Exclusive:Private profit 'draining £3bn a year' from Scots public services, says report

A Scottish Trades Union Congress (STUC) report estimated that between £2bn and £3bn spent on outsourcing every year in Scotland’s public services goes to private profit.

The STUC said that Scotland’s public money is being taken away from vital public services, including health, social care, education and local government and into the pockets of investors, global corporations and private equity funds.

Outsourcing is when a service is paid for by the public service but is carried out by an external company.

It can often happen due to a lack of capacity - for instance in the NHS or care sector.

Roz Foyer, STUC General Secretary, said: “This report exposes the true cost of Scotland’s rip-off outsourcing crisis - a systematic extraction of public wealth on an industrial scale.

“Billions of pounds that should be paying for health, care staff, cleaners, refuse workers and local services are instead lining the pockets of shareholders and private equity interests with not a penny reinvested into our public services.

“We are urging the Scottish Government to act now. The bear minimum they need to do is ensure the same level of scrutiny is applied to the extent and quality of privately delivered public services as the Government applies to direct provision.

“However, you cannot build a Fair Work economy on the backs of the private profiteering of our public services. Insourcing, directly awarding services and embracing trade unions as partners in that endeavour is not only fairer but also economically smarter.

“Every pound kept in public hands supports local jobs, local economies and better services.

“As we approach the election, Scotland cannot afford political silence from prospective MSPs who ignore the silent privatisation of Scotland’s public services. Our public services are too important to be auctioned off to the lowest bidder and should not be handed to profiteers.”

Scotland spends more than £16bn a year - out of a total of £111bn public expenditure buying services, goods and works from external suppliers.

The report said that “on a conservative estimate, between £2bn and £3bn per annum goes to profit and other mechanisms that private companies use to extract money from the outsourced spend of the Scottish public sector”.

The report - carried out by the Association for Public Service Excellence (APSE) on behalf of the STUC - highlights the private-dominated care sector, where 79 per cent of care home places are now in private hands and more than 20 per cent of income leaks out of the system to corporate owners and investors.

The services that are most commonly outsourced, such as social care and soft facilities management, are overwhelmingly staffed by women.

The report added that sacrificing the pay and pensions of thousands of low paid women is discriminatory, unfair and counterproductive.

Meanwhile, the Scottish Government’s Public Service Reform strategy has set out steps to create more efficient and joined up public services.

While the use of private contractors is an operational matter for individual organisations, using contractors can allow essential skills to be used in an effective manner.

A Scottish Government spokesperson said; “Through our Fair Work First policy we are leveraging employers’ commitment to fair work by applying Fair Work principles to public sector contracts where feasible.”