Government outsourcing at crossroads, warns think tank

A new report from the Institute for Government warns that politicians have ‘consistently overstated’ the extent of savings achieved through outsourcing services.

Outsourcing, defined in the paper as the private or voluntary sector delivering services to the government or the public after a process of competitive tendering, has been expanded over the past four decades.

The report, Government outsourcing: What has worked and what needs reform?, showcases that outsourcing waste collection, cleaning, catering and maintenance services has delivered ‘significant savings and benefits to citizens’. Outsourcing has worked best in ‘support services’ that are relatively simple to contract for and deliver: waste collection, cleaning, catering and maintenance.

However, on the other side of the argument, the Institute for Government paints a more mixed picture when it came to outsourcing HR, IT, prison and employment services, health and adult social care. In terms of probation, the think tank says that outsourcing has failed on every measure, harming ex-offenders trying to rebuild their lives. The heavy costs show why government should be cautious about extending outsourcing of front-line services and only do so when it is confident it will work.

Politicians and senior officials often cite up to 30 per cent savings when making the case for outsourcing services today. But while this was possible for some services outsourced in the 1980s and 1990s, the Institute for Government found little evidence that such savings are available today, whether for services outsourced for the first time or on second- or third-generation contracts. Where there is more recent evidence of savings, they are typically of around five per cent – 10 per cent.