Government tries to give outsourcing a boost?

Posted by James Kirkland on July 28th, 2010

Francis Maude’s proposal on scrapping the ‘gentlemen’s agreement’ that has ensured that new workers in outsourced industries receive similar benefits to their TUPE-protected colleagues, as featured in the Financial Times, represents another step along the road towards what the Government believes is the best way to avoid disincentives in the outsourcing industry.

His point that the informal Code is effectively a barrier to entry to new players in the market is not misplaced, but the muted response from the outsourcers themselves tells a tale of hard won improvements in workplace relations as the market has grown. Reduced friction when taking over new business is itself a removal of a significant barrier to entry, and surely a long term benefit. The public sector outsourcing industry – and its workforce – is a much more sophisticated, almost symbiotic, creature than it was in the days of the last Conservative administration.

In addition, greater value for the taxpayer could come from removing barriers like reducing the risk aversion of local government to using new players; easing the complexity of Competitive Dialogue (responsibility for which now sits inside Francis Maude’s empire); or trying to compensate for the advantage of the in situ contractor when contracts are renewed.

Of course, the elephant in the room is the removal of the biggest financial barrier of them all: pensions. Lord Hutton’s commission is surely going to look at how this barrier affects the costs of outsourcing, but the Government should tread carefully if it thinks it can use the barriers to entry argument as a means to tackle the pension deficit via the outsourcing industry.


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