Innovation and Efficiency

30.10.18

Councils face £30bn bill unless private firms act with ‘fairness and decency’

Councils could find themselves with a massive £30bn bill if private firms fail to improve how they deliver local services, according to a new report from Localis.

The report, ‘Ethical Commercialism,’ found that moving all local services in-house would put a £30bn dent in the public purse, and potentially disrupt any planned savings in a market that Localis claims is worth at least £69bn annually. 

This report comes just as the chancellor Phillip Hammond announced that the abolition of the Private Finance Initiative (PFI) and PFI2 for all future government contracts. All current contracts will be honoured.

As well as this, the New Local Government Network found earlier this month that 39% of council leaders plan on outsourcing less over the next two years. 

The think tank called for “greater levels of trust and standards of behaviour” from private companies and “greater levels of openness and transparency” from local authorities in order to preserve the public’s trust in having a mixed market for public services.

This can be achieved by incorporating greater social, environmental, and economic responsibility into contracts from the start, with greater procurement freedoms after Brexit offering the opportunity for local authorities to favour firms who behave ethically.

The report also suggested that councils could “co-brand” contracted out services with the logos and branding of service providers, thus demonstrating the effectiveness of commercial partnership.

The chief executive of Localis, Jonathan Werran, said: “A diverse, flexible and open market for local public services is one worth preserving for a very pragmatic reason, that being to keep going the countless thousands of vital services which millions of residents rely upon in their daily lives.

“Local government and the wider public sector simply can’t afford the rapid collapse of a mature and complex market.”

Werran also emphasised the importance of reform “on all sides,” noting that private firms need to “walk the walk of acting with fairness and decency” in delivering public services— whilst councils must take responsibility for drawing up contracts that encourage good commercial behaviour and present their commercial dealing to the public “in an open and transparent way,” which can be readily understood.

The report goes on to recommend that councils should develop procurement strategies in collaboration with neighbouring authorities; that Cabinet Office procurement guidelines should be more flexible; that the LGA should oversee the development of a single platform for local government contracts data, which should include any relevant KPIs; and that local authorities should be incentivised to employ relationship managers in recognition of the importance of long-term relationship building and trust.

Top image: 3D generator

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