What Labour’s new policy document on insourcing public services should say about social care and participatory democracy

On 20 July Labour’s Shadow Chancellor John McDonnell launched a new Labour Party document, Democratising Local Public Services: A Plan for Twenty-First Century Insourcing. [1]

This paper discusses its implications for social care, referring to Birmingham as a case study. 

Democratising Local Public Services commits a future Labour government to reversing four decades of outsourcing by local councils by legislating to ensure that the default option for councils is for the public sector to deliver its own services. The section headed ‘How Outsourcing Has Gone Wrong’ identifies two key issues with outsourcing: poor quality of provision, and lack of public accountability:

First, there is now widespread evidence of failures in service quality in services provided through outsourced contracts’ (p12)

…the second major harm from outsourcing has been a lack of accountability in different forms. The Information Commissioner has noted that just 23% of the public polled thought that the activities of private providers of public services were accessible. Information about outsourcing companies can only be requested by the public if it is held by a public authority on behalf of that outsourcing company. (p13)

How outsourcing has created the market in social care

Social care is the largest single area of council spending, most of which goes to external providers. It is therefore very surprising that there is only one reference to social care in the 53 pages of the Labour Party report. It’s a regrettable missed opportunity because social care exemplifies the two major problems with outsourced provision that the Labour party report identifies and is a prime candidate for insourcing.

The Thatcher government created a lucrative new market in social care by forcing local authorities to spend 85% of their social care budget in the private sector, decimating local authority provision. This is what The failure of privatised adult social care in England: what is to be done?, a 2016 report by The Centre for Health and the Public Interest, says:

[Under Thatcher social services] became a prime field for the new neoliberal policy of outsourcing public services to the private sector. […] the 1990 National Health Service and Community Care Act re-cast local councils as ‘enabling authorities’ rather than providers of care services, such as care homes. Funding for this new role was accompanied by a central government requirement that 85% of it should be spent on the ‘external’ purchase of care services from the private sector, so that local authorities began to contract with private providers to provide care rather than deliver it themselves.

Since then the transformation towards a market in adult social care has progressed steadily, with no attempt by any government to halt or reverse the trend. [ ….]  In 1979 64% of residential and nursing home beds were still provided by local authorities or the National Health Service; by 2012 the local authority share was 6%; in the case of domiciliary care, 95% was directly provided by local authorities as late as 1993; by 2012 it was just 11%. This also means the bulk of the adult social care workforce – around 72% – is now employed in the private and voluntary sectors, along with another 14% employed by individual service users making use of ‘personal budgets’, leaving just 14% employed by local authorities.’ (pp7-8)  [2]

The social care market is highly fragmented. As Bob Hudson says [3]:

There is no compact adult social care service that can be easily repatriated into public sector ownership. Rather the sector is characterised by a multiplicity of fragmented, competing providers. The care home sector supports round 410,000 residents across 11,300 homes from 5500 different providers (Competition and Markets Authority, 2017). The situation in home care is even more diverse with almost 900,000 people receiving help from over 10,000 regulated providers. (2018, pp1-2)

However, the prospect of exceptional profits attracted big equity investors into this new market. They bought up small providers and opened much larger homes for maximum profit, employing staff, largely women, on low pay. According to Social Care as a Local Economic Solution for the West Midlands, a report by David Powell, New Economics Foundation, with Karen Leach and Karen McCarthy, Localise West Midlands, published in 2017 [4]:

Built into every contract to a major provider will be the underlying need to deliver a significant return on investment – CRESC [the Centre for Research on Socio-Cultural Change] found that big care providers expect to offer 11% returns to investors (including costly debt repayments which often return to the parent operating company). The business models of the largest five residential care chain companies in the UK offer returns to investors that account for as much as 29p in every £1 of their costs – the second biggest drain on expenditure after wages.

