Corbyn on Carillion: we'll end outsourcing 'racket' in rule change

Labour will call a halt to the “outsourcing racket” exposed by Carillion’s collapse, by tearing up procurement rules to make the public sector the default choice for providing government services, Jeremy Corbyn has revealed.

Carillion’s collapse has emboldened Corbyn to press home his message that Labour rejects the “dogma of privatisation”.

“We will rewrite the rules to give the public back control of their services,” he told the Guardian shortly after clashing with the prime minister over the issue in the House of Commons.

“Theresa May exposed the failure of the outsource-first ideology at prime minister’s questions when she said the government was ‘a customer’ not ‘the manager’ of Carillion. I’m sorry, but if these are public contracts we should be the manager and not have a middleman like Carillion creaming off the profits.”

In a radical departure from the cross-party consensus of the past 25 years, Labour would impose strict conditions on local authorities and Whitehall departments that would be likely to drastically reduce the use of private-sector contractors.

Corbyn also used a wide-ranging interview with the Guardian to brush off concerns he would be too old to govern by the next general election; to insist Labour MPs should be constantly accountable to their constituents; and to underline his scepticism about some aspects of the EU single market.

He risked infuriating Labour backbenchers by warning that some of the rules Britain would have to accept to remain a member of the single market “do potentially make it harder for us to tackle the outsource-first racket”.

That contention clashes with the thinking of a well coordinated and vocal group of rebels, including Alison McGovern, Heidi Alexander and Chuka Umunna, who are campaigning to keep the UK in the single market and customs union.

Some experts question whether EU rules would limit a future government’s ability to halt outsourcing. Professor Anand Menon, director of thinktank UK in a Changing EU, pointed to a 2014 procurement directive that explicitly stated it was up to member-states to decide “the means of administration” of public services.

“The EU is about fairness between member-states,” he said. “It leaves it up to governments to decide how services are delivered”.

The Labour leader said the UK government was ill-equipped to extract the best deal from giant outsourcing firms, which can outbid each other by undermining their workers’ terms and conditions.

“It’s quite a small number of companies that are involved in this stuff. If you’re looking at major rail contracts, there isn’t a huge variety of companies available to do it, and we too often seem to be held over a barrel by these people,” he said.

He condemned the behaviour of the Virgin-Stagecoach consortium that has received what the former national infrastructure commission chair, Lord Adonis, has called a “bailout” from government on the franchise for the East Coast mainline.

Virgin rejects the idea that it’s a bailout. In a recent blogpost Richard Branson wrote: “The critics argue that Stagecoach and Virgin are somehow benefitting from this. The fact is we have both lost significant amounts of money – well over £100m in total – and have not received a penny in dividends.”

Corbyn, however, said: “What they’ve done is underbid, made a lot of money out of it and then moved on. When the East Coast mainline was publicly-owned, it paid in a handsome profit to the Treasury and it was well-run.”

In future, he said, “what we’re saying is, the preferred option on direct services should be the public option – and that means there should be a fairness in the delivery of these services”.

Labour’s 2017 manifesto pledged to use government procurement contracts to encourage firms to recognise trade unions and pay taxes in the UK.

Corbyn said: “Now we must go further. We are developing policies to make public delivery of public services the preferred option. We will put an end to the dogma of privatisation, which has hollowed out the public realm and held back our economy and services.”

Under a Corbyn-led Labour government:

• Local authorities and Whitehall departments would only be able to outsource a service if it could be shown to be failing.
  

• If a decision was taken to outsource, there would be a statutory requirement to prepare a “realistic” in-house bid, “well-resourced with senior staff and workforce representatives”.
  

• A full public consultation would have to be held.
  

• A new public value contracts commissioner would “ensure that any tender process is awarded on the basis of public value rather than which company is the cheapest employer”.
  

The shadow chancellor, John McDonnell, has also said Labour will review PfI projects, of the kind that a national audit office report warned on Thursday will cost the taxpayer a total £200bn over the coming decades.

On Brexit, where Corbyn has been accused of a lack of clarity over the kind of relationship Labour would like to maintain with the EU27, he repeated his assertion that it was not possible to remain inside the single market without being an EU member.

“The single market requires membership of the EU. We can have a relationship with the single market, and that is what we want to have, and want to negotiate,” he said.

When Corbyn made similar remarks last weekend, the shadow Northern Ireland secretary, Owen Smith, said he found them “slightly puzzling”, adding, “it is clearly possible for us to be outside the EU and inside the single market, as is Norway and other countries”.

The Labour leader insisted: “Norway is not a member of the single market. It accepts single market rules for the most part, but it does have some differences, particularly on fishing.”

Corbyn also emphasised that Labour would seek to negotiate a Brexit deal loose enough to allow Britain to escape aspects of current EU competition policy, including the obligation to offer large public contracts to firms across the EU.

“I would want us to have a trading relationship that would mean that we have tariff-free access to the market. I would also look at the competition policy, because there are elements of the direction of travel of Europe that I’m unhappy about,” he said.