Proof Private Sector Outsourcing Works

Carillion went tits up this week, but what does it actually mean for its contracts, employees and suppliers? Well very little to be honest. This is work that needs to be done, jobs that need filling and services that still need to be supplied.

Instead of fleecing the the taxpayer as many would like you to believe Carillion was operating on too thin a margin. The fundamental reason outsourcing services to organisation like Carillion occurs is because they can do it cheaper and more effectively than the state. Simply they “compete” and the state does not.

Trade unions claim that this kind of work should be undertaken by the state. State run businesses would still need to sub-contract projects to the private sector, as Carillion did with its suppliers. The only change would be the taxpayer picking up the bill for failure. Something that in this case the taxpayer has been protected from.

It was right of the government to not “bailout” or “pick up the tab”. The shareholders and creditors will lose the money. Pensions will be protected by going to the industry-funded PPF, setup after 2004 Pensions Act. Public services will revert to the government and be re-tendered or contracts sold on. This is not a “bailout”, it is “going bust”.

The government spent time working with Carillion to try and keep it afloat by offering it tenders with well thought through escape routes. Unfortunately this precautionary measure was not enough. The only really losers will be private sector suppliers who over extended themselves doing services for Carillion who haven’t been paid. Those who don’t have the cash flow to protect themselves from industry shocks at least.

The taxpayer will not lose out, but those who backed Carillion will. Isn’t this a win for private sector outsourcing?