G4S' failure does not destroy the argument for outsourcing

Philip Booth writes for the Spectator Coffee House

The left are having a field day in traducing the concept of contracting-out as if, somehow, the failure of G4S to deliver its Olympic contract was some kind of slam dunk. It is curious that one does not hear the same voices raised against the use of public sector in-house teams in relation to the queues at Heathrow airport's immigration desks.

In many senses, the obvious failure of contractors in situations such as the G4S Olympic contract, and in the welfare-to-work schemes, is a sign of the success of the whole idea. When government services provided by in-house teams fail, non-delivery is brushed under the carpet. Poorly performing schools linger forever; disorderly prisons fester; job centres do not get people back into work; and so on. When the G4S contract was granted cash was handed over; G4S failed to deliver on the contract; they paid up; and their share price tumbled. Everything was above board and transparent.

Contracting-out can lead to huge efficiency gains, transparency and better performance management. Politicians complain about principal-agent problems between shareholders and directors in companies but the worst principal-agent problems are all in the public sector. If my children's local state school is not cleaned properly, there is no effective mechanism to hold the people ultimately responsible - the politicians who run the education service - to account. It is too easy for management to let slack practice continue. Contracting-out of a service that can be well defined so that the contract can be easily written and supervised can alleviate these problems and, through the processes of competition and innovation, reduce costs significantly.

To read the rest of the article, click here.

Invest in the IEA. We are the catalyst for changing consensus and influencing public debate.

Donate now

Thank you for
your support

Subscribe to
publications

Subscribe

eNEWSLETTER