The Lessons of Carillion and what it means for Nottingham

We have just witnessed the collapse of a major outsourcing firm, Carillion, leaving behind it a train of debtors, shareholders with major losses, unfinished projects, employees without jobs, a pensions deficit and a scandal of directors who had rewarded themselves before the firm went bust.

In regards to Nottingham City Council, Carillion was indirectly involved with us in several projects, including the management of a set of local schools, the services provided by LIFT and restoration work at Highfields Park. It must be stressed that work on these projects will continue as planned, and that there contingency plans in place to ensure that there are no disruptions.

In terms of the wider Nottingham economy, we do not know what the implications are but should there be any serious threats then we will work with Nottingham Jobs and the Growth Hub in conjunction with employees and businesses to provide practical support.

What this crisis has done, however, is bring into question the concept of outsourcing. Some will say that there is no role for the private sector in delivery of public services but this is clearly not the case. It has a vital role in tram construction, major projects such as the reconstruction of Broadmarsh car park and specialist work. Clearly, it is not as simple as public sector good/private sector bad.

However, I believe it shouldn’t be more than marginally involved in people-based services such as probation, specialist care or core services such as waste disposal and public transport; anywhere where long-term investment and commitment is required. The private sector, when operating public contracts, does not have the motivation to direct profits back into the services they provide nor has it the motivation in the long run to put the individuals and clients first who are often the most vulnerable.

Corillian is a microcosm of the problem. Once it moved away from its role as a constructor and attempted to manage public services, it struggled. Corillian is yet another example of a private business which has underestimated how complicated running the public sector is; they go into areas with insufficient experience and are expected to pay its shareholders and reward bonuses, both of which are promises they cannot fulfill but do so anyway at the expense of the stability of the firm. Often everyone loses – both public and private sector alike. And certainly everyone, apart from a few cynical board members, have lost in this case. It is for all these reasons that Nottingham has been so sceptical about outsourcing and either kept services in house or brought them back under public control, NCT being but one example.

One of the reasons some Conservative councils are so financially fragile, despite being better funded than their Labour counterparts, is that they have outsourced heavily. Indeed, one of the reasons we have been so financially resilient is that we keep so many services under council control. But before we get complacent, the above only works with good management and motivated staff. It only works if there is capacity to invest. And that is becoming a real problem at the moment with incessant cuts made by the Conservative government.

Privatisation is beginning to fall apart and if the Conservative government wants decent public services then it needs to do one thing: fund it properly. It can start by increasing corporation tax to the sensible level that it was under the last Labour Government.