Britain’s senior civil servants are making preparations for spending cuts of up to 30% from next year, resulting in major job losses, in what is being dubbed the “public sector recession”.
Leading figures in the outsourcing industry have said they are planning to take over large swaths of public services as Whitehall prepares to cut costs across the board.
The three main parties have faced criticism during the election campaign for failing to be honest about the scale of cuts that will have to be introduced from next year to cut Britain’s £163bn fiscal deficit.
The Conservatives have pledged to cut public spending by £6bn this year through government efficiency savings.
But last week, the Institute for Fiscal Studies (IFS) criticised the “vague” plans sketched out by Labour, the Conservatives and the Liberal Democrats. It claimed the Tories were planning the sharpest spending cuts since the second world war, while Labour and the Lib Dems were planning to introduce the biggest cuts since the 1970s. But the IFS said that no party had gone “anywhere near identifying” the cuts needed to meet their ambition of cutting the bulk of the structural deficit – the part that can only be reduced by spending cuts or tax increases.
Leaders of some of Britain’s outsourcing companies told a conference in London that massive cuts in government department budgets would create a “once in a generation opportunity” to privatise public services.
Kevin Craven, of Balfour Beatty, the construction and outsourcing company, told the conference: “Post-election, the phoney war is over and the public sector recession will begin. And it’s going to be painful. It [the scale of cuts] is not going to be 10%. My clients [senior civil servants] are talking about 20-30% cuts to meet the aspirations of their political masters.
“If I am going to reduce the cost of delivering that service by 30%, it stands to reason there has to be a loss of jobs.”
Asked if outsourcing would be used to disguise job losses, Craven said: “The delivery of bad news, in whatever form it is, is generally not managed particularly well [by the public sector]. Typically, the private sector will be asked to perform the service because they are good at managing these sorts of things.”
Patrick Smith, of Capita, which has contracts with the Department of Health and Birmingham city council, said the post-election period could be “a game-changing era for outsourcing”. Permanent secretaries had told them they saw it as “a once in a generation opportunity to recast what public, private and voluntary does”.
Lord Freud, the former banker who has drawn up the Tories’ welfare reform plans, said that more private companies would provide services under the Conservatives. “I’m convinced that we’ll see it [outsourcing] function in welfare to work – I won’t say regardless of who wins the election – but it will happen more rapidly under the Conservatives. We’d like to see it spread rapidly into other areas.”
The Tories are planning to allow private companies to play a greater role in encouraging the long-term unemployed back to work. But they are also planning to allow private firms in other areas, such as rehabilitating offenders. Freud said that this extension of private provision would ensure that Britain continued to “lead the world” after the “privatisation boom” of the 1980s and the private finance initiative in the 1990s.
Freud warned that the public finances are facing a squeeze. “We face an austerity period in which government spending will be cut, but this is one area where it can rise and rise despite massive economic pressures,” he said. “Financiers can work it out – if there’s a market that can be made to work, and there’s very substantial growth both here and around the world, they are going to be interested. And indeed I hear they are interested.”
Other senior Tories have hinted at an expansion of outsourcing. But when asked in February about letting private companies run public services, Mark Hoban, a Treasury spokesman for the Conservatives, said his party would move at a pace “people feel comfortable with”.
Outsourcing firms say they could even take on running services such as road safety and teenage pregnancy programmes. Patrick Johnson, of Serco, one of Britain’s largest outsourcing companies, told the London conference that one single family had, since the 1970s, cost the British state £180m in healthcare, courts and prison costs. It would be “interesting if a [private] provider of services took over responsibility for the budget of an entire family”, he said.
Written with Nicholas Watt and first published in The Guardian