Logical and illogical privatisations

Can someone please explain the logic of privatising when you merely outsource to one company?

This post / rant has been bubbling away at me for years but reading this by Aditya Chakrabortty on the battle for public services in Barnet has prompted me to get it off my chest.

I often have arguments with my lefty friends because my default position is that privatisation is not necessarily a bad thing. There are some things the private sector can do better than the state (eg run restaurants) and there are many areas of life where competition generates a better outcome for the consumer. I am fascinated by the various utility models and often wonder why opening the telephone market seems to have worked (costs are coming down and customer service is improving) but it has arguably failed with electricity and gas. (I may post more on this with some actual evidence at some point)

However, I do struggle with outsourcing public services and assets to one privately-owned company. I might be tempted to make an exception for basic business process outsourcing¬† (BPO), i.e. financial processes such as payment of invoices, if I had ever actually worked somewhere where this had worked in practice. I’ll come back to BPO on another occasion as I think even in the private sector a lot of the thinking and practice here is flawed.

No, what I am completely bewildered by is outsourcing frontline services such as collecting the rubbish, running buses, assessing access to benefits etc. These are not areas where the private sector has specific expertise. These are not generally areas where the private sector can experiment with new delivery models (eg buses have to go on specific pre-planned routes, you can’t just rock up with a bus and start offering services for the public). These are not generally areas where investment in new technology will generate savings. These are not areas where failure to deliver will be punished by going out of business.So why privatise?

It is hard to avoid the conclusion that the only economic logic for outsourcing is a perception that the private sector will always be more efficient, which could also be read as “more ruthless in screwing down wages”.

But I am trying to understand the right wing state-shrinking world, so please help me out here. Please send me examples of where outsourcing these kinds of services has actually delivered the same or better service for less money.


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