Flow of Ideas

Outsourcing Public Services – with special reference to education

Glenn Rikowski, London, 26th July 2008

“But I'm just a soul whose intentions are good. Oh, Lord, please don't let me be misunderstood” (The Animals, Don’t let me be Misunderstood, 1965; first recorded by Nina Simone in 1954, and written by Bennie Benjamin, Gloria Caldwell and Sol Marcus).


Perhaps John Hutton, UK Secretary of State for Business, Enterprise & Regulatory Reform (BERR), had the above refrain in mind when he launched a review into the ‘public service industry’ last December. When Hutton appointed ex-CIA employee and former member of the UK Monetary Policy Committee of the Bank of England, Dr DeAnne Julius, to head his review into the public services industry he may have hoped that the British public might not conclude that he was in favour of the delivery of more public services by private sector operators and ‘third force’ charitable organisations. On the basis of the Julius Report (Julius, 2008), it is clear that Hutton’s is not a ‘soul whose intentions are good’ when it comes to protecting public services from the depredations of capital.

The Public Services Industry

What is this new ‘Public Services Industry’ (PSI)? According to the Julius Report, it is that part of public services which are delivered by the private and charitable sectors. In the Report there is a formal definition of the PSI as being:

“All private and third sector enterprises that provide services to the public on behalf of government or to the government itself” (Julius, 2008, p.5).

The PSI, therefore, is constituted by all those public services – such as health, education and welfare – that are delivered by private and/or charitable operators. The Report recognised that the distinction between a “good” and a “service” is blurred in practical terms and that this was reflected in the official statistics on the PSI (p.19); one of the things the BERR and the government needed to address, according to Julius. However, it is clear that John Hutton, and by default the New Labour government, support the extension and enhancement of the PSI, for:

“Given the emergence of a significant Public Service Industry, it is important that we examine how we can support the success and development of this industry both here in the UK and in overseas markets” (Hutton, 2008).

What this statement implies is that Hutton and New Labour are keen to promote a greater role for private sector delivery of public services in the UK and also to develop the capacity of UK companies to do the same in other countries under the banner of UK exports. Indeed, when the Julius Report came out on 10th July, Hutton was all set to go the United States the following week ‘to lead a first public service industry trade mission to Washington … to promote its export potential’ (Timmins, 2008a). As Timmins noted:

“[The Report] shows the UK is at the forefront of the outsourcing trend. Although the US spends more cash on outsourced services, the UK spends a larger share of its gross domestic product than the US or any other Organisation for Economic Co-operation and Development country except Sweden and Australia.” (2008b).

Thus, it appears the UK can teach the US lessons about opening up public services to capital. The Confederation of British Industry (CBI) exuded predictable enthusiasm for the Julius Report, gushing that:

“The growth of the UK public services industry here and abroad is a good news story and deserves recognition … [Though] … here in the UK more must be done to ensure free and fair competition that will help drive up quality and efficiency of our public services. No one should ask for special treatment, but the best provider – regardless of sector – should be delivering services” (CBI, 2008).

The Trades Union Council (TUC), in its submission to the Review, was concerned about its whole approach (TUC, 2008, p.4) as:

“This effectively presents the public services as if they were a commercially driven sector, in the same way, for example, as tourism, financial services or manufacturing … Public services are much more than commodities to be traded in the market. They are vital assets which protect people, bind the nation together and boost our prosperity” (Ibid.).

But the Julius Report is precisely about extending the commodification of public services: the TUC response provides no revelation on this score. However, the TUC confuses the issue when it brings in tourism etc. These do not turn state revenue into private profit – as private sector operators running schools seek to do. Furthermore, the TUC’s argument for public services being delivered by state organisations rests partly on the kind of economic instrumentalism advanced by the CBI in its statement above. The CBI even builds in the notion of equity – between sectors – though the TUC has a wider conception of equity and social justice. Public-sector union UNISON noted that ‘the advisory panel appointed by the government for the review was packed with privateers holding lucrative public service contracts’ (in Coysh, 2008). But surely UNISON should have known by now that New Labour plc, as a veritable ‘party of business’ (see Osler, 2002), does not play a straight game. Julius herself sat on the board of Serco – a major player in the UK PSI – until last year (Walker, 2008, p.1).

