. Disappointingly, there has been no response.

Does outsourcing facilities management services achieve social value? The simple answer is no. Section 1(3) of the Public Services (Social Value) Act 2012 requires a public sector authority to consider how a procurement

“might improve the economic, social and environmental well-being of the relevant area”.

When awarding central Government contracts, the Cabinet Office is obliged to consider the wider social benefits of procurement to ensure that cost does not override other Government considerations.

I want to take the opportunity to thank you, Mr Pritchard, for overseeing today’s debate. Let us move forward by initiating an open, frank and honest debate, with which I hope the Government will actively engage in the coming period. Value for money is not always delivered by the current procurement and outsourcing arrangements. For a Government who claim to pride themselves on hating waste, the reality is that nothing could be further from the truth.

The Government should be ambitious and see what services can now be brought back in-house. Fundamentally, the truth remains that when workers are paid properly and valued, productivity is better. After a long, difficult year for so many workers, the Government have often waxed lyrical. It is high time that politicians clearly show whose back they have—the cleaners, the contact tracers, the security staff and all manner of low-paid staff, or the directors of outsourcing companies.

I am going to set an informal time limit of three minutes, but if colleagues could be a bit quicker we might have some time for a two-minute reply later. Obviously, there are five minutes for the Scottish National party spokesman and the shadow Minister, and 10 minutes for the Minister. Thank you for your co-operation.

It is a pleasure to serve under your chairmanship, Mr Pritchard. I am delighted that my first contribution in Westminster Hall is to a debate secured by my hon. Friend the Member for Liverpool, Wavertree (Paula Barker) on an issue that I care about deeply.

I declare an interest: for decades, I have been active in the Labour movement and it was my great privilege to have served for four years as regional secretary of Unite the union in the north-west. In that role, I represented thousands of outsourced workers right across the north-west, in sectors as diverse as manufacturing, care and catering. I saw at first hand how outsourcing has fostered a culture of low pay and insecure employment. Successive Governments have justified the race to the bottom on workers’ rights as a price worth paying for greater efficiency, flexibility and value for money for the taxpayer.

The Institute for Government reported last year, however, that a string of high-profile outsourcing failures had wasted millions of pounds, delivered poor services and undermined public trust. The collapse of Carillion in 2018 left the Royal Liverpool Hospital building years behind schedule, while the Government continued to award £660 million in public contracts to Interserve just months before it went into administration. In both cases, it was the taxpayer who was left footing the bill, and workers and service users suffered.

This devastating pandemic has truly laid bare the deep failings of outsourcing. This week, we learned that the Government’s outsourced Serco test and trace system has failed to track almost a quarter of a million people who have been in close contact with someone infected with covid-19. On the Wirral, just under 59% of people who have potentially been exposed to this terrible virus have been contacted in the last week. Instead of the world-beating system that the Prime Minister promised us, we have absolute chaos.

It is not just Serco test and trace that has made private companies an absolute fortune at a time when everyone else is making enormous sacrifices to win the war on this terrible disease. External providers have profited at every level of the Government’s response to covid-19. In fact, the British Medical Association has this month reported that the Government’s focus on external providers has left public facilities often underused and ignored. A vast range of companies have been paid to produce, store and distribute personal protective equipment, manage the logistics of drive-in testing and onboard returning healthcare workers into the NHS. That is despite the evidence showing that local public health teams are best placed to respond to this deadly virus.

The Government continue to shell out millions of pounds of taxpayers’ money to their friends in the private sector who simply cannot do the job. Meanwhile, the Chancellor has the audacity to say that the Government can afford to pay furloughed workers in my constituency only a measly two thirds of their wages, while quibbling over the expense of providing free school meals to vulnerable children during the holidays.

The Prime Minister has said that there are lessons to be learned from his handling of the covid-19 crisis. That is unusual for him and is quite an understatement. One of the clearest lessons of all the outsourcing is that it has been a failed project. As we face the worst economic crisis in recent history, we need more than ever to put social value at the heart of national and local procurement strategies. That means creating secure and well-paid jobs, improving employment rights and promoting ecologically sustainable developments. It means creating economic growth that feeds back into our communities, rather than just lining the pockets of a handful of shareholders. We can do all of this and more, but only if we stop handing millions to private companies and invest in the public sector.

I first wish to pay tribute to my hon. Friend the Member for Liverpool, Wavertree (Paula Barker). In the short time she has been here, she has made a great contribution to the House. She has also made a great contribution to our party and to the union movement, where she spent many years on exactly these sorts of issues.