The care ‘market’ is increasingly consolidating towards such providers. As of 2015, nearly 20% of all care beds were provided by the ‘big four’ care companies – Four Seasons, Bupa Care Homes, HC-One Ltd, and Barchester Healthcare. They are gradually increasing their market share – buying up small chains and taking over provision from family-owned homes. (p12)

But now the care market is in crisis because the savage government cuts in local authority budgets have squeezed the flow of profits to the care businesses. More than 400 care home operators have collapsed in the last five years, including over 100 in 2018 (Guardian 12 March 2019).

Birmingham as a case study

I am going to use Birmingham as a case study. While, as the largest local authority, it is not typical of local authorities in England, I suspect it is quite typical in terms of the issues that are raised.

The Health and Social Care budget for 2019/20 is £325.706m, which is about 38% of the Council’s total net expenditure on services. Social care is the Council’s biggest service expenditure – but what is it spent on? There is no detailed breakdown in the City Council’s current Financial Plan, but in the minutes of the Health and Social Care Overview and Scrutiny Committee meeting on 20 November 2018 the Report of the Cabinet Member for Health & Social Care states that:

The total budget in 2018/19 for the portfolio is £336.1m. […]

  • 59% of the net total budget is allocated to external packages of care.
  • 9% is spent on specialist care services.
  • 11% is spent on assessment and support planning (Social Work).
  • 7% of the budget is spent on Supporting People.
  • 14% is spent on commissioning and other services.

So 59% of the net total budget for the portfolio is allocated to ‘external packages of care’. That is about £200m – not far short of a quarter of the whole controllable Council budget of £855m.

What are these ‘external packages of care’? The Cabinet member’s report doesn’t say. But what is being referred to here is what the Council spends in the local social care market. This may also include some, perhaps most, of the other 41% of the total budget.

It can be assumed that the large majority, if not all, of the ‘external packages of care’ refers to contracts with providers of care homes and supported living. These providers are listed on the Birmingham City Council website ‘Care Homes and Supported Living 2018’. [5] They total 700 providers, comprising 434 Care Homes, 196 Supported Living, 34 Home Support (Specialist – Sensory) and 41 Home Support (Specialist – Approved Premises) (totalling 705).

This raises a series of questions. One set concerns the quality of provision, for which the only information provided is the grades according to the Care Quality Commission listed for each provider. But there is no information about basic issues of public interest which are crucial for public accountability including:

  • Who are the owners of the providers? How many are owned by the big care companies?
  • How many clients does each provider support?
  • How many employees does each provider employ (the large majority of whom will be women)? What are their conditions of employment, including pay, progression, and union recognition?
  • What are the details of the contracts allocated to the providers by the Council?
  • What are the providers’ profit margins?

None of this information is easily publicly available and most of it is not publicly available at all. There is no information on the Council website of who the owners are of the 700 providers, with a handful of exceptions. One is Sevacare, which has three branches with contracts with the Council, in Hall Green, Kingstanding and Sutton Coldfield. Another is Carewatch, with a provider in North Birmingham. All have CQC Quality Ratings of Good. Information about Sevacare and Carewatch is publicly available because they are the fourth and fifth largest home care companies respectively in the country and feature in an investigation of The Home Care Business by CorporateWatch in 2016. [6] Here, slightly adapted and abridged, is what CorporateWatch says about them. First, Sevacare:

Sevacare was founded in Walsall in 1994 and has since grown to become the UK’s fourth biggest home care provider. It is owned by Ravi Bains and family. It has 54 branches, 9,600 clients and 5,200 employees. Annual revenue is £66m, with payouts to the owners in the last five years of £4.9m. ‘And on top of this Bains has ensured his roles as Chairman and CEO are well-remunerated: he made £410,000 in 2015 and similar amounts in previous years, putting him at the top of the list of well-paid home care bosses.’

Inspections by the Care Quality Commission into 36 of Sevacare’s branches over the last two years found almost half were unsatisfactory. Of these, 14 branches were rated as “requiring improvement”.

They also found calls often started late as not enough time was allowed for workers to travel between appointments, and that part of the service was short-staffed.

