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Shock Resistance: privatisation and its alternatives. John Medhurst “Britain is in the biggest wave of Government outsourcing since the 1980s” Alan White, New Statesman, September 2012. The background. Biggest public spending cuts since 1930s

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“Britain is in the biggest wave of Government outsourcing since the 1980s”

Alan White, New Statesman, September 2012

the background
The background
  • Biggest public spending cuts since 1930s
  • July 2011 - White Paper on Open Public Services signals massive outsourcing of public services
  • Services to be delivered by “any willing provider”
  • Process disguised but traditional privatisation continues
destruction of local public services
Destruction of local public services
  • Since 2010 £5bn of cuts and 230,000 jobs lost
  • Spending now falling on adult social care, children’s services, planning, culture & leisure
  • By 2015 local councils will have lost a third of their budgets
  • If cuts not reversed, by 2020 budgets could be cut by 80%
destruction of local public services1
Destruction of local public services

“The future cuts fill me with horror. We’ve been through hell already in Newcastle. The impact of another three years of cuts will bring local government to its knees”

Nick Forbes, Leader, Newcastle City Council.

destruction of local public services2
Destruction of local public services
  • Birmingham Council will cut £600m by 2016/17 - half the Council’s budget
  • March 2013 - Leader of Birmingham Council announces that city was preparing to “start a dialogue about decommissioning services”

“The end of local government as we know it”

Sir Albert Bore, Leader, Birmingham City Council.

major privatisation failures
Major Privatisation Failures
  • G4S – Olympics security
  • A4E – DWP Work Programme
  • ATOS - Disabled unemployed
  • Thames Water - Leaks and tax avoidance
privatisation failures nationalisation success
Privatisation Failures & Nationalisation Success
  • 2009: National Express abandoned East Coast rail franchise mid-contract because “insufficient profits”
  • East Coast rail renationalised as a Directly Operated Railway (DOR)
  • East Coast DOR has been big success – increased punctuality, customer satisfaction, and £600m to Treasury in 3 years
  • East Coast to be re-privatised in 2014
a case study g4s1
A case study – G4S
  • G4S Security Services - largest security solutions company in UK with turnover of £1.2 billion and 40,000 employees
  • £759m per year from taxpayer
  • Contracts with 10 central govt departments and agencies, and 14 Police Forces
  • G4S Immigration Removal Centres – one death; treatment of 10 year old asylum seeker led to attempted suicide; handcuffs and racist language
  • GH4S NHS non-emergency drivers – paid below Minimum wage.
a case study john reid
A case study – John Reid
  • Home Secretary, Secretary of Defence, Health Secretary
  • 2008: became “Consultant” to G4S whilst still an MP - £45,000 - £50,000
  • Three months later G4S win contract for private security at 200 MoD sites in UK
  • 2009 : £10,000 for 2 days attendance and address at 'Public-Private Partnership in Healthcare‘ Conference in Portugal sponsored by Portuguese Association of Private Hospitals
  • 2010: Becomes Director of G4S
the civil service dwp
The Civil Service – DWP
  • National Benefit Fraud hotline – Vertex.
  • Crisis Loans & Community Care Grants – abolish April 2013. Local authorities to provide alternatives. Likely outsourced.  
  • Transforming Labour Market Services – Monster Worldwide Ltd. Web based service replace the work of 250 staff on Employer Direct and Jobseeker Direct telephony service. 
  • JSA Online (telephony) service – outsourced to Capita in September 2012.
  • DWP staff in JSA Online start at £16,080. Capita pay £13,893 for same service.
the civil service ehrc
The Civil Service - EHRC
  • Budget of EHRC cut in half
  • Regional offices closed - new HQ opened in London “to be close to our key stakeholders”
  • EHRC Helpline outsourced to Sitel
  • Experienced EHRC Helpline staff made redundant
  • Sitel does not recognise trade unions
failure of pfi
Failure of PFI
  • Treasury Review of PFI concedes that “some of the commonly identified concerns ” about PFI are valid
  • Review driven by drying up of bank credit and long-term PFI debt
  • Aim of review “to help bring forward proposals for a new approach to using the private sector in the delivery of public assets and services”
the real agenda
The real agenda

“The changes will allow the government to forge ahead with our ambitious plans for public sector reforms, since the new pension arrangements will be substantially more affordable to alternative providers in the private and voluntary sector bidding for public sector contracts”