In May, the Prime Minister promised us a world-beating track and trace system. What we have instead is a system in disarray. The NHS Test and Trace system is not run by our national health service. Frankly, it is offensive to link the NHS with the shambles that the Government and the private sector have created. Our track and trace system is provided by Serco, the outsourcing giant responsible for a plethora of well-documented scandals. There was the electronic tagging scandal for which it was fined £23 million by the Serious Fraud Office. There was the extensive cover-up of sexual abuse of vulnerable women at Yarl’s Wood, and there is the ongoing scandal of asylum seekers’ accommodation and the “squalid, unsafe, slum housing”—not my words, but those of the chief executive of the Refugee Council. And Serco won a further £2 billion of contracts from the Home Office last year.

Why do the Government choose to award contracts worth hundreds of millions to run track and trace during a deadly pandemic, in what is literally a life-or-death situation? Why have the Government ignored the recommendations of the Scientific Advisory Group for Emergencies and the BMA? Would it not make more sense for track and trace to be run by local public health experts? My Labour colleagues and I have been asking such questions since the contracts were awarded, but answers have not been forthcoming.

The problems that have since arisen have shown the Serco system for what it is: completely unfit for purpose. By the end of August, after a month of encouraging British people to eat out to help out, and around the time the Government launched their back to work campaign, track and trace was failing to contact more than 30% of those who had been in contact with someone who had tested positive. Only 40% of test results were being returned within 24 hours. Since then we have seen lockdown after lockdown. Both lives and livelihoods have been put at risk because of a Government so wedded to the private sector that they are unwilling to admit their mistakes and give oversight to local health protection teams who, by the way, have reached 97% of close contacts of those testing positive, in contrast to Serco’s 62%.

It is not really a surprise that the system is doing so badly when we consider that staff employed by Serco to work on track and trace have spoken of days without contact from supervisors, or without being given any work to do. They are paid the minimum wage while Serco’s profits have surged. Low-paid, badly trained workers are not to blame for the failure of track and trace. The Government’s ideological obsession with outsourcing and subcontracting is. Track and trace has failed, testing is in chaos, and the track and trace app is mired in a multitude of technical issues.

In early February I was forced to self-isolate for two weeks after attending a conference where there was a coronavirus patient. I could not be told by the system at that time whether I had been in contact with that person or not. When I returned here, I asked the Secretary of State for Health and Social Care to introduce a track and trace app. He promised to look at it. Now, more than eight months later, we still do not have a working app.

Months of sacrifice and a Herculean effort on the part of the British people have been given scant regard by the Government. Now we have businesses on the brink and whole industries—tourism, hospitality and the arts, to name but a few—at serious risk of collapse. We are in recession and unemployment is climbing. No one is asking the Government for instant medical solutions to coronavirus, but we need a track and trace system that works to keep the public safe, delivered by local authorities with knowledge of the communities that they serve—not private profiteers, costing both public money and the public’s lives.

It is a pleasure to serve under your chairmanship, Mr Pritchard. I thank my hon. Friend the Member for Liverpool, Wavertree (Paula Barker)—my former employer, no less—for securing the debate. I draw Members’ attention to my membership of trade unions and donations from Unite, as set out in my entry in the Register of Members’ Financial Interests.

I also thank the PCS union, which represents more than 8,000 workers employed by private companies on Government contracts, for its ongoing work in this area, particularly its campaign to bring outsourced jobs back in-house, and for continuing to apply pressure on contractors and the Government to pay a real living wage—the one calculated by the Living Wage Foundation, not the one appropriated in a public relations stunt by former Chancellor George Osborne—while continuing to fight for workers to have access to the terms and conditions afforded to their civil service counterparts.

Last year I was proud to join more than 200 PCS members in my constituency of Stockport when they took industrial action over workloads, staffing levels and the oppressive working conditions that they were forced to endure while working on universal credit reforms. The level of outsourcing, cost to the taxpayer and general wastage of hiring private contractors in my region of Greater Manchester alone is truly eye-watering. It is a legacy that we have been forced to endure since the Thatcher era, and it has been a 30-year-long failed experiment.

Almost three years on from the collapse of Carillion, described at the time as the largest ever trading liquidation in the UK, lessons have failed to be learned and it is slowly coming to light just how entrenched outsourcing has become in this country. In my region alone, the Manchester Evening News was able to unearth Carillion’s involvement in 10 major public and private sector projects, including Network Rail electrification, the M6 smart motorway work, High Speed 2, Airport City and Owens Park. It was also heavily linked to Greater Manchester schools, roads and basic services, through contracts with Manchester, Tameside, Rochdale and my own local authority, Stockport Council. In my borough, a Carillion offshoot was contracted to handle estates, assets and facilities management at various sites.

That is all part of a staggering 10-year £100 million deal that was signed in 2014 to handle key development services. Private contracting permeates every single stratum of our society, from Stockport Town Hall to Greater Manchester police. With local authorities already strapped for cash by central Government, how can it be right that they sign off multimillion-pound contracts with companies that often have little to no track record of delivery, as we have seen most recently in the Government’s decision to outsource covid test and tracing to Serco? Months later, we still do not have a functioning system like those of our European partners.

