Labour set to end local council outsourcing contracts

John McDonnell

Shares in Britain’s government and public services contractors are in the spotlight today after the Labour Party pledged to extend commitments to renationalise the privatised sector.

All the major stocks in the outsourcing sector have been under pressure over the past half-decade, with the likes of Capita, Serco, Babcock, Kier and Mitie trading at a fraction of where they were, while Carillion went bust and Interserve was only saved in a debt-for-equity investor wipeout.

At the weekend Labour said it would bring in legislation, a Local Public Services Act, to force councils into insourcing, or bringing the delivery of public services back in-house and directly employing their own staff. It is understood John McDonnell, the shadow chancellor and architect of what he called an “insourcing revolution”, wants to extend that to government departments cancelling what her regards as a bad contract.

Outsourcing of public services was introduced during Margaret Thatcher’s reforms to roll back state control.

Announcing Labour’s new policy, Mr McDonnell said that outsourcing had led to “massive failures in service delivery as we saw with the collapse of Carillion. People have had enough and want their services back.”

However, Matthew Fell of the CBI said: “Rejecting the innovation, investment and cost savings suppliers can bring to vital public services and infrastructure is an extreme move, devoid of evidence yet dripping in dogma.”