Shortly after Margaret Thatcher took power, her environment secretary, Michael Heseltine, wrote: “The management ethos must run right through our national life – private and public companies, civil service, nationalised industries, local government, the National Health Service.” Since 1980, ministers have stayed true to his word. Britain is the outsourcing capital of Europe. No other country on the continent relies so heavily on the consulting industry to do the work of the state. Earlier this year, ministers quietly dropped restrictions on spending controls, allowing Whitehall departments to potentially spend even more on external consultants.
Those controls were the product of David Cameron’s 2008 pledge to end what he called the reign of “policy by PowerPoint”. Mr Cameron correctly argued that the use of consultancies had exploded under New Labour, whose faith in the credo of New Public Management, an agenda that sought to make the public sector function more like a business, produced lucrative opportunities for consultancies. Yet the story was hardly different under the Conservatives. While spending on consultants initially decreased under Mr Cameron’s government, economists Mariana Mazzucato and Rosie Collington note that consultancy firms bid for contracts at cut-price rates in an attempt to gain a foothold in government. When the time came for the state to spend big, the consultants would be ready.
That time arrived in 2020. As reporters Walt Bogdanich and Michael Forsythe point out in their book When McKinsey Comes to Town, the Covid-19 test-and-trace programme, led by the former McKinsey consultant Dido Harding, was an expensive fiasco. McKinsey charged £563,400 to outline the programme’s “vision, purpose and narrative”, while Deloitte scooped up contracts worth £298m. About 2,500 consultants were drafted in, yet the programme failed to meet the most basic targets, returning less than half of test results within 24 hours. The defence of this industry is that it creates efficiencies and imports expertise where it is otherwise lacking. The scandal of the test-and-trace programme exposed the holes in this argument.
The omnipresence of consultancies across government is not only a sign of profiteering. It is also a symptom of shrinking faith in the public sector. As austerity has decimated public sector bodies, consultants have stepped in to fill the gaps. Between 2016 and 2019, spending on management consultancies in the NHS trebled. Because of this erosion of state capacity, some argue the state must partner with business to deliver everything from NHS services to climate infrastructure. This credulous faith in the private sector’s superiority sustains a self-fulfilling prophecy: if its functions are outsourced, the public sector loses the capacity to do things well.
In 2021, Labour’s Rachel Reeves criticised the Conservatives’ spending on private consultants during the pandemic, and said her party in government would push a radical programme of “insourcing” to bring public services back under democratic control. Two years is a long time in politics. Today, as shadow chancellor, Ms Reeves wants to deliver her policies through public private partnerships. Meanwhile, the shadow health secretary, Wes Streeting, has written effusively of the role that private healthcare providers can play in cutting NHS waiting lists. In Britain, it seems that, no matter the colour of the party, politicians will continue to blindly believe that public sector functions can be bought off a shelf.
