The growth of outsourcing

Issue section: 

The effective privatisation of public sector jobs can be resisted by shop floor militancy.

Like many of the aspects of contemporary capitalism that we have come to hate, the vogue for outsourcing in Britain first gained ground under the Thatcher government.

In 1988, after privatising British Gas and British Telecom, the Tories passed a law subjecting local authority services to "compulsory competitive tendering" or CCT.

Since then the jargon has changed - the current buzzword is "procurement" - but this type of business activity has mushroomed, spawning companies such as Capita and providing markets for existing firms such as Serco.

Outsourcing companies' activities are no longer confined to local government. They have spread to the NHS, universities and even to policing.

Today the value of the market in outsourced public services is estimated at 89 billion pounds. To put that figure in perspective, outsourcing activities made up over 12 percent of the UK's GDP in 2011. And it is likely to grow as the NHS is increasingly opened up to firms such as Virgin which now runs primary care services in large parts of England.

Given that one of the main ways that outsourcing firms make their profits is by competing on the basis of lower labour costs, it is reasonable to ask what the impact of outsourcing has been on organised workers.

When the trend first became established in the late 1980s, it was in the wake of the defeats of key groups such as the steel workers and miners.

These defeats shaped perspectives, especially at the top of the movement. The then-secretary of the GMB union, John Edmonds, argued in 1986 that, "We must accept that within the next decade the trade unions are not going to be in a position to force contract cleaners, for example, to pay reasonable pay and conditions through traditional trade union organisation."

His solution instead was to look to legislation to establish minimum standards. The problem with this approach was that it depended entirely on waiting for a "favourable", that is Labour, government.

When one eventually came in 1997, it took a further seven years to obtain agreement from Labour that it would try and deal with one of the main effects of outsourcing - the growth of a two-tier workforce in contracted-out services, with newly recruited workers on worse pay and conditions than their ex-public sector colleagues.

The resulting code was important in providing for pay and other conditions that were "no less favourable".

But it didn't completely eradicate the two-tier workforce, particularly over pensions. It was also voluntary, which meant contractors could get around it, and many did. In fact, proper enforcement depended on effective union organisation, and this wasn't always in place.

Since then the Conservative-Liberal Coalition has abolished the code. This has allowed contractors in social care in particular to get away with serious attacks on pay and conditions.

A recent report from the Resolution Foundation estimated that up to around 200,000 care workers are being effectively paid less than the minimum wage as a result of their travel allowances being reduced or removed.

The coalition has also watered down the regulations further to try and breathe new life into a model that is based on poor pay and conditions.

But it is important to recognise that these moves are an attempt to sustain the outsourcing market and encourage activity and new entrants that might have been put off by some of the unions' successes.

Contract cleaners in the unions Unite and Unison have been central to the campaign for a living wage, and the transport workers' RMT union has been able to organise cleaners on London Underground and elsewhere.

In fact, many of these campaigns show precisely how pessimistic Edmonds was being in 1986. By contrast, they show that low-paid migrants, working part time in outsourced services, can organise and win better conditions.

Moreover, as the proportion of former public sector workers in many contracts has fallen over time, the focus has shifted from the two-tier workforce within these contracts to equal treatment with the in-house workforce. The recent strike at SOAS university in London was sharply concentrated on this.

The disruption put pressure on the institution to force the contractor to improve the cleaners' terms, though the fact that they were employed by a rich multinational, ISS, might have helped too.

While they didn't win all their demands, their success will encourage other contract workers.

Their victory shows that it is possible to persuade the main unions to sanction strikes in this area.

Indeed, industrial action is probably the best way of undermining the outsourcing model and winning reforms in order to protect contracted-out workers' terms back on the agenda.