Risks of outsourcing and privatisation laid bare | Letters

Readers address government blunders, NHS privatisation, and Capita’s and Carillion’s woes

If the Conservatives would look beyond market-fundamentalist theory they would see that outsourcing is more intrinsically flawed the more complex the task and the more uncertain the contingencies around the contractual terms (Report, 1 February). The results can be the worst of public and private regimes. On the supplier side, not only is a lot of outsourcing conducted in markets characterised by monopoly and oligopoly, the impossibility of writing “complete” long-term contracts that cover all eventualities means that both competitive pressures for performance and the buyer’s control are weak.

These realities put the state over a barrel: it faces prohibitive penalties for exiting a failing contract and closing down the task is rarely an option, so it becomes subject to ratcheting costs even as it loses strategic oversight. Add the current freedoms of public limited companies to reject internal investment in favour of debt-fuelled mergers and acquisitions, continuously rising executive pay and shareholder dividends and the corporate incentives are about as misaligned from the public interest as they could be. Rather than understand this, however, the solution in public services has been increasingly Kafkaesque attempts at regulatory oversight, which is ironic given that the whole strategy is justified by the “public-choice” critique of bureaucracy.

Continue reading... February 04, 2018 at 10:52PM