What is worse is that, despite paying such exorbitant fees to private contractors, nothing is put in place to ensure that workers are treated with dignity. For example, earlier this year the PCS union led a month-long walkout in response to Interserve’s treatment of its staff, who were maintaining the then Foreign and Commonwealth Office premises. The move was the longest period of strike action in the history of the Foreign Office—all because Interserve was not prepared to recognise trade unionised workers and was continuing to drive down its staff through measures such as reducing working hours.

It is not much to ask in return for multimillion-pound, multi-year contracts that these organisations recognise trade unions. As we have seen time and again, these companies will never prioritise workers’ wellbeing over private profit. It is time to end that practice once and for all, bring these contracts back in-house and finally deliver the services that we so desperately need, efficiently and in a fiscally responsible way, if we are to kickstart our economy again and recover from this crippling pandemic.

It is a pleasure to serve under your chairmanship, Mr Pritchard. I congratulate the hon. Member for Liverpool, Wavertree (Paula Barker) on securing this important debate. Civil service numbers have gone down in key Departments—the Department for Work and Pensions, the Home Office, the Ministry of Housing, Communities and Local Government and the Department of Health and Social Care—by between 30% and 50%, most drastically in the last couple of years.

They are the services that are most needed by the public. Yet the outsourced market has an annual turnover of £82 billion. Research by Unison shows that £9 billion has been paid in total cost overruns on 105 outsourced IT contracts in central and local government, the NHS and other public bodies. No one can ignore the latest disastrous privatisation of the test, track and trace system, where some consultants are paid £7,000 a day. That is just under half of what civil servants on the lowest AO grade outside London earn in a year.

Despite its failure, Serco is set to generate between £160 million and £165 million in profits this year, thanks to its covid-19 contracts. Last year, the CEO, Rupert Soames, pocketed an estimated £4.5 million. It is not about the money, and nor is it about effectiveness. Serco’s test, track and trace contract is running at 67% effectiveness, compared with the 97% effectiveness of local public health teams. This is the same Serco that was fined £2.6 million for shortcomings in relation to a contract for asylum seekers’ accommodation in January 2020 and that paid £22.9 million to the Serious Fraud Office under its tagging contract, where it claimed for returned, released or even dead clients.

As long as someone is a friend of this Government, their ability to deliver is irrelevant. Now it appears that Serco may be awarded a contract to run interviews with vulnerable asylum seekers for the Home Office. The PCS union has serious concerns that the Home Office is cynically using the covid situation to bring in privatisation through the back door, and I agree with those concerns. Outsourcing is most certainly not about improving terms and conditions—look at the ISS cleaners, in dispute with Her Majesty’s Revenue and Customs for several months, including in my Liverpool constituency, over the failure of companies to pay a living wage or afford them the sick pay and holiday entitlement of their directly employed counterparts. Now the same company is bidding to take on HMRC’s security contract, which will lead to more job losses.

The rationale behind the massive outsourcing of public sector work to the private sector is driven by ideology and nothing else. It leads to job losses, insecure contracts, lower wages and worse terms and conditions, but bigger profits for the Tory donors. I am fully behind our public sector unions—PCS, Unison and Unite—in fighting back for a living wage, secure jobs and decent terms and conditions and to save the public purse money, because it is becoming increasingly clear that privatisation is not about saving public funds.

It is a pleasure to serve under your chairmanship, Mr Pritchard. I congratulate the hon. Member for Liverpool, Wavertree (Paula Barker) on securing this important debate.

Many elements of the UK’s public services that have been central to the response to covid-19 have been outsourced in recent years. The NHS supply chain, which is responsible for delivering personal protective equipment, was privatised in 2006. Since the disastrous Health and Social Care Act 2012, NHS outsourcing and privatisation has been incentivised. In the last five years alone, private companies were handed £15 billion of NHS contracts.

According to research by We Own It, the Government are wasting as much as £10 billion a year on running an internal market in the NHS. Every penny spent on NHS privatisation and outsourcing is a penny less spent on patient care. The amount we spend on the internal market would be enough to pay for 72,000 nurses and 20,000 doctors. It is the same pattern of privatisation and deregulation that has decimated many of our essential services since the 1980s, across the transport, energy, water, mail and healthcare sectors. The British public tend to pay more for these services than similar European nations, simply to enrich shareholders.

During the coronavirus pandemic, outsourcing has increased at an alarming rate. After suspending commissioning rules, Government Ministers have awarded exclusive coronavirus-related state contracts worth more than £10 billion to private companies. We only have to look at examples such as Randox. The Government have also spent £12 billion on a failed test and trace programme, which prioritises the enrichment of private corporations over the protection of our communities.

