Mark Leftly: Serco's woes show how anyone can struggle to benefit from outsourcing

Westminster Outlook Outsourcing is a dreadfully prosaic word for a process that is fundamentally realigning the balance between commerce and state.

Concerned critics argue that handing over vast swathes of services traditionally run by the public sector, from schools inspections to street cleaning, is effectively privatisation. The only difference is that the taxpayer doesn't get any money up front as it is handing management of services or institutions to well-paid private sector players rather than selling any assets.

Though not a new phenomenon, outsourcing has gathered pace under the Coalition. Ministers believe that the private sector can use its competitive instincts to make services more efficient, meaning that they will ultimately be cheaper to run and more productive.

Paul Lester predicted the outsourcing boom several years ago when the credit crunch was turning into a financial crisis. Then chief executive at VT Group – which was later gobbled up by rival Babcock International – he said that public services would be contracted to the private sector "with a vengeance" after the 2010 election.

By 2012, the UK was the world's second biggest outsourcing market, while £1.5bn of public sector deals were signed in the first quarter of this year alone, according to recent figures from Arvato and NelsonHall.

In theory, this should be a nice little earner for the big outsourcing firms and help curb public spending.

But theory is poor substitute for practice, as Rupert Soames is fast discovering. Serco's new chief executive must have thought he knew a thing or two about the state given that he is, depending on which Conservative politician you more greatly admire, the grandson of Sir Winston Churchill or the brother of Sir Nicholas Soames.

Plain Mr Soames, of course, had an idea what he was getting himself into when he took on the Serco top job earlier in May, given that what was once the biggest company no one had ever heard of was all over the headlines last year. Most notoriously, Serco charged the taxpayer for electronically tagging non-existent prisoners.

But he can only be shocked as to the issues his root-and-branch review of the business has discovered. Yesterday, he warned that there will be extra write-downs on big contracts in asylum seekers' detention centres, known as Compass, and clinical healthcare of as much as £15m.

In a statement, Serco said of Compass: "The cost of meeting our obligations to the customer is now expected to exceed revenues from the contract over its five-year life."

That's the problem with the very word outsourcing: it underplays the gravity of change happening and the complicated, non-commercial nature of traditionally state-run work.

The private sector cannot just come in and transform a service immediately, if it can change it at all. Those aforementioned critics fear that the private sector win bumper contracts to the detriment of public services, though Serco's woes show that outsourcing is often to neither side's benefit.

There is an important lesson here: never trust a verb masquerading as a noun.

Arts and Entertainment
Hand out press photograph/film still from the movie Mad Max Fury Road (Downloaded from the Warner Bro's media site/Jasin Boland/© 2014 Warner Bros. Entertainment Inc.)
films'You have to try everything and it’s all a process of elimination, but ultimately you find your path'
Life and Style
food + drinkFrom Mediterranean Tomato Tart to Raw Caramel Peanut Pie
Boys to men: there’s nothing wrong with traditional ‘manly’ things, until masculinity is used to exclude people
indybest13 best grooming essentials
Arts and Entertainment
Armstrong, left, and Bain's writing credits include Peep Show, Fresh Meat, and The Old Guys
TVThe pair have presented their view of 21st-century foibles in shows such as Peep Show and Fresh Meat
Arts and Entertainment
Keys to success: Andrew and Julian Lloyd Webber
arts + entsMrs Bach had too many kids to write the great man's music, says Julian Lloyd Webber
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
healthMovember isn't about a moustache trend, it saves lives
Arts and Entertainment
Imelda Staunton as Dolores Umbridge in the Harry Potter films

New essay by JK Rowling went live on Pottermore site on Friday

Russia Today’s new UK channel began broadcasting yesterday. Discussions so far have included why Britons see Russia as ‘the bad guy’

New UK station Russia Today gives a very bizarre view of Britain

Arts and Entertainment
Keira Knightley and Benedict Cumberbatch at the premiere of The Imitation Game at the BFI London Film Festival
filmsKeira Knightley tried to miss The Imitation Game premiere to watch Bake Off
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The benefits of Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Day In a Page

Bryan Adams' heartstopping images of wounded British soldiers to go on show at Somerset House

Bryan Adams' images of wounded soldiers

Taken over the course of four years, Adams' portraits are an astonishing document of the aftermath of war
The drugs revolution starts now as MPs agree its high time for change

The drugs revolution starts now as MPs agree its high time for change

Commons debate highlights growing cross-party consensus on softening UK drugs legislation, unchanged for 43 years
The camera is turned on tabloid editors in Richard Peppiatt's 'One Rogue Reporter'

Gotcha! The camera is turned on tabloid editors

Hugh Grant says Richard Peppiatt's 'One Rogue Reporter' documentary will highlight issues raised by Leveson
Fall of the Berlin Wall: It was thanks to Mikhail Gorbachev that this symbol of division fell

Fall of the Berlin Wall

It was thanks to Gorbachev that this symbol of division fell
Halloween 2014: What makes Ouija boards, demon dolls, and evil clowns so frightening?

What makes ouija boards and demon dolls scary?

Ouija boards, demon dolls, evil children and clowns are all classic tropes of horror, and this year’s Halloween releases feature them all. What makes them so frightening, decade after decade?
A safari in modern Britain: Rose Rouse reveals how her four-year tour of Harlesden taught her as much about the UK as it did about NW10

Rose Rouse's safari in modern Britain

Rouse decided to walk and talk with as many different people as possible in her neighbourhood of Harlesden and her experiences have been published in a new book
Welcome to my world of no smell and odd tastes: How a bike accident left one woman living with unwanted food mash-ups

'My world of no smell and odd tastes'

A head injury from a bicycle accident had the surprising effect of robbing Nell Frizzell of two of her senses

Matt Parker is proud of his square roots

The "stand-up mathematician" is using comedy nights to preach maths to big audiences
Paul Scholes column: Beating Manchester City is vital part of life at Manchester United. This is first major test for Luke Shaw, Angel Di Maria and Radamel Falcao – it’s not a game to lose

Paul Scholes column

Beating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
Frank Warren: Call me an old git, but I just can't see that there's a place for women’s boxing

Frank Warren column

Call me an old git, but I just can't see that there's a place for women’s boxing
Adrian Heath interview: Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room

Adrian Heath's American dream...

Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room
Simon Hart: Manchester City will rise again but they need to change their attitude

Manchester City will rise again but they need to change their attitude

Manuel Pellegrini’s side are too good to fail and derby allows them to start again, says Simon Hart
Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities