Government is guilty of repeated outsourcing failures – but Labour’s policy risks throwing away the successes

Labour’s policy of bringing public services back into government hands by default would be a mistake, argues a new report from the Institute for Government. But senior politicians have consistently overstated how much money is saved by outsourcing services. 

Outsourced services are those delivered by the private or voluntary sector. Published today, Government outsourcing: what has worked and what needs reform ranks which have been outsourced successfully and which need reform.

The report finds that outsourcing waste collection, cleaning, catering and maintenance services has delivered significant savings and benefits to citizens. Particularly in these areas, bringing services entirely back into government hands could lead to worse and more expensive services for the public.

The report also shows that consecutive governments have overstated the benefits of outsourcing. Senior politicians regularly claim outsourcing can still deliver 20–30% savings but there is no evidence to support this.

The report highlights a series of high-profile contract failures – including security at the Olympics, welfare assessments, offender tagging and probation. These contracts have wasted millions of pounds, delivered poor services and undermined public trust. The outsourcing of probation failed on every measure, harming ex-offenders trying to rebuild their lives.

Consecutive governments have outsourced services with no market of good suppliers or in pursuit of unrealistic cost savings – and without a reasonable expectation that companies could deliver efficiencies or improve the quality of services.

The authors recommend that the current government must strengthen its commercial skills and capabilities, makes ministers and officials more accountable to the public and improve the evidence base that informs outsourcing decisions.

Tom Sasse, Institute for Government senior researcher, said:

“A lot of confusion continues to crowd the debate over outsourcing. Labour’s policy of bringing services back into government hands by default risks throwing away the benefits of outsourcing. But at the same time, the government must address the causes of repeated outsourcing failures.”

Notes to editors

1. The Institute for Government is an independent think tank that works to make government more effective.
2. For more information, including data to reproduce any charts, please contact press@instituteforgovernment.org.uk / 0785 031 3791.