John Medhurst Johnme@pcs.org.uk. “Britain is in the biggest wave of Government outsourcing since the 1980s” Alan White, New Statesman, September 2012.

John Medhurst

Johnme@pcs.org.uk

Shock Resistance:privatisation and its

alternatives

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

Alan White, New Statesman, September 2012

Biggest public spending cuts since 1930sJuly 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

The background

Since 2010 £5bn of cuts and 230,000 jobs lostSpending now falling on adult social care,

children’s services, planning, culture & leisureBy 2015 local councils will have lost a third of

their budgetsIf cuts not reversed, by 2020 budgets could

be cut by 80%

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 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.

Destruction of local public services

G4S – Olympics securityA4E – DWP Work ProgrammeATOS - Disabled unemployedThames Water - Leaks and tax

avoidance

Major Privatisation Failures

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

Privatisation Failures & Nationalisation Success

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 taxpayerContracts with 10 central govt departments and agencies,

and 14 Police ForcesG4S 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 – G4S

Home Secretary, Secretary of Defence, Health Secretary2008: became “Consultant” to G4S whilst still an MP -

£45,000 - £50,000Three months later G4S win contract for private security

at 200 MoD sites in UK2009 : £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

A case study – John Reid

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 – DWP

Budget of EHRC cut in halfRegional offices closed - new HQ opened in

London “to be close to our key stakeholders”EHRC Helpline outsourced to SitelExperienced EHRC Helpline staff made

redundantSitel does not recognise trade unions

The Civil Service - EHRC

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”

Failure of PFI

“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

The real agenda

Hinchinbrook Hospital - massive PFI debtsNow run by Circle Healthcare - a “mutual” with 49%

employee share ownership, so not labelled privatisationCircle = 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

A “new approach”

“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

Mutualisation?

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

MyCSP

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

Francis Maude, 2011

Mutualisation?

MyCSP Ltd has contract for Civil Service pensions for next 7 years

40% owned by the Equiniti GroupEquiniti Chair – Kevin Beeston, ex SercoEquiniti CEO – Wayne Story, ex Capita

MyCSP Ltd

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

MyCSP Ltd Chair

“Thatcherism disguised as mutualism”Michael Stephenson, General SecretaryCo-operative Party, 2012

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!

Independent Shared Services Centres

“Government Owned Contractor Operated”

GOCOs

Forensic Science Service - from Executive Agency to GOCO (2005)

GOGO not successful commercial entity2012 - 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

Examples of GOCOs

Proposal to turn DE&S into a GOCONo other country runs defence procurement in this wayWould require primary legislationRaises questions about sharing of technologies with a

commercial body – conflicts of interest etcUSA GOCO example – Lead Systems Integrated. Failed,

brought back to Dept of Defence

Defence Equipment and Support (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 GOCO

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

Colin Cram, Managing Director Marc 1 Ltd

Public Service.co.uk

DE&S GOCOs

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 TaxWould cost Treasury £200m over 5 years.

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

Turning workers into“Employee shareholders”

JL does not recognise trade unionsUsual management hierarchies. Relationship to sub-

contractors same as other businessesMany JL staff on near Minimum Wage. Bonus not a

luxury but a necessitySome JL worker-partners concerned that 3,000 more

would dilute value of bonuses for existing 70,000 staff

The John Lewis Model?

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

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 increase backdated 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)

The John Lewis Model?

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 models?

Lucas Aerospace sought to cut jobs.LA shop stewards - mix of aerospace designers, shop

floor engineers and “unskilled” labourAlternative Corporate Plan drawn up by a combine of all

LA workersIdeas 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 Plan”

LA refused to negotiate the planSuggestions of public ownership of LA - only govt

supporter Industry Secretary Tony BennWilson 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

“Alternative Corporate Plan”

UK’s only not-for-profit energy supplierA social enterprise without shareholdersRe-invests surplus profitNot raised pricesAssistance to customers

in debitUses renewable energy

Ebico

Mondragon Co-Operative

Federation of Worker Co-ops based in Basque Region, Spain

Spain’s 7th largest companyCo-operative university, bank, social security mutualsCo-ops owned by worker-membersRun by 1 person, 1 vote80,000 worker-owners in 256 companiesHighest paid managers salaries capped at 6 times that of

lowest paid workers (in U.S CEOs makes 380 times more)

Mondragon Co-Operative

USW America’s largest industrial union – 1.2 m membersUSW 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 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

Mondragon and United Steelworkers

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

“Recovered Factories” in Venezuela

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

An example - Ineval

“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

“A new sector of the economy”

“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

Resisting Privatisation

Resisting Privatisation

Resisting Privatisation

Resisting Privatisation

Resisting Privatisation

Resisting Privatisation

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 defeated

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” party2005 – Morales elected President of Bolivia

Privatisation can be defeated