The man responsible for a billion-pound council budget tells Elliot Wilson why £900 million a year is spent on outsourcing
We often think outsourcing is a new phenomenon. It isn’t. Rulers have been doing it for millennia. Witness the contracting of mercenary Saxons in the early-5th century to keep the Picts at bay or the East India Company, a private firm, which ran India on Britain’s behalf, profitably and vicariously, for a century.
Yet it’s only since the late-1980s that the word has come to identify more than a passing political or military phase. For many of us, outsourcing has come to define our very lives.
We may be employed by one of Britain’s outsourcing giants, such as Serco, Capita or Virgin Care. Our banks and utilities deploy them to deal with our telephone calls and emailed queries. Emergency calls to your local GP during the witching hours are likely to be routed through a third-party provider. Sixty years ago, all of this was provided by your local county council; now, hardly any of it is.
Yet outsourcing doesn’t just “happen”; it has to be orchestrated, managed, supervised and regulated. Nor does this story involve only giant service contractors. This is also a tale about the individuals behind the scenes, pulling the strings – the people who make our modern world work.
Melvyn Caplan is one of these people. Retired IBM sales director, he is a Conservative cabinet member of Westminster City Council, responsible for finance and customer services.
This isn’t about saying the private sector can do things best… it’s all about delivering the best possible service to the public
Councillor Caplan was first elected in 1990, two years after the council negotiated its first outsourcing contract, involving the disposal of residential and commercial waste. Even by the standards of its day, this was a landmark deal – a management buyout no less, led by a senior council manager and backed by private money. That contract, now worth £40 million a year, has since passed on to the French services provider Veolia.
He sees public and private-sector outsourcing as two sides of the same coin. “We aren’t really that much different from any other commercial company in terms of how we operate,” he says. Here, he points to John Lewis and Marks & Spencer, both keen outsourcers for decades.
Mr Caplan doesn’t view the process of outsourcing – heralded by some and hated by others – as an ideological movement. “This isn’t about saying the private sector can do things best.
We aren’t dogmatic. It’s all about delivering the best possible service to the public. I believe that you do what you do best and you leave things that others do better to them.”
It’s a simple message, but also one that hides a hugely complex back-story. First, the figures. Westminster is one of Britain’s wealthiest councils, dragging in more than £1 billion a year in taxes. Yet most of this cash goes in one door and out another: £900 million is channelled straight into the maw of outsourcers, with the rest used to pay the council’s shrinking in-house staff of 2,300.
From this pot, £150 million goes to Capita, which delivers a wide range of tricky technical and human-based services including housing benefits. Serco gets a further £40 million to deal with parking violations, always a controversial service for any council and one that, Mr Caplan claims, (perhaps a tad too eagerly), “makes us virtually no profit”. BT recently secured a chunky contract to run the council’s back office and accounting; other outsourced services include security and upkeep of schools, and keeping roads free of potholes.
Yet this is just the top-line stuff. You need to drill down to see how handing the running of vital services to experts tends to benefit everyone. Mr Caplan flags up the example of rubbish collections.
The council’s purview includes some of the world’s richest shopping thoroughfares. Eight separate collections are made on Oxford Street every day; the fuel-efficient trucks, with built-in GPS tracking, separate out refuse as they go.
Westminster hosts marathons, rock concerts and public events galore, yet it’s rare to see litter-strewn streets. And the reason is co-ordination. I mention Bill Bryson’s 1991 book Neither Here Nor There in which he observes that while “Paris gleams, London is a toilet”. “Arguably,” says Mr Caplan, “I would agree that London is cleaner than Paris these days.”
And therein lies the rub. Outsourcing may not always be everyone’s cup of tea. When something goes drastically wrong, like G4S’s Olympic-sized security foul-up, outsourcers get it in the neck and rightly so.
However, it’s hard to imagine modern public services, as we know them, being provided by the state alone. Far better, surely, to ring a trained Capita operator to query a council tax bill than to phone a clock-watching functionary in city hall. Thirty years ago, council taxes didn’t exist and rubbish was thrown into trucks, which dumped them directly in landfills, rather than separating and recycling.
If Mr Caplan has one gripe, it’s with the fact that we all suffer from a lack of joined-up government. Councils increasingly work with each other to provide cross-constituency services. Westminster has joined forces with Kensington and Chelsea, and Hammersmith and Fulham to offer a single educational directorate covering all three boroughs.
But communication often breaks down when the needs of local and central government collide. Mr Caplan points to the “frictions” that exist between the NHS and the need for localised healthcare. “This area is crying out for reform,” he believes. “A classic example is the hospital discharge, where someone is let out of hospital, yet there is no one there to help them back to their home.”
So where do we go from here? Could we outsource the council itself – after all, what exactly are administrators for?
“Ah, but why do we have great clean streets,” Mr Caplan replies. “It’s because we specify [to outsourcers] what we want. Veolia only collects rubbish eight times a day on Oxford Street because we tell them to. The service provider out there is only going to do what we tell them to. And that’s the skill of managing any business. It’s about deciding what you want, making your message clear, then ensuring you get what you ask for. That is why we are here.”