Outsourcing does not just result in dangerously worse outcomes. As many trade unions, inducing Unite, PCS, Unison and others, have made clear, the incentivisation of outsourcing has a devastating impact on workers’ rights. Across the board, outsourcing has reduced wages, increased workloads, provided minimal sick pay, and delivered worse conditions and, in many cases, worker exploitation.

Following the return of full school opening, Unison has begun a campaign to get all private companies that deliver services in schools to pay full sick pay. I support that important campaign, and I call on the Government to extend sick pay and full working conditions to all workers, no matter their terms and conditions.

I will end on this. The pandemic has demonstrated that an over-dependence on the private sector weakens our national ability to act in a time of crisis. For the sake of public health, the Government must reassess their ideological commitment to outsourcing and privatisation.

It is an honour to serve under your chairmanship, Mr Pritchard. I thank my hon. Friend the Member for Liverpool, Wavertree (Paula Barker) for securing this really important debate. As a member of the PCS trade union, I wish to speak about the use of private firms across the justice system. Millions of pounds have been wasted on outside agencies and contractors throughout the court reform programme under Tim Parker.

The ideological obsession with the private sector goes far beyond the courts. Last month, dozens of civilian enforcement officers employed by Her Majesty’s Courts and Tribunals Service were transferred to the private sector after years of failed attempts to outsource that sensitive work. One of the two contractors, Marston Holdings Ltd, immediately put its newly transferred workers at risk of redundancy, blaming the anticipated impact of covid-19 on its workload. The courts service expressed surprise and disappointment at the move, but made no attempt to protect its staff when warned about it before the transfer. PCS insists that HMCTS is the only Government agency to transfer staff into a known redundancy situation. I wholeheartedly agree with its concerns about that behaviour. Had the courts service initiated a pre-transfer redundancy process, the affected staff would have had official union representation throughout this traumatic process. Instead, they have been left high and dry because Marston refuses to recognise PCS.

Another example of the private sector profiting from our justice system is the new generation of private prisons that are in the pipeline. At least five of the next six jails are set to be run by the private sector. Astonishingly, private prisons do not reveal how many staff they employ, and nor are their minimum staffing levels specified in contracts, yet it is widely accepted that prison understaffing leads directly to extra violence. Private prison operators, just like all corporate privateers, exist to maximise profit for shareholders, and that means slashing costs—especially staff costs—to the bone. No wonder private prisons are an average of almost 50% more violent than public prisons, according to Guardian research last year. I urge the Government to hold an independent inquiry into why private prisons are more violent than public prisons before awarding any more private prison contracts, and to ensure that minimum staffing levels and union recognition are requirements for all private prisons.

It is a pleasure to see you in the Chair, Mr Pritchard. I thank my hon. Friend the Member for Liverpool, Wavertree (Paula Barker) for securing this debate on a really important issue. Outsourcing is a scam, an illusion, a con and an opportunity for jargon-filled management consultants to do a flashy presentation about how they can save a few quid from the bottom line, in the short term, at least. In the long run, the costs are high in lost expertise and lost capacity, and the biggest cost of all is for those long-suffering employees who end up on inferior terms and conditions, if they have a job at all.

Public and private sector companies alike have been seduced by the outsourcing mirage. The savings that are dangled in front of them are not cost-free or painless. In almost every situation, the majority of the savings come directly from the employees, either by paying them less or by having fewer of them. Of course, in theory, employees’ terms and conditions are protected under TUPE, but as an EU regulation it is now at the mercy of the Government, who could decide to water it down or get rid of it at any moment. TUPE does not need watering down; it needs strengthening. There are many ways that employers can evade TUPE protections, both in terms of dismissals and changing terms and conditions after a transfer—if they could not, a major incentive for outsourcing would be removed at a stroke.

Why would anyone want to give up sick pay, overtime rates or other benefits accrued over, say, 20 years of employment just because the name over the door has changed? Is not the loyalty of the employee who has given more than half their life worth more than a factual reference and a redundancy payment that might be able to buy them a second-hand car at the end of the situation? Employers may say that that is not what they want to happen, and that when they outsource employees, they do not want to see anyone suffering, but that is what happens all too often. Every time, that is because the original employer has washed their hands of the situation. They have outsourced their employees, and they have outsourced their legal obligations, but they have not outsourced their moral responsibilities, and they will know, from the moment the transfer takes place, that the clock is ticking.

Insecurity is baked into the workplace, and it is given rocket boosters by the outsourcing industry. It is little wonder that so many people feel a sense of helplessness. It does not have to be this way. Job security should be a basic right in a civilised society, but we see the outsourcing poison spreading everywhere at the moment. Often, the lowest-paid members of society suffer the most, being forced to give up hard-won terms and conditions, with little that can be done to challenge that.

