John McDonnell’s speech at the Launch of Democratising Local Public Services
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Thank you to the Community Wealth Building Unit and to UNISON for hosting us today.
You have an exciting programme of discussions today, on local government finance, the Preston model, and the new municipalism.
I hope what myself and Andrew Gwynne say can give a further boost to these discussions.
Taking the responsibility of government seriously
We are at the stage now where we think a general election could be called as early as October.
We are facing the farce of the Tory leadership contenders not only committing to a disastrous no-deal Brexit, but also making a set of reckless pledges on the economy.
Only on Thursday the Office for Budget Responsibility, which is usually very politically guarded, stepped in to admonish Boris Johnson and Jeremy Hunt. The OBR said: “the remaining Conservative leadership contenders have made a series of uncosted proposals for tax cuts and spending increases …”
The Labour Party led by Jeremy Corbyn recognises that being in government is a solemn responsibility that requires care and competence.
So we’ve been turning our costed policy announcements into implementation manuals and draft legislation, in preparation for a general election.
Today we present the outcome of that process for some of our policy on insourcing and local government.
We’re releasing a report today called Democratising Local Public Services: A Plan for Twenty-First Century Insourcing.
Because Andrew Gwynne, our Shadow Secretary of State for Communities and Local Government, is the chirpier of the two of us, I’m going to let him speak to you about our positive policy agenda.
I’m going to speak about some of the background: what’s gone wrong with outsourcing, and why insourcing makes economic sense.
Many of you know the history well. Like me, you’ve lived through it.
Margaret Thatcher was elected forty years ago this year.
The Tories, over the following fifteen years, forced outsourcing onto councils, through compulsory competitive tendering.
A 1980 law required construction and maintenance work to be put out for tender.
The 1988 Local Government Act put eight more ‘defined activities’ on the block for outsourcing.
Sports and leisure services were added in 1990, and a series of administrative services after 1992.
Make no mistake. This was a top-down project that required councils to prioritise private service delivery.
So much for the ‘free’ market.
And what’s remarkable is that, even with all this top-down pressure, the move towards outsourcing was slow at first.
By 1985 only 41 out of 456 local authorities had brought in private contractors. By 1993, 66.8% of contracts were still won-inhouse.
Some councils across the country have kept services inhouse, or fought against the tide.
I want to acknowledge the courage of those councillors, some of whom might be here today.
But the pressure of Thatcher, and the blunt force of the law, wore many councils down.
The failures of outsourcing
We all know the results.
The catastrophic collapse of Carillion highlighted the problems with the outsourcing business model.
But we have seen multiple failures at the local government level, where contracts have been brought back in-house.
Corporate services in South Derbyshire, grass-cutting services in Aberdeen, technical services in Sefton, parking services in Worthing …
Across all these services areas, across the country, we see the same patterns. Cost overruns. Disappointed expectations. Targets missed.
To put it simply: outsourcing is a broken business model.
After year upon year of failures the public has rightly lost confidence in the privatisation of our public services and the carve up of the public realm for private profit.
The government’s ideological pursuit of privatisation and outsourcing has seen the public pay the price as fat cat bosses count their profits.
But what’s made it worse is that much of this has been done behind closed doors – and without accountability.
Just 23% of the public think the activities of outsourcers are accessible.
Loopholes in the Human Rights Act and Freedom of Information Act mean outsourcers are not subject to the same law as the rest of government.
And councils often find their hands tied when they come into power with no way to get out of 10- or 12-year contracts.
Costs have gone up, too.
Councils have faced mounting fees for tendering, drafting, and contract management.
And other costs have been shunted onto the community.
Skills have been systematically drained out of local councils, making it harder and harder for insourcing to be reinstated.
Why insourcing makes economic sense
It’s time to end the outsourcing scandal, which has seen private companies rip off the taxpayer, degrade our public services and put people at risk whilst remaining wholly unaccountable to the people who rely on and fund these services.
Andrew Gwynne will say more about how our plan for twenty-first century insourcing will work.
But before I hand the floor over to Andrew let me say a few more words about why I am launching this report with him.
I’m launching this report because ending outsourcing should be a core commitment of any Labour Party member.
Outsourcing is, and always has been, an assault on labour. It’s a deliberate, direct strategy to undermine the power of trade unions, and to undercut workers’ terms and conditions. That’s where the savings promised by outsourcers come from. I want to acknowledge the hard work trade unions have done to fight against outsourcing. In Labour we will stand unflinchingly against it.
But I am also launching this report because insourcing makes economic sense – as a number of reports and academic studies have demonstrated.
Insourcing involves lower costs. Services can be strategically combined over time when they are provided inhouse, delivering efficiency gains.
An APSE survey for Unison of 140 local authorities showed that almost two-thirds of respondents anticipated financial savings from insourcing.
Many others anticipated no cost increases, since when services are brought in house there is no need for expensive tendering processes and legal fees – and no need to pay dividends to distant shareholders.
Insourcing involves a longer time-horizon, which can lead to better maintenance of resources for services.
When services are delivered by councils, employing staff, risks can be better managed and economies of scale better harnessed.
Outsourcers have promised innovation and efficiency. But time and time again that has not been delivered, as a recent Public Administration and Constitutional Affairs Select Committee report pointed out.
We hope that this report gives councillors a set of tools to make the case for insourcing. We hope that we can arm people with the arguments they need – arguments about the public interest, legal arguments, and yes, economic arguments – to bring about an insourcing revolution.
Community wealth building – and practical socialism
Our Community Wealth Building Unit has been doing important work, allowing councillors to share knowledge to keep value within communities.
And insourcing is the best example of ‘community wealth-building’. There is no better way for wealth to be fostered and protected within a local area, than by ensuring key public services are delivered by councils, employing local staff.
We will not forget the importance of local government when we are a Labour Government. To all of the councillors in the room, I pledge now: we will not flake on you.
Local government is a key site for building a socialist society, and today is another step on the road to giving local councils the powers they need to contribute to that society.
I have spoken recently about how socialism, at its best, is practical. It is not some far-off vision or far-fetched programme.
Insourcing is an essential part of a programme for practical socialism, which delivers people’s basic needs and improves people’s everyday lives.
I look forward to making that real difference in people’s lives as part of a Labour Government.
It’s now my pleasure to hand over to my Shadow Cabinet colleague, Andrew Gwynne.