A Domesday Book for public service contracts – better data, better value for money

We do know more about aspects of the commitments entered into by the state. A process known as Whole of Government Accounting, inaugurated under the Brown government, and the Office of Budget Responsibility, created by the Cameron coalition, were important reforms. They show multi-year trends in spending and revenue and allocations to departments but at high level. Poor data make it hard, maybe impossible, to assess the marketisation of services in recent years.[1] At a greater level of detail, public bodies are now required to publish details of their external spending and list procurements on their websites. But the picture is far from clear. After the tendering stage, contracts do not have to be put into common reporting templates. As a result, what public bodies know is not compared and contrasted with what neighbours or other sectors may have learnt. MPs complain that it is “almost impossible” to find out what is being spent on particular services, [2] including contracted services.

Since the early 1980s, the government has massively expanded the purchase of services from private companies. We know this from the fortunes enjoyed by the companies themselves – from their stock exchange performance and their executives’ pay. These new ‘markets’ in contracting are dominated by a handful of firms, including Capita and Serco – companies specially created to exploit burgeoning profit opportunities. Yet the phenomenon has been little studied. There is no taxonomy of service contracts; it is often hard to tell where the purchase of goods (desks, energy, vehicles, laptops) merges into outsourcing (service contracts).

The Treasury exercises strong control over revenue and budget aggregates. It knows how much is spent in total but pays surprisingly little attention to the how of spending – to performance and efficiency. The UK government falters when it comes to gauging whether policies make a difference and how spending decisions affect households and communities, or on whether councils, trusts and departments are efficient, effective and equitable. Because of these gaps, accountability suffers: parliament and citizens lack the tools to hold decision-makers responsible.

Yet the Treasury’s own spending manual says that spending decisions, including outsourcing, should be conceptualised and measured in the round. [3] The ‘extra-contractual’ effects of letting a contract should be counted in, it says. A council should not let a contract with the result that staff are made redundant without factoring in the net cost to the public purse of any resulting spike in benefits payments to jobless workers – and any effects on their health and wellbeing, which may not push spending up immediately but may have longer-run consequences. A council may not bear these unintended contract costs itself but the Department of Work and Pension’s budget will. A risk here is ‘cost shunting’, where savings in one programme produce costs elsewhere. Even if the Department for Health and Social Care knew about NHS contracting (and it’s unclear whether it knows much at all), it does not necessarily share information either with the Treasury and Cabinet Office or other departments. The same happens with the Department of Housing, Communities and Local Government (which has the smallest commercial unit of all Whitehall departments) and council contracting.

In June 2018 David Lidington, the Cabinet Office minister, said the ‘social value’ of contracts should be counted in (Gov.uk 2018). Social value entailed, for example, challenging contractors on their equality and diversity record. That surely means publishing data on areas such as ethnic minority staffing or the gender pay gap. To avoid, as the minister put it, “too narrow a focus on value for money” entails knowing much more about contractors – who they are, the extent of their public sector involvement, their performance as well as specific information about their workforce. To the minister’s list could be added trade union recognition, location of headquarters and regional presence and other indicators of social value.