Such are the warped priorities of this Government that that happens at the same time as the obscenity of contractors getting paid £7,000 a day to run the abysmal test and trace system. Never has the contrast been starker, and never has the need for change been greater. Let us use the power of public sector finances to be a force for good, let us keep things in the public sector, let us aim to be an exemplar in pay and conditions, and let us never give the private sector an excuse to justify driving down people’s wages.

I was a long way down the queue to speak, Mr Pritchard, and I was worried about getting in, so I thank you and other hon. Members for making that happen. I thank the hon. Member for Liverpool, Wavertree (Paula Barker) for bringing this issue forward. I have expressed concern about it over a number of years as an elected representative.

It seems like a lifetime ago—it probably was—that I sat on Ards Borough Council. I was very unhappy with the outsourcing of staff to agencies. While we advocated certain pay conditions and holidays, to get around that in practice, agency staff were used. Clearly, the agency staff did not have the same conditions as others, and that concerned me greatly.

I agree with the use of agency staff for the short term for some staff members, but the agency had staff in place for over a year. As with all things, those in government, both local and central, must lead by example. I am pleased that Ards and North Down Borough Council, my local council, has taken the brave decision to cut down on agency staff for the long term. That must be applauded. That means that the staff there now have the pay and conditions that they should have had at the very beginning.

Bringing things in house should bring accountability, and it sends the better message that we treat staff equally on pay and conditions. Civil servants are some of the brightest people we have. To think that we are unable to train them in different skills and move them into different areas of need does them a disservice. I saw many examples during the lockdown of council staff stepping out of their office and into another role that needed filling. It was clear that the potential and the desire were equally matched, and they had the ability to do those things.

I realise that there were extenuating circumstances, and some people do not handle moving area well, but others clearly excel, so there is no reason to bring in private contractors when we have the ability and foresight to plan ahead and upskill our own staff, allowing the private sector to make use of the resources, while we train those who dedicate their life to public service. The social security office staff in Ann Street in Newtownards have got their heads round the brand-new benefits system, which is quite difficult for them to use. They were able to rely on outside consultants and contractors, but the staff that were there were retained, so the conditions remained in place.

Time does not permit me to continue, but I must be clear. There are some things that must be outsourced, but others cannot and should be kept in-house. I want to make a plea for those who are in-house. and I recognise those good employers who do the right thing.

It is a pleasure to see you in the Chair, Mr Pritchard. I refer to my entry in the Register of Members’ Financial Interests, my position as chair of the PCS parliamentary group and my trade union membership of Unison, of which I have been a member of good standing for 25 years. It is pleasure to see a debate led by my Unison comrade—I believe it is her first in Westminster Hall—the hon. Member for Liverpool, Wavertree (Paula Barker).

I was in Westminster Hall on Monday evening, when I heard the far-right of the Conservative party wax lyrical about immigration and slagging off other political parties, which were not there to defend themselves. Is it not interesting that no Conservative Back Bencher is here to defend the basic tenet of the Conservative party’s political philosophy of private sector involvement in public services? Those watching the debate will be able to draw their own conclusions as to why that is.

I will concentrate some of my remarks on the Home Office pilot being carried out for asylum case interviews, as touched on by the hon. Member for Liverpool, Riverside (Kim Johnson). We understand that the company involved is Serco, although the Government have yet to confirm that—it seems to be a secret pilot scheme. We have to ask ourselves why that is the case. Is it because the director general of UK Visas and Immigration happens to be a former employee of Serco? Perhaps that is the reason why Serco has been drafted in to carry out these asylum case interviews.

It has not been touched on in the debate, but it is important when discussing asylum case interviews to say that the Government have argued in court, unfortunately successfully, that outsourced companies—private contractors—carrying out public sector services are exempt from human rights legislation. I have to say that I am fearful of the fact that a private sector company is carrying out asylum case interviews. I would have thought that we would want to make sure that someone’s human rights were respected in an asylum case interview—we would certainly expect their human rights to be protected.

That is one of the key reasons why I have consistently—before I arrived in this place and ever since—been against the outsourcing agenda that the Government have had for the last decade. My friend, the hon. Member for Liverpool, Wavertree, and other speakers mentioned the rogues’ gallery involving Serco and its test and trace system. A quite astonishing figure has been provided; the Boston Consulting Group is getting eye-watering consultancy fees for this wonderful test and trace system that the Government talk about. Some consultants are earning £7,000 per day from the public purse. I think we may be in the wrong job, Mr Pritchard, if that is what some people are getting.

We have heard about the impact of outsourcing on terms and conditions—the cuts to wages and working hours and the refusal of outsourcers to pay the living wage, for example. We have seen great examples of trade unions fighting back on that, including the PCS, Unison and Unite, which have been mentioned.

In the moments I have left, I will ask the Minister a question on public procurement policy notes and the request for contractor relief to continue—I understand it is due to expire on 31 October. The Minister has a letter in her possession from myself, as chair of the PCS parliamentary group, asking whether she could give an update on the public procurement policy notes and if she will be amenable to the request that all staff who have to isolate should be given full pay during that absence. We are of the view that there is an opportunity here to help local communities to manage and recover from covid.

Mr Pritchard, I thank you for being in the chair today. The outsourcing agenda is wrong. I believe that the people of these islands should be entitled to strong public services and strong public sector delivery in public sector hands.

It is a pleasure to serve under your chairmanship, Mr Pritchard. I congratulate my hon. Friend the Member for Liverpool, Wavertree (Paula Barker) on securing this important debate and on her powerful speech, which set up the multiplicity of ways in which outsourcing is failing workers on pay, terms and conditions, job security, and health and safety.

The devastating impact of these failings was illustrated in many contributions, including those from my hon. Friends the Members for Birkenhead (Mick Whitley), for Leeds North West (Alex Sobel), for Liverpool, Riverside (Kim Johnson) and for Ellesmere Port and Neston (Justin Madders), and from the hon. Members for Leicester East (Claudia Webbe) and for Strangford (Jim Shannon). My hon. Friend the Member for Stockport (Navendu Mishra) shared an example from his constituency of outsourced workers in relation to universal credit and being subject to exploitative practices. My hon. Friend the Member for Luton South (Rachel Hopkins) shared the example of staff at Her Majesty’s Courts and Tribunals Service who were outsourced, only to find themselves made redundant. There were many other examples, and I thank all hon. Members who contributed to the debate.

The coronavirus pandemic has shone a bright light on the Government’s broken model of outsourcing. It has exposed the grotesque inequality of terms and conditions of employees working side by side in the same Departments—civil servants able to self-isolate on full sick pay, while outsourced cleaners or security staff face an impossible choice between coming to work with symptoms or being unable to pay their bills. There is cruelty and stupidity in that approach, in equal measure. It is terrible for workers and extremely risky for infection control. It has exposed the Government’s dependence on a small number of private firms to deliver vital public services, often with no clear evidence of their ability to do so competently, creating multiple layers of risk, both for staff and for those who rely on the services those firms are contracted to deliver.

Outsourced workers have been an integral part of the frontline during the coronavirus pandemic. Thousands are in roles such as cleaning, security and facilities management. Those jobs cannot be done on Zoom. Those workers have continued to travel to work on public transport, spending their shifts in contact with other workers or surfaces that have been touched by many other hands. Often, they are disproportionately from black, Asian and minority ethnic backgrounds: BAME workers make up 16% and 26% of cleaners and security guards, respectively, compared with 12% of the wider workforce. They are key workers, those same key workers the Government clapped on Thursday evenings earlier in the year. They have faced multiple risks to do their essential work, yet they have been left to fall through the cracks in the protections from which others who work in public service benefit.

The major driver for outsourcing is cost reduction. Studies have shown that all too often it leads to a deterioration in pay, terms and conditions for the workforce, including insecure contracts and a loss of access to benefits, such as pensions and sick pay. That approach is being applied across many different areas of public services. Unite, Unison, the GMB and PCS all have harrowing examples—too many to set out in detail in the time available today—in which Tory austerity is paid for at the expense of the mental, physical and financial wellbeing of outsourced workers in Government Departments, local authorities and the NHS.

Yet the Government’s failing outsource model is simply not delivering. That failure is illustrated most starkly today in the Serco and Sitel track and trace contract, a shocking example of the Tory instinct to outsource overriding all the evidence that local authorities are best placed to deliver a service that involves the day-to-day investigation of contact between people in specific geographical communities. The Government spent more than £10 billion on a contract that has been subcontracted to 29 different unnamed companies, creating a completely unaccountable tangle, and it seems that they are committed to even more of the same.

In 2017, Carillion collapsed in an outsourcing scandal of national proportions. It became clear that Carillion had built a house of cards, with undeliverable contract stacked on undeliverable contract, and a huge web of smaller firms entirely dependent on it. Seven hundred and eighty firms went into liquidation as a consequence of the collapse of Carillion, and more than 3,000 people lost their jobs. My hon. Friend the Member for Leeds West (Rachel Reeves) led the investigation into Carillion as Chair of the Select Committee on Business, Energy and Industrial Strategy, and Labour is committed to implementing the lessons of that sorry tale—it is beyond comprehension that the Government are not.