Depending on how long care workers have to travel between appointments, such low rates will likely leave the actual rate of pay closer to the minimum wage of £7.20.

And this is what CorporateWatch says about Carewatch:

Carewatch is the UK’s fifth biggest home care provider. It has expanded rapidly since being bought by corporate investment firm Lyceum Capital in 2008, buying up smaller rivals, signing contracts with local authorities and working to increase its service to people paying for their own care. Carewatch both provides care directly and franchises out operations to smaller business who run branches themselves under the Carewatch brand. Most of the recent acquisitions have been of franchisees, thereby bringing more Carewatch branches in house. It now has 76 branches, 28 of them franchised. It cares for 16,000 people. It employs 7,700 employees. Its annual revenue is £63million. Payouts to owners in the last five years amount to £17.1million (accrued). The highest paid director’s salary and other benefits is £306,000.

Lyceum is a private equity investment firm based in central London. It was founded by ex-Lehman Brothers banker Philip Buscombe, who continues to serve as Chairman and is married to Conservative peer Peta Buscombe. Electoral Commission records show he donated £4,000 to Tory MP Alok Sharma before the 2015 election. Lyceum also owns the EAT sandwich chain and the care home business Sequence Care Group. Of Sequence’s 11 services registered with the Care Quality Commission, three have been rated as “inadequate” and placed in special measures, with another three “requiring improvement”.

The social care workforce

Information about the workforce in the 700 social care providers with contracts with Birmingham City Council is not available, but there is information for the West Midlands in the report Social Care as a Local Economic Solution for the West Midlands. Social care is a significant section of the local economy. The annual gross expenditure on adult social care in the West Midlands is £2 billion, representing 35% of local authority spending. 165,000 workers are employed in the social care sector. Of these 77% are employed in the private sector, 7.5% directly by local authorities, 7% in the NHS, and 8% through ‘direct payment.’ (p15). A large percentage of those in the private sector will of course be employed by private providers contracted by Birmingham City Council, as by far the largest local authority in the West Midlands. 37% of all employees in adult social care work for the biggest 2% of companies. P12. Two-fifths of social care workers in the West Midlands are employed in ‘microenterprises,’ with fewer than five employees. (p21).

The report points out that demand for social care is increasing:

The West Midlands will need an ever-greater number of social care jobs – an extra 25,000 jobs by 2025, according to Skills for Care…. It notes that there is likely to be “a large increase in demand for labour in the sector. This is driven by demographic change and will mean employers and policy makers need to look wider than the traditional demographics for recruitment in the future.” (p15)

This information about Birmingham and the West Midlands is likely to be quite typical of the situation across England. It demonstrates that social care is a substantial sector of the national private sector economy, paid for by local councils but with little public accountability beyond basic measures of quality because ‘commercial confidentiality’, and councils’ failure to make information public, protects contracts from public scrutiny. It is a perfect example of Labour’s argument in Democratising Local Public Services: A Plan for Twenty-First Century Insourcing of the need to end outsourcing and bring public services in-house:

…insourced provision is more democratically accountable. This is not a value judgment or a matter of impression; it is a matter of law.

…This means that citizens can challenge inhouse provision to provide justification for its actions, and can challenge local councils when they violate human rights, or act unlawfully or unreasonably or follow an improper process.

In addition, and perhaps more importantly, residents can hold councils to account through their local councillors, or through attendance at council meetings. In contrast, private providers (as well as not being subject to the Human Rights Act, and the FOIA, at least in most cases) may be far more secretive, untransparent, and opaque. (pp19-20)

Councils bringing social care provision in-house

Democratising Local Public Services: A Plan for Twenty-First Century Insourcing proposes

…an insourcing framework that is capable of being implemented by a Labour Government. But there are also aspects of this framework that can be used by councils, and things that can be done now, without a change to the law. (p6)

In both scenarios councils could bring social care contracts in-house once they have reached their expiry date. However, there is a fundamental question of what capacity a council has to do so and take on the responsibility of provision, and this would be particularly important in the case of social care given the scale of provision. Part IV of the report, ‘What Councils Can Do Now’ says:

Even without a legislative framework, individual councils could decide to adopt the core of the policy framework put forward here. They could decide as a body that all contracts that reach the end of their expiry date, or which are terminated, should generally result in insourcing.