Some of the data in the Julius Report is noteworthy. The UK PSI comprises 6% of GDP and employs over 1.2 million people (p.i). It is the most developed PSI in the world, with revenues of £79bn in 2007-08, ‘generating £45bn in value added’ (p.ii). The UK PSI has grown ‘by almost 130 per cent’ over the last 12 years, with 6.8% growth per year in real terms over the 1995-6 to 2003-4 period (Ibid.). However, since 2003, the growth rate for the UK PSI ‘levelled off to 2.9 percent per year’ (Ibid). This was cause for concern for the New Labour government, and heralded the Julius Report: how could this slowdown in the rate of the UK PSI be reversed and PSI exports increased? The Report attempts to provide answers to these questions.

Implications for Education

The Julius Report provides New Labour, or more likely the next Conservative government, with analyses and ideas regarding stimulating the business takeover of public services. What I have called ‘the business takeover of schools’ (as defined in Rikowski, 2006) is an aspect of this enterprise. The Report noted that over the last 12 years education was the fastest growing sector of the UK PSI, at 8.1% per year (p.ii). The education category of the UK PSI was worth £7.3bn in 2007-08 (p.16). It is clear from the Report that New Labour views education as making a valuable contribution to the health and growth of the UK’s PSI. The Julius Report, therefore, indicates a long term goal – more likely to be realised by the Conservative Party – of letting capital loose on an ever greater scale within UK schools, colleges and universities.


CBI (2008) CBI Reaction to DeAnne Julius Report, News Release, Confederation of British Industry, 10th July: http://www.cbi.org.uk/ndbs/press.nsf/0363c1f07c6ca12a8025671c00381cc7/75d92b24f8c542da80257481005bc149?OpenDocument

Coysh, D. (2008) Minister boasts: We’re world champs of privatising, Morning Star, 11th July, p.1 & p.4.

Hutton, J. (2008) Foreword by SoS John Hutton, to the ‘Public Services Industry Review’, Department for Business, Enterprise & Regulatory Reform, 10th July, BERR: London: http://www.berr.gov.uk/files/file6965.pdf

Julius, D. (2008) Public Services Industry Review – Understanding the Public Services Industry: How big, how good, where next? Department for Business, Enterprise & Regulatory Reform, 10th July, PUB 8742/0.2k/08/NP.URN 08/1074, BERR: London. Online at: http://www.berr.gov.uk/files/file6965.pdf

Osler, D. (2002) Labour Party plc: New Labour as a Party of Business, Edinburgh: Mainstream Publishing.

Rikowski, G. (2006) On the Capitalisation of Schools in England, a paper prepared for The Flow of Ideas, 1st November: http://www.flowideas.co.uk/?page=articles&sub=On%20the%20Capitalisation%20of%20Schools%20in%20England

Timmins, N. (2008a) Outsourcing to private sector doubles to £80bn, Financial Times, 10th July, p.1.

Timmins, N. (2008b) Outsourcing covers third of services, Financial Times, 10th July, p.3.

TUC (2008) TUC Response to the Julies Review of the Public Service Industry, May, London: Trades Union Council, at: http://www.tuc.org.uk/publicsector/tuc-14819-f0.pdf

Walker, D. (2008) Attention to detail – Interview with DeAnne Julius, The Guardian, 14th May, at: http://www.guardian.co.uk/society/2008/may/14/interviews.society

© Copyright, Flow of Ideas, Ruth Rikowski and Glenn Rikowski. Website by [whiteLayer]
Call for Authors
Printer Friendly
Order by DateAlphabetical[Close menu]