Danny Alexander, December 2011

a new approach
A “new approach”
  • Hinchinbrook Hospital - massive PFI debts
  • Now run by Circle Healthcare - a “mutual” with 49% employee share ownership, so not labelled privatisation
  • Circle = a joint venture between Circle Partnerships and hedge fund Circle Holdings registered in British Virgins Islands and Jersey
  • No previous experience in running an entire hospital with emergency and A&E facilities

“We will not dictate the precise form of these mutuals; rather, this should be driven by what is best for the users of services and by employees as co-owners of the business. Options include wholly employee-led, multi-stakeholder and mutual joint ventures”

Open Public Services White Paper, 2011

  • A Mutual Joint Venture (MJV)
  • Decision imposed by Maude- “dictated by Govt”
  • Staff given no choice
  • Staff lost civil service status and access to PCSPS

“As a market develops, the newly established mutual joint ventures will have to bid for contracts along with other potential contractors”

Francis Maude, 2011

mycsp ltd
  • MyCSP Ltd has contract for Civil Service pensions for next 7 years
  • 40% owned by the Equiniti Group
  • Equiniti Chair – Kevin Beeston, ex Serco
  • Equiniti CEO – Wayne Story, ex Capita
mycsp ltd chair
MyCSP Ltd Chair
  • Lord Hutton (John Hutton) - ex Labour Defence and Business Secretary
  • Now on Board of US nuclear power company Hyperion Power
  • Hutton Report recommended “reform” of public sector pensions
  • His MyCSP salary - £1,000 a day
  • “Employee owners” given no say in appointment

“Thatcherism disguised as mutualism”

Michael Stephenson, General Secretary

Co-operative Party, 2012

independent shared services centres
Independent Shared Services Centres
  •  Five ISSCs
  •  ISSC1 (DfT + DCLG, DID, ONS) outsourced to Arvato June 2013
  • Cabinet Office confirmed that ISSC2 (DWP + DEFRA, DfE, BIS, DECC) was to be a “Public Sector Mutual” in public sector.
  • PSM option dropped after Minister imposed a Joint Venture model (over 50% private ownership). Now no “Mutual” element at all!

“Government Owned

Contractor Operated”

examples of gocos
Examples of GOCOs
  • Forensic Science Service - from Executive Agency to GOCO (2005)
  • GOGO not successful commercial entity
  • 2012 - FSS GOCO wound up, work to be contracted out. No consultation with legal experts, DPP or police.
  • Atomic Weapons Establishment (AWE) – GOCO set up but not open to public scrutiny
defence equipment and support de s goco
Defence Equipment and Support (DE&S) GOCO
  • Proposal to turn DE&S into a GOCO
  • No other country runs defence procurement in this way
  • Would require primary legislation
  • Raises questions about sharing of technologies with a commercial body – conflicts of interest etc
  • USA GOCO example – Lead Systems Integrated. Failed, brought back to Dept of Defence
de s goco

“At present we cannot easily see how the DE&S as a GOCO would even work in practice, let alone why it would be less expensive and a better alternative to what is in place today”

Royal United Services Institutes - Acquisition Focus Group

de s gocos

“A GOCO would not be restricted by civil service and military terms and conditions of employment”

Colin Cram, Managing Director Marc 1 Ltd


turning workers into employee shareholders
Turning workers into“Employee shareholders”
  • Govt will legislate for “owner-employee” contracts of employment
  • Employees given shares in exchange for waiving employment rights – protection unfair dismissal, statutory redundancy pay, right to flexible working
  • “Employee Owners” have to give 16 weeks notice of return from Maternity Leave.
  • First £2,000 of shares exempt from NI and Income Tax
  • Would cost Treasury £200m over 5 years.
turning workers into employee shareholders1
Turning workers into“Employee shareholders”
  • Fosters divisions amongst workers – armies of little Thatcherites competing with each other for shares in place of trade union and employment rights
  • Not even supported by business:

“What would the population at large think of businesses that want to trade employment rights for money?”

Justin King, CEO, Sainsbury’s

the john lewis model
The John Lewis Model?
  • JL does not recognise trade unions
  • Usual management hierarchies. Relationship to sub-contractors same as other businesses
  • Many JL staff on near Minimum Wage. Bonus not a luxury but a necessity
  • Some JL worker-partners concerned that 3,000 more would dilute value of bonuses for existing 70,000 staff
the john lewis model1
The John Lewis Model?

