Here is the view s of Mark Lewis, who heads up the outsourcing practice at law firm Berwin Leighton Paisner.
By Mark Lewis
“There really hasn’t been anything like it before. Yes, about a year ago, just before the ceremonial pens were being pulled out to ink the contract, we had Edinburgh City Council’s decision to withdraw from a massive street works to white collar services outsourcing to MITIE (2,000 staff in TUPE scope). That was a political decision, caused by a rebellion on the Council by its Labour councillors.
This time, we have plenty of political fury directed at the London Borough of Barnet and its decision to sign a massive, long term, multi-service outsourcing deal with Capita. A quick search online will reveal the many groups and individuals who oppose the outsourcing decision. But here, with Maria Nash, we have a legal challenge. And the problem with legal challenges is that, if they are successful, they create legal precedents. Even if they fail, they attract much publicity.
That’s the least of it. The thing about legal precedents is that, once set, they may be good for lawyers, but they are very bad news for those ministers, councillors and their officials who have to be brave enough to take unpopular – and potentially unlawful – decisions that will be challenged through the courts. So if Maria Nash, Barnet resident and fierce opponent of the whopping great outsourcing planned by her local council, wins she and her supporters could well bring to a halt the wave of outsourcings currently going through procurement processes up and down the UK, and all those being planned. Even if those deals aren’t halted, they will be delayed, pending the outcome of the Nash case. Whoever wins the first round, you can be sure it will go the next. This one could easily go all the way to the Supreme Court. Either way, whoever wins, it will be bad to catastrophic for public sector outsourcers, their shareholders and government ministers.
So, what are the odds on Maria Nash winning? From here, hard to say. But we have been told that she has been given leave bring a judicial review against Barnet’s decision to let this outsourcing contract to Capita. This initial legal process is not a stroll in the park: it is designed precisely to filter out unworthy cases. So we must assume she has a case worth bringing – in other words, one that seems to be properly grounded in law, rather than politics.
As reported, the Nash case is that the proposed Capita outsourcing is unlawful. Why? Because Barnet failed to consult widely enough on its decisions, failed to meet its statutory public sector equality obligations and because the decisions are based on ‘grossly inadequate assessments of the relative merits and risks involved and hence are unreasonable and amount to a breach of its fiduciary duty’. In other words, it is claimed that there are both procedural and actual illegalities in the decisions Barnet has so far reached to outsource these services to Capita. On the fiduciary duty claim, it goes that local councils have a general a duty of trust to their residents and council taxpayers. Can they breach that trust by outsourcing a whole range of services over the long term? And the public sector equality obligation argument is probably the most controversial and ‘political’ of the grounds for this legal challenge. It runs like this: local authorities have a statutory duty to treat their residents equally and fairly in the provision of their services. As far as we can tell, Maria Nash claims that, as a local resident, she is dependent on a range of local social services necessary to enable her to live her life decently, and that the decision to outsource on this scale and over the 10-year term would on the balance of probabilities result in those social services being withdrawn or largely curtailed, either immediately or over the foreseeable term of the outsourcing. So, she says, if that is right, she will be unable to lead a decent life and face being treated unequally, in breach of the council’s duties.
Cases like Maria Nash’s don’t come around very often – perhaps once a generation. They may or may not be politically motivated. But this one does seem to be grounded in law. That’s why it will be so worrying for public sector outsourcers and their shareholders. And come to think of it, for local councils up and down the UK and, ultimately, central government. Why central government? If a precedent is set, it will not be long before the decisions of ministers could be challenged on similar grounds, or at least exposed politically as causing local authorities to outsource, because that’s all they have left after swingeing central government cuts.