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A Magazine for Sheffield

Outsourcing: Public Services, Private Profits

Like most people, until recently I had little idea about the number of Sheffield's public services that were being delivered by private companies. I'd seen that my bins are collected by Veolia, that many of the staff at the Town Hall wear Kier badges and that there seem to be any number of vans driving around purporting to be working 'in partnership' with Sheffield City Council. But when I heard that our Council were congratulating a multinational bus company for securing public funding to buy new buses, I started to wonder - why is the taxpayer buying new buses for a profit making company? So I started asking questions at Council meetings and opened a new can of worms - the world of outsourcing. The first thing I found out was that 61% of our Council's budget is spent on what are termed third party contractors - private companies, voluntary organisations and charities. The Council pays the contractor to deliver a service and the contractor pays the workers, buys the materials and does the work. That is a huge £730 million each year. Of this, nearly £220 million is spent by just 11 companies. Finding this information was relatively easy, so next I began wondering how much of the money spent with these companies is profit. Getting that information has proven more difficult. First we come up against the problem of "commercial confidentiality". Each of these contracts has a confidentiality clause which means that although the Council knows how much profit these companies make out of us, the taxpayer doesn't. I continued to push for some information, even if it was just a total value for the last financial year, respecting confidentiality. Finally, after four months, I managed to get a partial answer. Taking 8 of those top 11 companies, the average profit margin was 7%, or £9.2 million. If we assume the other three will be similar, the total amount in profit siphoned off by the top 11 companies was around £15.4 million. This at a time when we are being told that the Council will be making hundreds of redundancies and having to find an extra £10 million in savings next year. The Council likes to suggest that this money is re-invested into the local economy, but in truth most of it is paid in dividends to parent companies or used to hike up unreasonably high directors' pay deals during a time of austerity. My wider research has shown that one of Sheffield's outsourcing companies paid almost all of its profits in dividends to shareholders, while another pays its CEO every two weeks what it takes an average employee 12 months to earn. This is before we even start to consider the levels of tax that they pay or don't pay. My concerns are being reflected in the outside world. The Guardian, on 22nd June, commented, 'It does not seem unreasonable to ask whether rewarding shareholders is an inevitable cost in this sector.' Channel 4 News has recently run a series of reports called Who Rules Your World, identifying an increasingly small number of powerful companies involved in public service outsourcing. The main concern is transparency. We, the public, know very little about what these companies do for us and even less about what happens to the money they make. More to the point, we can't even find out because private companies, even those providing public services paid for by the taxpayer, are not covered by Freedom of Information laws. Even the consultants advising the outsourcing industry are questioning the lack of public oversight and indeed the extent of the practice into sensitive areas. The recent problems with Southern Cross Care Homes and the tragic abuse of girls in the care of Rochdale Social Services highlight areas that are clearly unsuitable for private profit solutions. An influential advisor to outsourcing companies recently commented, 'That Rochdale example really caused me to question the whole ethos of using the private sector for such services.' If we want councils to deliver democratic services that embody the values of equality, impartiality, communal good and public service, we need to know all we can about who is delivering those services and where the money goes. We deserve a transparent, accountable, ethical and honest policy from our councils about what is and isn't acceptable in the world of outsourcing. Sheffield City Council isn't yet there but if we ask the right questions we can make that difference. )

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