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Saturday, May 21, 2016

The cost of privatisation

Politicians in Wales have always been strong advocates of merging back office functions within the public sector so as to achieve savings which can be released for front-line services. What they often don't say is that the only realistic way to achieve this is through outsourcing those functions to a private sector company.

Attempts to deliver such savings in Wales have led to mixed results, not least in South East Wales where the costs of delivering this change proved to be a major obstacle. And of course as this reform involves significant change-management and investment in ICT, then public sector bodies often have to buy in expertise and are at the mercy of these companies for cost and savings projections.

The Guardian reports on one such attempt in which the National Audit Office concluded that a Cabinet Office plan to privatise some of Whitehall’s office functions and save up to £500m a year has instead cost £4m and is beset with problems.

Ministers transferred back-office functions – human resources, payroll and accounts – to the private sector two-and-a-half years ago in a plan which was supposed to “radically improve efficiency across departments”.

Auditors say that the “shared services” initiative did not achieve the projected saving of at least £128m a year. Instead it has saved £90m, £4m less than it has cost.

In this particular case, we need to be careful what we wish for and be absolutely certain that any such project can deliver on what is promised.

If we are to proceed to do this in future then we must reinforce the expertise available to the public sector in evaluating such initiatives.
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