London Daily

Focus on the big picture.
Sunday, Aug 23, 2026

The myth of the 'efficient' private sector has been busted by Covid

The myth of the 'efficient' private sector has been busted by Covid

Countries who kept their response to the pandemic in-house have fared much better – will the UK learn its lesson?
Last Friday, as towns and cities across the UK faced up to renewed lockdown restrictions, executives at Serco had reason to celebrate.

Serco is one of the dozens of private companies that have been contracted by the government to provide services as part of the national test-and-trace system. One of its contracts with the Department of Health and Social Care could be worth up to £410m. And at the end of last week, shares in the company soared by 18% after it announced profits vastly greater than forecast earlier this year.

Rarely has a government been so successful in its attempts to hollow out the NHS and the public sector as Boris Johnson’s has during this pandemic. The egregious costs of those private contracts are now well documented. Last week we learned that senior consultants from Boston Consulting Group are being paid as much as £6,250 a day to work on test and trace.

That means in just one week they take home what nurses are paid in a year. Growing evidence shows this approach isn’t working: countries that have largely retained testing and tracing in-house have fared far better in the crisis. This goes for wealthy nations such as Germany, as well as poorer ones such as Cuba.

To understand why Britain – a country that boasts one of the oldest and historically most effective national public health systems in the world – has chosen to outsource its response to Covid-19, we need to look back to the interests and ideas that have shaped its welfare state. Today, outsourcing has been normalised, but it is in fact a new phenomenon.

The institutions that make up the British welfare state emerged following the second world war. The National Health Service in particular found support among liberal and Keynesian politicians, who realised that economic recovery after the war required a healthy workforce.

As support for communism grew in the east during the 1950s, fears of revolution from below gripped politicians of all stripes. In short, the welfare state was an era-defining idea supported by an unusual coalition of interests.

In the decades after 1945, migrants to Britain, including the Windrush generation, became the builders, nurses, doctors, administrators, cleaners and technicians needed to create a nationwide welfare system. During this golden age of British welfarism, practical experience gained through long public service careers and the work of administrators, often women, were seen as critical for running services well.

But in the 1980s, all this began to change – both in the UK and elsewhere. The Conservative government that was elected in 1979 recognised neither the value of public sector expertise nor of public service provision.

Under the leadership of Margaret Thatcher, the government launched a full-frontal assault on both. As the ideology of neoliberalism came to define economic policy through the ensuing decades, a related set of ideas took hold within the public sector, backed by corporate interests.

New public management was based on the false pretense that private competition in the public sector leads to improvement and cost-saving. Adopted by the Conservative and New Labour governments of the 1990s and 2000s, NPM reforms introduced quasi-market structures and private sector models of corporate governance into areas such as healthcare, schools and elderly care.

Success was increasingly measured in terms of “doing more with less” in the short term, with little consideration for the longer-term loss of capabilities and knowledge that resulted from outsourcing large swathes of the welfare state to private companies.

In few areas was this transformation more radical than in IT. Throughout the second half of the 20th century, key developments in computing were driven by public sector institutions.

Many governments had an in-house management and development agency that could be fielded out to other departments where support for IT was needed - operating similarly to today’s private sector consultancies, but for a fraction of the price, and with a much longer institutional memory.

But by the turn of the millennium, most public sectors were outsourcing IT and digital infrastructure to multinational companies, and their capabilities in these areas diminished.

The election of the 2010 coalition government accelerated these long-term changes. Its austerity agenda was not just about cutting budgets to reduce Britain’s deficit, but also involved the restructuring of public services and the outsourcing of management to ostensibly reduce direct costs.

The 2012 Health and Social Care Act, for example, transformed how NHS services are commissioned and provided in England as part of a wider cost-cutting agenda. Existing processes were uprooted and management consultancies were brought in to deal with the disarray that ensued.

The Royal College of General Practitioners and trade unions had warned that making local GPs responsible for commissioning services under this new system would not work; GPs don’t necessarily have the time, knowledge or capacity to make commissioning decisions.

And indeed, they were right: we now know that clinical commissioning groups have spent millions of pounds on management consultancy firms including McKinsey, PricewaterhouseCoopers and Deloitte since the implementation of the act.

Today, the twin ideologies of NPM and austerity cast long shadows over the public sector. Structures within welfare programmes that once provided the checks and balances necessary to prevent the hollowing out of the welfare state have been slowly unpicked. After decades of outsourcing, Britain’s public sector was left enervated and underresourced in the face of a deadly pandemic.

Far from being a nanny state, NPM and austerity have also infantilised Britain’s public sector; it doesn’t have the confidence or capacity to take on challenges such as test and trace – even if the government wanted it to.

Instead of a truly integrated national system capable of stopping the virus, Britain has a patchwork of private companies and struggling local authorities trying to plug gaps.

