Prime minister-in-waiting Andy Burnham takes aim at outsourcing

Failure in play

As reported by Computer Weekly in October last year, even before Capita took over the contract, the Public Accounts Committee (PAC) warned the government about missed milestones as being of concern, among other things.

Several months later, on 1 December, Capita took over the pension scheme, which has 1.7 million members, from MyCSP. But by January this year, an HMRC troubleshooter had to step in to lead an “urgent recovery plan” amid difficulties following the transfer. The problems continued, with huge delays in paying out pensions, leaving many scheme members in financial distress, including people with no other source of income receiving no pension.

Despite the obvious failures of Capita, the challenges Burnham will face in bringing services in house were laid bare in a recent joint Public Accounts Committee (PAC) and Public Administration and Constitutional Affairs Committee (PACAC) hearing, which examined the disastrous contract.

Cabinet minister Nick Thomas-Symonds had previously described the contract as being a prime candidate for insourcing, but tellingly although he stated he “would insource” tomorrow, this was cautioned with the inevitable “if possible”.

He later told the joint PAC/PACAC Parliamentary committee meeting that “it is for the birds” to think the contract could be terminated right away. He said it could create an “immediate, catastrophic operational vacuum”, stating: “I cannot replace a complex pension operation overnight.”

In the same meeting, PACAC chair Simon Hoare MP described a two-year period to get the in-house resources and service up and running, and suggested that in this interim period Capita would lose incentive.

“What is today a bad situation then suddenly gets 10 times worse,” he said, telling the joint hearing. “Isn’t the stark issue, in essence, a company like Capita has the private parts of HMG [His Majesty’s government] very firmly in its grip?”

Switch from outsourcing ‘easy to say’

Mark Lewis, specialist tech and outsourcing lawyer at Stephenson Harwood, said what Burnham is reported as promising is “much easier to say than to deliver”, adding: “It’s most likely that he and his team haven’t begun to cost bringing major – [or] even smaller – outsourcing services in house, paying out early contract termination costs, and meeting TUPE and redundancy costs. This could hollow out his promise as a prohibitively expensive and complex exercise.”

The TUPE implications alone would involve taking private sector staff on to the public sector payroll with all the ongoing added costs that would follow, meeting the costs of any redundancies for those private sector staff who didn’t transfer, along with enhanced redundancy payouts for staff with those rights in their employment terms. 

Lewis questioned whether the UK public sector would be any better at delivering and managing insourced services than it has been at procuring and managing outsourced services: “Looking at the long and mostly troubled history of central and local government procurement and the management of outsourcing programmes, I think we know the answer.”