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The Industry’s Voice No.3

13 August 2008

Outsourcing – the debate warms up
The provision of public services on increasingly limited budgets is at the heart of the political debate, and according the BSA’s Mark Fox, the DeAnne Julius report puts the case for outsourcing

The UK outsourcing industry is a major driver of the UK economy, across every region of the country. It delivers choice, innovation and diversity. These are the talents and the attributes that will help see it through the increasingly tough economic and political environments. The BSA, as the industry’s principal representative body, is well placed to argue the case for light regulation and competitive taxation with the Government and in Parliament. This work is even more important in the tough economic times arguably than it is in the good times.

In recent weeks the BSA has played a leading role in the drawing up of the DeAnne Julius review of the Public Service Industry, commissioned by BERR Secretary of State John Hutton, and the publication of the Joint Statement on Access to Skills. We welcomed the findings of the review which praised the role of the industry in delivering the full range of public sector services. It outlined ways to improve engagements with
the private sector and encouraged a broader role for the industry.

One of the BSA’s principal roles is the champion the benefits of outsourcing across the private and public sectors. The industry plays a crucial role ion keeping the economy flexible and dynamic and the Julius Review provides many new and good reasons why the industry’s role in delivering public services needs to be deepened and broadened.

Worryingly, however, the review was given a cool reception by the trade unions and in recent weeks union
leaders have renewed their calls for a slowing down of government outsourcing. The BSA is committed to positive and constructive relations with the unions, as evidenced by our participation in the Public Services Forum, but they will not inhibit us from energetically championing the real contribution the industry makes to creating employment, providing skills and training and improving productivity.

The provision of public services on increasingly limited budgets is at the heart of the political debate and is set to be one of the dominating themes of the General Election, whenever it comes. Competing visions about how this can be done most effectively have been outlined in recent weeks by Gordon Brown and James Purnell for Labour, and Davids Cameron and Willetts for the Conservatives.

The stakes are high because at the centre of the debate is how a whole swathe of central and local government services should be delivered from education, health, defence through to environmental,
transport and welfare services. That is why John Hutton has asked DeAnne Julius to conduct a review of the Public Service Industry.

At the moment all the political parties agree that the private sector has an increasing role to play in delivering public services but there is little consensus on how it should do it. There is no agreement at all
between the parties about how the private sector’s involvement in public sector service delivery should be
characterised. The Government, led by John Hutton and his Special Advisor John Williams, have developed
the concept of the Public Service Industry. The Conservatives are deeply sceptical of the notion and talk
straightforwardly about outsourcing contracts to the private sector.

In the middle of this increasingly heated debate sits the UK outsourcing industry. The industry is the largest in the world, second only in size to the United States, and operates across the private as well as the public sector. The public sector part of the industry, of course, is the bit that grabs the headlines and interests politicians and policy makers.

The scale of the industry in the public sector alone is impressive:

● In 2007/8 its revenues totaled £79bn, generating £45bn in value added and employing over 1.2 million people.

● Add indirect growth and employment the PSI contributes £88bn of value added to the GDP and supports
2.3 million jobs.

Over the period up top and through the next General Election the BSA and the industry have to negotiate our
way through an increasingly heated and fractious political debate. This task is increased by the very real economic challenges everyone is facing.

So this is an important time for the BSA and the industry – and it is an exciting one too. There are huge opportunities to explain the many positive aspects the industry brings across the private and public sectors. We will continue to work with policy makers and regulators to ensure the environment remains as competitive as possible and where necessary take on the critics to promote the value of what we offer.

● Mark Fox, is chief executive of the BSA – The Business Services Association

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