Exclusive: Labour would strip controversial firms G4S and Serco of lucrative contracts

Party said it will try to ‘unpick’ £6bn in outsourcing deals

Controversial public sector outsourcing firms such as Serco and G4S face being stripped of their lucrative Government contracts if Labour wins next general election.

Senior party sources told The Independent that they would have a “long, hard look” at the contracts, which are worth more than£6bn.

At the same time shadow justice minister Sadiq Khan said he would “rip up” any contracts he is asked to sign as part of coalition plans to outsource the probation service.

He added that even those contracts that had got under way by 2015 would be “forensically examined” by an incoming Labour government in an attempt to find ways to “unpick” them. Ironically it was under Labour that companies such as Serco, G4S and Capita dramatically grew in size – benefiting from generous outsourcing contracts across the public sector. But sources close to Ed Miliband said he was increasingly concerned that they were not providing “better competition” or “driving down” prices as had been intended at the time.

“This is not ideological but we intend to have a long, hard look at these contracts,” the source said. “Our concern is that what we have in this country now is an oligopoly of a few companies that are not competing effectively and are providing poor value for money for the taxpayer.”

A recent government investigation into contracts held by Serco and G4S found evidence of “inconsistent management” in 22 out of the 28 deals across eight government departments and agencies. One of the first areas to be reviewed by Labour will be the justice system in the wake of the investigation into fraudulent over-charging by Serco and G4S in criminal tagging contracts.

Mr Khan is opposed to the Government’s plans to outsource the probation service – even after Serco and G4S ruled themselves out of the bidding. They will still be able to play a “supporting role” to other bidders.

The new private contracts are due to start at the end of 2014, but Mr Khan said that if there are delays, they could become caught up in the pre-general election purdah period during which contracts could not be signed.

“I warn those involved in bidding that if Labour wins the next election, and these contracts land on my desk needing my signature, I will not put pen to paper. I’ll rip them up.”

Mr Khan added that while he could not commit to reversing the changes if they had been signed – because of the prohibitive cost of extracting the government from them – he would do everything he could to end them.

“I say to companies that are thinking of getting involved – you’re on notice. I’ll be painstakingly forensic in scrutinising any contracts I inherit to find the slightest opportunity to walk away from them without lumbering the taxpayer with a huge bill. Don’t think this is a done deal just because this Government is obsessed with privatising probation.”