Instead, it would appear that the Government are now content for the two largest Government contractors, Interserve and Mitie, to merge. The merger would create the UK’s largest facilities management company, with almost 80,000 employees, yet both companies have had financial problems in recent years, both have a poor history of industrial relations and, since they are competitors, the merger is a back-door route to obtain contracts that they were previously not considered good enough to be awarded.

In conclusion, I ask the Minister what assessment she has made of the impact of the proposed merger of Interserve and Mitie on employee terms and conditions, on redundancies, and on the quality of services that will be delivered. What assessment has she made of the social value that the merger will bring? What evidence has she seen to give confidence that this is not another Carillion waiting to happen? What discussions has she had with trade unions on the disparity in terms and conditions for outsourced workers in Government buildings and frontline public services during the coronavirus pandemic? Does she know, and will she name, the 29 companies delivering track and trace services for Serco? If not, why not? Finally, and most importantly, what is her message to outsourced key workers on Government contracts, supporting and delivering vital public services, who are fearful today about the safety of their workplace or their journey to work, and are worried that if they develop coronavirus symptoms and have to self-isolate, they will have to choose between the health and safety of their colleagues and the wider public, or their ability to put food on the table?

It is a pleasure to serve under your chairmanship, Mr Pritchard.

I am grateful to the hon. Member for Liverpool, Wavertree (Paula Barker) for securing the debate. The Government are the custodian of public money and it is very important that we retain the confidence of taxpayers about how that money is spent. It is similarly important that we have a robust, highly skilled civil service, with the expertise and capacity to deliver projects and services over the long term and at pace, and that we treat those in the private and public sectors who carry out work for the Government with respect. That is why I welcome not only the way in which the hon. Member has raised issues about external private contractors but the respectful way in which she makes her case.

The civil service has historically used contractors, working alongside civil servants, to provide additional capacity and specialist skills and to manage short-notice urgent requirements. Where it is cost-effective to do so and the requirement is temporary, this makes sense, but let me also be clear that we are focused on driving down the use of consultants, improving internal civil service capability and driving greater value. We will do this in a variety of ways: revamping our in-house training; looking again at procurement rules, particularly relating to social value; and continuing the work of my predecessor, now the Secretary of State for Digital, Culture, Media and Sport, in dealing with issues about outsourcing raised following the collapse of Carillion.

Consultants are used to provide advice on the strategy, structure, management or operations of an organisation, and where an external perspective may be helpful or even necessary. We also use professional services firms to support the implementation and delivery of services—for example, PwC supported the delivery of the reform programme for Her Majesty’s Courts and Tribunals Service—and we use contingent labour to fill gaps in business-as-usual or service delivery activities. It is also right to say that the civil service itself has grown in number over recent years, partly because of the EU exit operations but also because of covid. We have recruited an extra 6,000 civil servants in the Home Office, for instance, to tackle security, counter-terrorism, crime and policing issues.

I will now address some of the points made by the hon. Member for Liverpool, Wavertree. I met the leaders of the three civil service unions yesterday. I have not been in post for long, so it was simply an introductory meeting, but I know that some of those unions also represent workers within private sector contracting companies, and I will be very happy to look into some of the issues that she raised today about outsourced workers and their pay and conditions, particularly as regards sick pay.

Other Members have also raised issues about working conditions during the pandemic and it is important to say that not everybody can work over Zoom. In many ways, it is a privilege to be able to do so and not to have to go into an office. On the other hand, I am also aware many workers’ office jobs are not easily conducted at home, and it is important for the Government, as an employer, to provide safe work spaces, so that we can take into account those who are in shared or cramped accommodation.

The hon. Member for Liverpool, Wavertree also talked about delivering social value through contracts, and we quite agree. We recently took a new look at social value, considering how we take into account environmental factors in how contracts are delivered, whether a contractor is improving the skills of their workforce or their approach to apprenticeships, and so on. We will look at social value in quite a comprehensive way, because once the EU transition period has ended, we will be in a position to come up with a new procurement strategy. Indeed, we are working very hard to draw that up. She raised a number of issues about how we extract value from existing Government contracts, and I will take those away to consider them.

The hon. Member for Birkenhead (Mick Whitley) made a number of important points, but it is important that we recognise that we could not have responded to some of the challenges of the pandemic without expertise from both the public sector and the private sector. Again, I assure him that social value is at the heart of the new procurement strategy that we are drawing up, particularly on issues such as climate change and waste.

The hon. Member for Leeds North West (Alex Sobel) raised a number of important issues about track and trace. We all want this system to work. Let us not pretend that it has been perfect from the outset, but a lot of things have been done to improve that service and we are now conducting hundreds of thousands of tests daily. We hope to be on track to deliver—I do not want to get the number wrong, but there is certainly a much increased capacity when it comes to testing and we have ironed out some of the problems that we saw around September with demand on the system.