The ten questions to determine insourcing or outsourcing could also be asked as councils make these decisions. Phrased slightly differently, they are the following:

  1. Can the council be satisfied that the service is amenable to precise measurement and evaluation by contract?
  2. Can the council be satisfied it has sufficient contract management skills?
  3. Can the council be satisfied there is a sufficient existing supply of high- quality service providers?
  4. Can the council be satisfied there is a sufficient existing workforce, in the public or private sector, with adequate skills and capabilities to deliver high- quality services?
  5. Can the council be satisfied that the service does not require stable, high-quality public premises?
  6. Can the council be satisfied there is no strategic need for public capacity and expertise to control and improve the service?
  7. Can the council be satisfied there is no evidence of greater cost efficiency if the service is provided inhouse?
  8. Can the council be satisfied that the service does not involve significant contact with at-risk groups, exercise of coercive powers, or risk of infringement of people’s rights?
  9. Can the council be satisfied that the service is not a de facto monopoly, or one that demands exceptional investment?
  10. Can the council be satisfied that the service does not make exceptional demands on workers? (p42)

The Labour party report claims that

Adopting this framework, even without the structure that new legislation would bring, could still improve standards, result in more transparent decision-making, and encourage outsourcing companies to lift their conduct where outsourcing is still appropriate. (p43)

Councils should open the books on existing contracts to make them publicly accountable

This framework is intended to provide a set of criteria for councils to decide whether they have the capacity to bring out-sourced services, including social care provision, in-house. But what the Labour party report doesn’t do is challenge existing out-sourced provision by calling on councils to end the secrecy and open the books on the existing contracts they have with private sector providers in order to make them publicly accountable. It’s a serious omission in the report.

The report does contain a list of ‘Minimum Contractual Standards for Outsourcing’ (p26) which could be used to challenge existing out-sourced providers. Even though the legal powers aren’t available to enforce them they could be means to mobilise public support, including by social care users and workers, and put pressure on providers to make concessions. This is the list of headings:

(i) Making outsourced activities subject to the Freedom of Information Act

(ii) Subjecting private contractors to the Human Rights Act

(iii) Workers’ rights

(iv) Local supply chains

(v) Gender pay audits, equal pay, and equality

(vi) Addressing anti-democratic contractual periods

(vii) Community benefit

(viii) Monitoring of performance

(ix) Excluding certain parties from the contracting process

But Labour needs to go much further. It should be demanding that councils implement the following Recommendations of the Centre for Health and the Public Interest report The failure of privatised adult social care in England: what is to be done?:

  1. Where a public body has a legal contract with a private provider, the contents of that contract should be fully transparent.
  2. The ownership details of companies providing public services under contract to the public sector should be available for public scrutiny.
  3. Private companies in receipt of public services contracts should be domiciled in the UK and subject to UK taxation law.
  4. Consideration should be given to giving local electorates powers to call to account any provider judged to be providing an inadequate service.
  5. All providers should be required to comply with minimum standards of workforce terms and conditions and to accept collective bargaining rights.
  6. There is scope to impose a contract on private companies that places an upper limit on what constitutes a reasonable return on investment. This scope should be exploited.
  7. Organisations with a social purpose should be defined as the preferred providers of care and support services.
  8. Steps should be taken to rebuild providing capacity in the statutory and not-for-profit sectors. (p21)

In particular, recommendations 1, 2 and 4 refer to actions within the power of local councils to implement immediately. Recommendations 1 and 2 call for councils to ‘open the books’ about out-sourced contracts to enable public scrutiny and accountability. And recommendation 4 would enable service users and citizens generally to campaign for improved services where needed. Of course only one of the eight Recommendations specifically refers to social care: the rest apply to all out-sourced contracts, all of which should be opened up to public scrutiny.