But these weaknesses do not justify delegating the pandemic response to a collection of profit-driven companies. There is no reason to think that Serco, or Sitel, or a group of graduates working for KPMG have the expertise to take on these challenges either.

Contrary to what Serco’s chief executive has claimed, the decision to outsource public sector capabilities is a purely ideological move. There has never been a better time to rebuild our welfare state.
Newsletter

Related Articles

0:00
0:00
Close
UK Opens National Artificial Intelligence Safety Testing Facility
UK Government Finalizes Plans to Bring Remaining Regional Rail Services Into Public Ownership
Environment Agency Imposes Record Penalties on Water Companies Over Illegal Sewage Discharges
Great British Energy Announces Offshore Wind Partnership in North Sea
UK Government Tightens Planning Rules to Accelerate Housing Development
NHS Launches Digital Overhaul to Cut Elective Care Waiting Lists
Bank of England Signals Interest Rates May Stay Higher for Longer as Inflation Pressures Persist
The rise and fall of Hui Ka Yan, China’s richest man
Woke: Britain Considers Plain Packaging for Cigars as Specialist Shops Warn of Industry Collapse
Britain's Public-Service Productivity Remains Below 2019 as £80 Billion Output Gap Fuels WFH Debate
Mandelson Epstein Case in Jeopardy as U.S. Files Stay Out of Reach
Prince Harry and Six Others Ordered to Pay £9.5 Million After High Court Defeat
Bank of England Holds Interest Rate at 3.75% as Inflation and Energy Risks Persist
UK AI Security Tests Find Autonomous Agent Attempting Malicious Code Injection
UK Economy Grows 0.4% in Second Quarter Amid Global Pressures
UK Joins European Allies in Condemning Israeli Settlement Plans in West Bank E1 Area
Multiple People Killed in A66 Collision Near Middlesbrough Involving Police Vehicle
UK Government Holds First National Day for Victims and Survivors of Terrorism
UK Met Office Warns of Severe Autumn Storms as Strong El Niño Follows Historic Drought
Petrol Bombs Set Luxury Cars Alight Outside Birmingham Wedding as Police Hunt Three Men
Bitcoin Surges Toward $80,000 as Short Squeeze and ETF Inflows Ignite Crypto Rally
Prince Harry and Co-Claimants Ordered to Pay £9.5 Million Toward Daily Mail Publisher’s Legal Costs
Prince Harry and Meghan Markle Reportedly Plan Return to Britain With Their Children
UK Court Ruling Threatens Deportation Plans for Potential Trafficking Victims to Albania
Kemi Badenoch Presses UK Government for Decisions on Rosebank and Jackdaw Oil Fields
UK Foreign Affairs Committee Chair Calls for Ban on Goods from Occupied West Bank
Andy Burnham Government to Place Civil Servants Directly in English Mayoral Offices
Met Office Warns Major El Niño Could Bring Stormier, Wetter Autumn to UK
UK Economy Gains Unexpected Momentum Ahead of Andy Burnham Government’s First Budget
Twenty-Nine US States Take Meta to Trial Over Alleged Child Addiction on Instagram and Facebook
Former Scottish National Party Executive Peter Murrell Jailed for Five Years Over £400,000 Embezzlement
Moderna and Merck's Personalized Cancer Vaccine Succeeds in Historic Late-Stage Melanoma Trial
Prince Harry and Meghan to Move Back to Britain With Their Children
England and Wales Have Fewer Than 1,800 Prison Places Left for Men
Royal Navy to Accelerate DragonFire Laser Deployment Against Growing Drone Threat
Northern Ireland Approves Five Hundred Million Pound Belfast Harbour Expansion
Great British Railways Takes Full Control of Avanti West Coast as Rail Nationalisation Reaches Final Stage
UK AI Safety Institute Calls for Mandatory Security Audits of Advanced AI Models
Scotland Secures Three Billion Pounds for Floating Offshore Wind Hub in Aberdeen
Government Overrides Local Councils to Approve Green Belt Housing Across Southern England
UK and EU Move Toward Mutual Recognition of Food Standards to Ease Cross-Channel Trade
Government Plans Multibillion-Pound Private Healthcare Expansion to Cut NHS Surgical Backlogs
Bank of England Signals Faster Rate Cuts as Inflation Falls Below the Two Percent Target
Suspected People Smuggler Arrested After Investigation Identified Him
Children's Doctors Warn That Vaping Can Lead Young People to Smoking
Hundreds of Thousands of Students Receive GCSE and Vocational Results Across England, Wales and Northern Ireland
Here Is What Can Never Happen in Your Country: Taiwan Is Giving Money to All Its People Because It Collected Too Much Tax
UK Inflation Rises to 2.9% as Energy Bills Jump
UK Issues New Conduct Guide for Asylum Seekers on Consent and Respect
Moderna Shares Surge After Positive Personalized Skin Cancer Trial Results
×