For all the efficiency issues of the public sector, outsourcing to the private sector is not necessarily the solution.
Getting caught up in the ‘public bad, private good’ argument is one of the oldest red herrings around.
We all know the arguments – the public sector lacks the profit motive to make it as efficient as the private sector, and the risk-averse nature of government tempers innovation.
To which the counter argument asserts it’s that very profit motive which prevents the delivery of cost-effective public services and, anyway, you can’t apply the exact same productivity metrics to an organisation that exists to perform a civic function.
I’ll leave it to the online commenters to thrash that one out – but what I would suggest is that it’s possible for both those arguments to be true.
There’s no question that the public sector has been sloppy in some of its practices. When Paul Jenkins, outgoing head of Whitehall’s central legal adviser the Treasury Solicitor’s Office (TSol), first joined in 2006 he says there was almost no cost information available.
Consequently before one Christmas TSol discovered it could not pay staff because there was no money. ‘We had no idea that clients had stopped paying their bills early for Christmas,’ he says.
Poor management information has been – and still is – a big problem across nearly all public sector bodies (although TSol has since invested time and money to rectify this).
But for all the efficiency issues of the public sector, outsourcing services to the private sector is not necessarily the solution.
In fact Jenkins expects TSol to bring more work in-house as the private sector is ‘much more expensive’.
Indeed the cost of external legal providers is an issue the private sector itself is well aware of, with the expense of external fees being a major factor in the expansion of in-house teams over the last decade.
Mark Hynes, head of legal and director of corporate affairs at the London borough of Lambeth, makes a convincing argument that outsourcing is a ‘false economy’.
As external legal partners are profit-driven, giving them more work ‘would result in the overall legal charges increasing beyond the savings delivered in payroll terms’, he says.
In the current climate local authorities are seeking to cut overheads fast. But they should think long and hard before swallowing the argument wholesale that long-term savings can be had in commissioning services rather than providing them directly.
Kathleen Hall is a Gazette reporter