Government outsourcing: What has worked and what needs reform?

Labour’s policy of bringing public services back into government hands by default would be a mistake. But senior politicians have consistently overstated how much money is saved by outsourcing services. 

Outsourced services are those delivered by the private or voluntary sector. This report ranks which have been outsourced successfully and which need reform.

It finds that outsourcing waste collection, cleaning, catering and maintenance services has delivered significant savings and benefits to citizens. Particularly in these areas, bringing services entirely back into government hands could lead to worse and more expensive services for the public.

The report also shows that consecutive governments have overstated the benefits of outsourcing. Senior politicians regularly claim outsourcing can still deliver 20–30% savings but there is no evidence to support this.

It highlights a series of high-profile contract failures – including security at the Olympics, welfare assessments, offender tagging and probation. These contracts have wasted millions of pounds, delivered poor services and undermined public trust. The outsourcing of probation failed on every measure, harming ex-offenders trying to rebuild their lives.

Consecutive governments have outsourced services with no market of good suppliers or in pursuit of unrealistic cost savings – and without a reasonable expectation that companies could deliver efficiencies or improve the quality of services.

The report recommends that the current government must strengthen its commercial skills and capabilities, makes ministers and officials more accountable to the public and improve the evidence base that informs outsourcing decisions.