How the fall of Carillion points the way towards a strong localism and "social value"


It's been held up as the great scandal of privatisation in the UK - for which all the major parties have to take their historic blame. But the collapse and liquidation of Carillion - a huge private company that was contracted by the UK government to execute infrastructure and building services - has also been seen as the opportunity for a reset.

In particular, some believe that local and social enterprises might be best placed to provide local services, than giant and opaque mega-corporations like Carillion. (Let alone the option of the state returning to be the main provider of public services). 

In the Guardian today, Asheem Singh, author of The Moral Marketplaceexplains what went wrong, and what now needs to happen:

Advocates in business, charity and social enterprise have argued for years that the seedy Carillion model of price-obsessed, public service outsourcing – which was near fetishised under the Coalition government – will cost us big in the long run. These outsourcing giants create “pipelines” – massive banks of contracts – put together by teams of young graduates who write bid after bid and submit them to the government, blithely disregarding the impact of their work in the real world.

The result is an endless stream of government contracts, boosted by upfront money and the promise of more to come. The bottom line looks healthy and everyone gets their bonuses. But all of these contracts, amassed as they have been with little thought or care, have only the smallest chance of ever being delivered as promised. 

These companies will now claim the reason Carillion has failed is because the margins are too tight; the austerity too harsh. The public and voluntary sectors know all about the impact of cuts to government spending, but these firms have created a rod for their own backs, undercutting each other just to get an order on the books.

The government has sponsored this race to the bottom by focusing only on price – rather than value or quality of service. This tango between businesses and government, both indifferent to public wellbeing in the face of profit, has been a cancer at the heart of UK society for years.

Advocates in the voluntary and social enterprise sector have not sat on their hands; they have not just grumbled. They have articulated solutions. Social Enterprise UK’s 2012 report The Shadow State argued that the accounts of bidders must be open; that there must be diligence by government and reasoning behind price setting.

Such diligence is surely the minimum we can expect when millions of pounds of taxpayer’s money is at stake. And in 2015, Acevo argued the problem had reached a tipping point and a new concordat was needed: a “community first” test that favours organisations that demonstrate genuine social value, rather than the faceless companies trying to deliver on the cheap. 

It is time to demand these changes. Where public services go out to tender, the preferred partners for government should be social enterprises and charitable organisations, where profits are generally redeployed in the community and people come first. This may require legislation. But if the only thing that comes out of all of this mess is a review of the procurement rules, which adds more administrative work to the application process, then the government will have failed once again.

None of this should be controversial. Placing social value and social enterprise at the heart of the nation’s public services should be the moral mission of any caring government. When businesses like Carillon overreach and explode, it is not just the taxpayer’s wallet that feels the pinch. Vulnerable workers risk losing their jobs, hospitals face being uncleaned, schoolchildren across the country risk going hungry at lunch, because the private companies that promised to deliver those services broke that promise.

Charities and social enterprises must use this scandal as a platform for action. Carillion’s downfall must be the moment the country puts social value back at the heart of its public services.

Note the use of the term "social value" in this last paragraph. The 2013 Social Value Act, from the UK government, defines social value as: "the additional benefit to the community - economic, social and environmental - over and above the direct purchasing of goods, services and outcomes". 

Couldn't it be argued that the way to bring most "social value" to society is for those "goods, services and outcomes" to be sourced locally or regionally? This is the case brought by Locality's new paper Keep It Local

By commissioning local community organisations to provide local services, councils can simultaneously create better, more responsive services and build fairer, more resilient local economies.

We have a strong "localism" theme in A/UK - see our posts on the Barnsley and Preston models in particular, and the work of Chris Cook profiled here. Yet for all those working away on their projects in their communities, it's rare that their activities can be the basis for a direct critique of the top-down structures of the usual political system.

Carillion's crashing fall gives us the basis to national proclaim the power of the local--at least for this week.