“PCS fully supports the John Lewis workers' demand for the living wage. Employers who sub-contract poverty pay, like the government and John Lewis, need to be both exposed and taken on" Chris Baugh, PCS General Secretary

the john lewis model2
The John Lewis Model?
  • 2012 – Strikes by IWW organised cleaners at JL Oxford Street forced contractor ICM to back off redundancies and wage cut
  • Key demand of the London Living Wage - not conceded, but cleaners won 10% pay increasebackdated to start of contract in March 2012
  • Hours of work re-organised to reduce excessive shifts (had to be available for work during unpaid breaks)
alternative models1
Alternative models?
  • 1971 - Occupation of Upper Clyde Shipbuilders inspired hundreds of worker occupations in next decade
  • Focal point 1974-75 while Tony Benn Sec of State for Industry
  • Benn and others looked for alternative models to orthodox nationalisation
alternative corporate plan
“Alternative Corporate Plan”
  • Lucas Aerospace sought to cut jobs.
  • LA shop stewards - mix of aerospace designers, shop floor engineers and “unskilled” labour
  • Alternative Corporate Plan drawn up by a combine of all LA workers
  • Ideas for alternative production based on social usefulness – new kidney machines, portable life support systems, improved wheelchairs, battery driven cars, solar panels, wind generators, etc
alternative corporate plan1
“Alternative Corporate Plan”
  • LA refused to negotiate the plan
  • Suggestions of public ownership of LA - only govt supporter Industry Secretary Tony Benn
  • Wilson removed Benn from post after pressure from CBI and media because of support for LA workers and public ownership.
  • LA Alternative Corporate Plan not acted on, but an inspiration for today’s Green New Deal
  • UK’s only not-for-profit energy supplier
  • A social enterprise without shareholders
  • Re-invests surplus profit
  • Not raised prices
  • Assistance to customers

in debit

  • Uses renewable energy
mondragon co operative1
Mondragon Co-Operative
  • Federation of Worker Co-ops based in Basque Region, Spain
  • Spain’s 7th largest company
  • Co-operative university, bank, social security mutuals
  • Co-ops owned by worker-members
  • Run by 1 person, 1 vote
  • 80,000 worker-owners in 256 companies
  • Highest paid managers salaries capped at 6 times that of lowest paid workers (in U.S CEOs makes 380 times more)
mondragon and united steelworkers
Mondragon and United Steelworkers
  • USW America’s largest industrial union – 1.2 m members
  • USW in partnership with Mondragon and Ohio Employee Ownership Centre create a template for introducing “Union Co-ops” into mid-west Rust Belt
  • Union co-ops model differ from traditional worker-owned Co-ops
  • Unions appoint management team and collective bargaining model
mondragon and united steelworkers1
Mondragon and United Steelworkers

“A union co-op is a unionized worker-owned co-operative in which worker-owners all own an equal share of the business and have an equal vote in overseeing the business”

Ohio Employee Ownership Centre

recovered factories in venezuela
“Recovered Factories” in Venezuela
  • 2002/3 – bosses lockout in attempted coup, hundreds of factories shut
  • Workers took over factories to keep them running.
  • 2005 - Chavez legislated to keep these running under workers control or “Co-management”.
  • Many workers co-operatives created and funded
an example ineval
An example - Ineval
  • Ineval – valve manufacturing company under workers’ control since 2005
  • Legally a co-operative – 51% owned by state, 49% by workers
  • Decisions taken by Workers Assembly, which elects recallable “co-ordinators of production” for one year
  • All employees paid equally
a new sector of the economy
“A new sector of the economy”

“We want it in public ownership, but for workers to control all production and administration. This is the new productive model. We don’t want to create new capitalists here”

Francisco Pinero, Ineval Treasurer

resisting privatisation
Resisting Privatisation

“These examples are not the result of accidental errors of judgement. They result from a political and economic logic which says that in every sphere of our lives, the market and the profit motive will perform better than any other system. It is this dogma that all who want democratically accountable and publicly owned services must challenge”

Mark Serwotka, PCS General Secretary

privatisation can be defeated
Privatisation can be defeated
  • 2000: Bolivia’s water supply privatised - Cochabamba Water run for profit by Bechtel
  • “Law 2029” gave Bechtel control of all water resources in Cochabamba.
  • Bechtel raised prices by 35%, charged for installation of meters, and for licenses to collect rainwater.
  • “If people don’t pay their water bills, their water will be turned off” – G. Thorpe, Bechtel Executive
  • Massive campaign of resistance led by Union of Coca Farmers (UCF)
privatisation can be defeated2
Privatisation can be defeated
  • UCF leader Evo Morales led 600km march from Cochabamba to La Paz.
  • Occupation of central la Paz.
  • Eventually privatisation reversed and water re-nationalised.
  • Morales and others create “Movement Toward Socialism” party
  • 2005 – Morales elected President of Bolivia