Small-scale provision and personalised care

The evidence is that what people want from social care is small-scale provision and personalised care:

The Care Quality Commission’s 2014-17 review, ‘The state of adult social care services,’ summarised its findings of comprehensive inspections into the sector across England. It found that:

  • High performing care providers were those that had the strongest cultures around person-led care, “where people are at the centre – treating people as people, as opposed to recipients of care.”
  • Community social care providers were rated the highest, with 87% of providers achieving a “good” or “outstanding” rating from the Commission.
  • Smaller care homes are rated better than larger ones: 89% of both small nursing and residential homes were rated good or outstanding, compared to just 65% of large nursing homes and 72% of large residential homes. (Social care as a local economic solution for the West Midlands, p13)

This could be provided by small council-owned care homes and council-owned supported living provider organisations, or if the council did not have the capacity, by alternative non-profit forms of ownership in line with the Labour Party consultation report Alternative Models of Ownership, published in 2017 and followed up by a conference headed by John McDonnell in 2018.[7]  It advocates, as well as nationalisation and municipal ownership, various forms of community-owned and worker-owned non-profit social enterprises, including co-operatives.

Social care as a local economic solution for the West Midlands notes that ‘Research […] has suggested that the costs of social care provision by microenterprises need be no higher than those of larger companies and that the qualitative experience of a more personalised approach to care can be far higher.’(p16), though at present ‘Less than 1% of the adult social care market is met by cooperatives; in the West Midlands’ (p11).

Participatory democracy at every level of the local social care system

Whatever the forms of ownership the issue of democracy is central. The Labour Party Consultation Paper, Democratic Public Ownership, published in September 2018 with a Foreword by John McDonnell and Rebecca Long-Bailey, establishes some principles and arguments which have fundamental implications for local councils and services such as social care. [8]

Public utilities, services, and other enterprises were owned for the public, but the public itself had little say in how they were run and for what purpose.

There is … considerable evidence to suggest that greater “co-production” of public services – the involvement of citizens in how public services are produced – does produce beneficial effects in terms of performance, as well as making public services more accountable to citizens and enhancing people’s sense of ownership and support.

Democratic participation can enhance the effectiveness of publicly owned enterprises by tapping into grassroots forms of knowledge from the direct experience of employees and users of public goods and services.

New forms of democratic ownership should incorporate the users of public services as key stakeholders in the decision-making process. (no page numbers)

What is being proposed here is genuine participatory democracy, not fake ‘co-production’, where popular participation is restricted to the lower levels of the council’s policy-making structure [9]:

There may be co-production at the level of interpersonal professional-client relations or community-provider relations but there is no co-production at the strategic level of the design, commissioning and democratic accountability of services, beyond any limited consultation exercises, because there is no participation by the users of services or the workers providing services in the political bodies in the Town Halls and Council Houses where the strategic decisions are made. (p3)

Democratic Public Ownership has to apply at every level of social care provision, from the individual to the local community network to the local council. As the new campaign Reclaim Social Care says, [10]

Social Care should be

  • Locally provided, locally accountable and designed as far as possible by service users
  • Addressing people’s aims, aspirations and choices not just bare needs

The responsibility of the local council is to enable and support this multi-layered participatory system of policy and practice, of structures and relationships, to flourish, ensuring that at each level the users of the social care service and the workers in it have an effective say in how it is run. This includes ensuring that the council’s social care policy and strategic decision-making are open to effective participation by service users and workers, and citizens in general.

In the case of co-operatives and other forms of social enterprises they would need to be established in formal partnerships with the local council to guarantee participation and accountability.