It is also important that we understand that this process is a partnership between national and local, and between public and private, and I think that it is naive to suggest that the public sector alone could have built up this service so quickly and delivered it at such a great pace. We appreciate the expertise that we have received from the private sector.

Local authorities can furlough staff, so many local authority staff who could not do their normal jobs were still employed by the local authority. There was capacity in local authorities to deliver this programme. Should that capacity not have been taken up and used before going to the private sector?

It is important to understand that the private sector has provided the framework for the system, with local authorities able to plug into that framework. The private sector provides the national call centres and so on, but a lot of the local expertise is provided at local level from healthcare experts on the ground, particularly in some of those harder-to-reach instances where we need to go knocking on people’s doors. Ultimately, we share the hon. Gentleman’s aim to improve the service and build plenty of public confidence in it because it is such a key tool in dealing with the pandemic.

The hon. Member for Stockport (Navendu Mishra) is a PCS union member, and I met his leader yesterday. It is important to remember that successive Governments of all colours use outsourcers. In a previous life, I was a councillor in Tower Hamlets. There were a number of outsourced contracts there and not very impressive in-house management of them, I should say. Outsourcers can provide a lot of expertise and capacity and it is naive to suggest that the public sector alone has all that capacity and expertise in house. Let us not do down some of the people who work for those contractors and bring a lot of capacity and sense to the system.

Both the hon. Member for Liverpool, Riverside (Kim Johnson) and the hon. Member for Leicester East (Claudia Webbe) seem to take an ideological view that effectively says private bad, public good. That is a great shame because it fails to acknowledge what the private sector can provide for public good.

Leicester has been in extended measures and lockdown for the longest time, as the Minister will appreciate. On the test and trace system alone, the private contractors delivering that have a success rate of less than 50%. Our own local authority, which understands the issues, was able to deliver a success rate of more than 85%. That is the difference between the private and the public sector. That is the reality. It is not ideological; it is the reality on the ground. That is what is happening and it is serious.

I thank the hon. Lady for her comments. Does she believe that the local authority in Leicester would be capable of delivering a fully functioning test-and-trace system that would do all that such a system needs to do? I think that is not the case. The private sector has been able to achieve impressive things during the pandemic and provide a lot of public good at speed and in innovative ways. That has been critical in procurement of all manner of goods and services, from PPE to new diagnostics, which have been fundamental to how we have protected the public.

The hon. Member for Luton South (Rachel Hopkins) raised a number about the justice system, but I am afraid that, as a Cabinet Office Minister, I do not have the expertise on some of the issues she raises. I am happy to look into them for her and reply in writing. The hon. Member for Ellesmere Port and Neston (Justin Madders) raised a number of issues on contractor pay. I am working on the very issue of value from contractors with my ministerial colleague, Lord Agnew. Some hon. Members may be aware that he has recently set out his concern about some of the reliance in Whitehall on management consultants and that we have infantilised civil servants and deprived some of our brightest public servants of

“opportunities to work on the most challenging, fulfilling and crunchy issues.”

Our reliance on consultants and other contractors can, at times, hinder the development of internal civil service capability. We have discussed that at length and are keen to improve what we do in terms of in-house learning capability and expertise.

I am always glad to see the hon. Member for Strangford (Jim Shannon) in this Chamber. He talked about civil service churn and skills, and I reassure him that we want to upskill our civil service. We are looking again at the quality of our training, as I mentioned, and he might be interested in the comprehensive Ditchley lecture given by my right hon. Friend the Member for Surrey Heath (Michael Gove), which talks about some of these issues.

There are many other issues to cover, but I am cognisant of the time. I reassure hon. Members that we need tighter controls around contractor expenditure, supported by better quality data and management information.

I want to leave time for the hon. Member for Liverpool, Wavertree to respond, so I will not give way.

There will always be situations where it makes sense to use contractors, working alongside our high-quality civil servants, to deliver specialist advice and services and to tackle short-notice urgent requirements where the civil service does not have sufficient capacity. We also need to reverse the trend we have seen over recent years, which has eroded civil service capability and led to an over-reliance on consultants and other contractors.

Hon. Members raised a number of other issues today about outsourcing and I am happy to take them away. I thank the hon. Member for Liverpool, Wavertree again for her thoughtful contribution.

I thank you, Mr Pritchard, for chairing this important debate today, and I thank all hon. Members who have spoken and the Minister for her considered approach.

The Minister said that the Government are the custodian of public money, and that it is important to retain public trust. I reiterate that public trust is at an all-time low, particularly in my constituency. I would be grateful if the Minister can take up the very important issues raised today.

Question put and agreed to.


That this House has considered Government use of external private contractors and effect on employment.

Sitting adjourned.