Mark Whitehead 28 September 2018

Has outsourcing had its day?

Has outsourcing had its day? image

The recent report into the fiasco by Grant Thornton seems to compound the view that the grand strategy being followed by the Tory-led north London council to outsource as many of its operations as possible is now discredited.

Barnet was the flagship for the idea that councils should be reduced to just the occasional meeting to decide who to hand out the contracts to – an idea going back at least as far as the 1980s.

The creation of the "Easycouncil" as it was dubbed seems to have had its day.

Certainly the council seems to think so. In the wake of the £2m fraud involving a company it set up with outsourcing giant Capita, it has decided to pull its financial operations back in-house. It has fallen out of love with handing over control of major services to outside organisations.

Capita, too, has decided not to pursue "flagship outsourcing" in the future, preferring to stick with merely "transactional" operations such as collecting council tax.

So the day 38-year-old Trishul Shah, a former long-standing and trusted employee of Barnet Council was jailed for five years at the end of July for siphoning off more than £2m into his own bank account in 62 separate payments, marks a turning point in the story of outsourcing in local government.

It shows what can go wrong, especially when it is noted that the fraud only came to light when Shah's own bank raised a query about where all the money was coming from.

But it should be kept in perspective.

Fraud was not invented when outsourcing became all the rage. People were dipping their fingers in the till before outsourcing was ever thought of as a political strategy in the heady days of Margaret Thatcher – and still happens today in all kinds of organisations in the public and private sectors.

For as long as people can get their hands on some cash and think they can get away with it, it seems, there will always be those who will have a go.

Grant Thornton's report on Barnet's predicament makes painful reading. Its 'action plan' stretches over 14 pages but can be summarised in one sentence: keep proper control of your financial operations.

When controls are relaxed and accountability unclear, opportunities arise for those with bright ideas about making some extra cash on the side.

Some of the more ambitious outsourcing schemes such as Barnet's joint venture may appear efficient and cost-saving. But when the amount of extra oversight needed must be factored in, it might not seem so attractive.

Commenting on the Grant Thornton report, Labour's shadow communities secretary Andrew Gwynne branded the Barnet experience as a 'textbook example of why outsourcing fails'. It showed, he said that the 'mass outsourcing experiment with our public services' had failed.

Up to a point. Outsourcing need expert management and the relative advantages and disadvantages of paying an outside organisation to carry out some of your operations must be carefully weighed. But it seems unlikely it will be ditched altogether as an option in a modern council's toolkit.

Barnet reminds us that large-scale outsourcing projects are at best risky and can be extremely costly in the long run in both financial and political terms. Capita has agreed to pay the £2m lost but the toll in time and anguish must be colossal.

Other councils may well now ask themselves if the Easycouncil strategy is worth considering when they look at the smouldering ruins of Barnet's great outsourcing experiment.

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