Birmingham City Council is now to begin the process of transferring 167 staff from Capita in-house together with the return of 147 council staff whose secondments have come to an end.

Is this part of a wider movement away from privatisation? The FT reported (9.2.18) that in 2017 according to the Association for Public Sector Excellence – around a third of Conservative local authorities, and 42 per cent of Labour councils, took services back in-house.

Expensive and less efficient?

In the first six years of the contract 2006, BusinessLive reports, Capita was paid £6 billion, according to website Diginomica and in 2011 it attempted to offshore roles to India in a decision that was later reversed at an extra cost of £1m a year to the council.(BL link no longer active, see Chamberlain Files)

Birmingham City Council’s call centre was taken inhouse at the end of 2014, saving £4 million a year and proving more popular with customers. Capita had been paid according to volume of calls rather than quality of service – a frustrated repeat caller was worth more than an instantly satisfied customer. It had also been heavily criticised over poor service, soaring costs and poor communication with council service departments.

Professor David Bailey has been a long-term critic of the contract. One of his major charges was that the contract lacked transparency about its cost implications:

“The gross profits figure of £15m is a significant understatement of the true ‘value extraction’ by Capita Group as a whole in 2015, which was over £20m on my back-of-a-spreadsheet calculation, because Service Birmingham bought tens of millions of pounds of ‘stuff’ from other Capita group companies, all of which no doubt were making significant profits”.

He paid tribute to the Birmingham Post: “The editors have allowed those of us critical of the SBJV significant space to examine the latter over several years through blogs and columns. Business editor Graeme Brown has doggedly dug out financial statements and highlighted the ongoing level of profits at SBJV while public affairs editor Neil Elkes has returned to the issue repeatedly. The paper’s journalists have, I feel, played a significant role in terms of local democratic scrutiny. Well done to them”.

Since outsourcing ended, costs have been slashed and the customer satisfaction rate has risen from 49% to 69%. The costs are set to further reduce by an estimated £1 million a year by 2020 as more information and services are made available online via the council’s website or smart phone apps.