The army’s Olympic performance challenged the defence minister’s private ‘ethos’. So why is the government currently negotiating £4bn of new tenders – many in defence?
There is more joy in heaven over one sinner that repenteth, and so on. But why did it take Philip Hammond so long, and when will other Tory politicians – and new Labour supporters – catch up? In an interview after the Olympics, during which the army unfussily provided the bag-searching and frisking that the private security firm G4S failed to arrange, the defence secretary said his “starting prejudice” had been that “we have to look at the way the private sector does things to know how we should do things in government”. The Olympics changed his mind.
The private sector, Hammond argued, tried to do a job “incredibly leanly with very little resilience”. That didn’t work for defence or security. If you wanted safety, you needed high levels of back-up in case anything went wrong. During the Olympics, he said, for every three people doing searches, the army provided “one watching them and … two others watching him”. If you wanted a Typhoon available at a particular point to defend the UK from attack, the armed services would say you needed four aircraft and 60 engineers. G4S would provide one aircraft “with two blokes … It’s a completely different ethos and way of operating.”
Hammond talks this way because he’s expecting an argument with George Osborne over his department’s budget and besides, he’s an old-fashioned Tory who likes soldiers, aircraft and warships. But what he says could be applied to health, education, social services, policing and job centres.
Hospitals need “resilience” because they deal with life-threatening conditions, schools because a lost year’s education can’t be replaced, social services because children are at risk of abuse, policing because a murderer may escape and kill again, job centres because unemployment causes mental illness and family break-up. It just isn’t the same as, say, running a restaurant. If you haven’t kept the table booking, customers grumble then find somewhere else. They don’t drop dead, flunk their SATs or start battering babies.
Opponents of outsourcing and marketising public services have made this argument for decades. Americans have long puzzled over why, after years of outsourcing, the federal government has more employees than ever. A book by two US professors, The Private Abuse of the Public Interest, gave the answer. When services are handed over to private firms, government has to create layers of monitors, regulators, inspectors, accountants, lawyers and so on to ensure they do the job properly and to respond to “variously vexed” consumers and whistleblowers who complain that they aren’t doing so.
The Reaganites and Thatcherites who started outsourcing in the 1980s didn’t understand that. They thought you signed a contract, walked away, and didn’t bother again until the contract was up for renewal. If the cases of A4e (which was contracted to find jobs for the unemployed, but put many into non-jobs) and G4S are any guide, ministers still, amazingly, think the same.
They should look at the evidence. Hammond, instead of waiting for the Olympic security fiasco, could have read a report commissioned by US Congress which found that a quarter of the money spent on contractors in Iraq and Afghanistan was wasted and, in many instances, the work could have been done more cheaply by the US forces’ military and civilian staff. He could have looked at the 2010 US state department report on ArmorGroup (acquired by G4S in 2008), which was supposed to guard the Kabul embassy but failed “to recruit, train or manage … at the staffing level or the quality required by its contract”.
Hammond and other ministers could read a report by the US’s non-partisan Project on Government Oversight, which found that over 550 outsourced services, the federal government paid, on average, almost twice as much to contractors as it would have paid its own employees and in one case, five times as much.
They could dip into reports from UK parliamentary select committees and auditors that repeatedly show that bringing in the private sector doesn’t automatically give better value. Of the private finance initiative, for example, the public accounts committee said last year it looked “better value for the private sector than for the taxpayer“. Ministers could look at the outsourced project to computerise NHS records, finally abandoned last September after it cost £12bn. Or at contracted-out cleaning services, which led to more hospital-acquired infections because, in a classic example of a change in what Hammond calls “ethos”, employees’ shared sense of responsibility for cleanliness was lost.
Yet despite such evidence, the government is currently negotiating £4bn of new tenders – “as exciting as outsourcing gets”, according to one investment banker – with justice, work and pensions, and Hammond’s defence department in the lead. Will he act on the lessons of the Olympics and announce that the private sector just can’t perform some of the jobs earmarked for outsourcing? Will other ministers?