The reformed council structures to enable participatory democracy might include a Social Care Committee with representatives of service users and workers as well as councillors, a similar Social Care Scrutiny Committee, and Social Care public forums at whatever scale(s) people choose. Not displacing elected representative government and the role of local councillors but complementing it with opportunities for direct participation by citizens in the policy process: a new combination of representative and participatory democracy. (My recent paper ‘Co-production, social care and participatory democracy’ makes some specific proposals.)

It is a fundamental weakness of the new Labour party document Democratising Local Public Services: A Plan for Twenty-First Century Insourcing that it ignores this whole issue. There is not a single mention of the two key Labour party documents Alternative Models of Ownership and Democratic Public Ownership in its 53 pages, in spite of numerous references to other publications. It defines democratising only in terms of services being run in-house by local councils, but that in itself is no guarantee of public participation. Councils also require a culture of public participation and the structures and processes to ensure it at every level by service users, service workers and citizens generally.

Birmingham City Council should publish now its plans to bring its out-sourced social care services in-house

Birmingham Council’s Local Manifesto 2018-2022 is titled ‘A Rebirth of Municipal Socialism’. It promises

We will re-state the case for the municipal provision of services in Birmingham, heralding a new age of municipal socialism.

And the Labour council in Birmingham will lead by example, calling time on the misplaced notion that the private sector always trumps the public sector by adopting a policy of in-house preferred for all contracts.

That was published in March 2018, a year and a half ago. Where are the detailed plans to put this policy into practice – and specifically for social care, the biggest sector of the Council’s outsourcing?

And when will the Council open the books and make public these and all its other out-sourcing contracts so there can be genuine public accountability?


Richard Hatcher

1 September 2019

Some of the material in this paper appeared in ‘The Council Budget – time to open the books and change policy: the case of Adult Social Care’. Birmingham Against the Cuts, 21 March 2019 https://birminghamagainstthecuts.wordpress.com/2019/03/21/the-council-budget-time-to-open-the-books-and-change-policy-the-case-of-adult-social-care/.


1.       The Labour Party (2019) Democratising Local Public Services: A Plan for Twenty-First Century Insourcing. http://labour.org.uk/wp-content/uploads/2019/07/Democratising-Local-Public-Services.pdf

2.       Bob Hudson (2016) ‘The failure of privatised adult social care in England: what is to be done?’, The Centre for Health and the Public Interest. https://chpi.org.uk/wp-content/uploads/2016/11/CHPI-SocialCare-Oct16-Proof01a.pdf

3.       Bob Hudson (n.d.) ‘Adult Social Care: An Irretrievable Outsourcing?’ https://www.healthcampaignstogether.com/pdf/Hudson%20Social%20Care%202018.pdf

4.       David Powell, New Economics Foundation, with Karen Leach and Karen McCarthy, Localise West Midlands (2017) Social Care as a Local Economic Solution for the West Midlands. https://neweconomics.org/uploads/files/West-Midlands-Social-Care-report.pdf

5.       Birmingham City Council website  (2018) ‘Care Homes and Supported Living 2018’. https://www.birmingham.gov.uk/directory/55/care_homes_home_support_and_supported_living/category/1069

6.       CorporateWatch (2016) The Home Care Business. https://corporatewatch.org/the-home-care-business/#__RefHeading___Toc2989_782775029

7.       The Labour Party (2017) Alternative Models of Ownership. https://labour.org.uk/wp-content/uploads/2017/10/Alternative-Models-of-Ownership.pdf

8.       The Labour Party (2018) Democratic Public Ownership. https://labour.org.uk/wp-content/uploads/2018/09/Democratic-public-ownership-consulation.pdf

9.       Richard Hatcher (July 2019) ‘Co-production, social care and participatory democracy’.  https://www.healthcampaignstogether.com/pdf/1907%2019%20RH%20co-production%20article%20v3.pdf In ‘Health Campaigns Together: The Debate over Social Care – New Additional Reading’ https://www.healthcampaignstogether.com/socialcare.php

10.   ‘Our Social Care System is Broken’. https://www.healthcampaignstogether.com/pdf/Social%20Care%20Leaflet%20draft%204%20final.pdf


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