UK’s public service outsourcing sparks debate
Business process outsourcing and shared services has become increasingly prevalent in the last few years. The UK is at the forefront of the outsourcing trend. The country is leading the way in outsourcing some part of its public services and the rest of Europe is following suit. The UK public sector is known as one of the most sophisticated users of ICT and BPO among governments worldwide.
A government-sponsored study by UK economist DeAnne Julius found that outsourcing of public services benefits taxpayers. According to the report, competitive tendering has led to an estimated 10% to 30% cost savings with no undesirable effect, and has improved service quality in some cases. IT is often part of business process outsourcing, and it involves contracting out an area of the business processes while the client retains strategic and government control. The UK utilizes back office outsourcing, which includes internal business functions like purchasing, payroll and records management, and front office outsourcing, which includes customer-related services like call centers.
The Department of Business Enterprise and Regulatory Reform (BERR) report show that the UK’s ‘Public Services Industry’ (PSI) has grown significantly in the past 12 years is now the second most developed in the world next to the US, with revenues totalling to £79 billion and generating £45 billion in value added and employing more than 1.2 million people.
Additionally, a 2007 study conducted by Kable, a leading provider of public sector research, estimates that the total spend of the UK’s public sector in outsourcing reached £5.3 billion in 2007 and is likely to reach £7.5bn by 2012.
Julius quoted a number of studies, and found that in the US there has been no significant association between contracting and employment in local government services. While in New Zealand government outsourcing attributed to 58% of cost savings due to labor cuts. “Government departments and local authorities should seek to introduce competitive challenge into areas of service delivery where it has not yet been tried and consider how best to incentivize further innovation in sectors where it already exists”, suggests Julius.
But trade unions are skeptical of the report’s findings and argued that the government should be investing in public sector provisions rather than commissioning economists to make such reports and investing in private firms. “Instead of commissioning economists to investigate how much can be sold off, the government should ask itself what our public services are for. But when you see workers who have won awards for providing public services being privatized, you begin to understand that profit is taking priority over service delivery. There has been no public debate about this. Yet we now have the horrifying prospect of a Labor secretary of state jetting off round the world to persuade business leaders that our cherished public services are not only for sale, they are ripe for the picking” says Mark Serwotka, Secretary General of the Public and Commercial Services Union.
Despite the ongoing debate on outsourcing public services, Terry Arthur, a Financial Services Fellow of the Institute of Economic Affairs (IEA), believes that “The launch of eight new school ‘academies’ in London, sponsored by various institutions and entrepreneurs, including Lord Harris, makes this an appropriate time to consider the economic implications of such outsourcing.”
Author: Kim G.
Tags: UK Outsourcing
September 22nd, 2008 at 3:34 am
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Allen Taylor