The biggest Myth of all

Market forces will drive down costs and improve efficiency




The national rail system was dismantled for privatisation. Railtrack took over responsibility for track and signalling, train services were franchised to train operating companies who lease the rolling stock from three rail leasing companies. Maintenance, depots and freight services were also privatised to other companies.


Railtrack PLC, was placed in administration on 7 October 2001 and replaced by Network Rail, a non-profit company, which owns and maintains the tracks, signals, bridges and 2,500 stations. Network Rail stopped outsourcing maintenance and transferred 16,000 maintenance staff, over 5,000 road vehicles, 600 depots and 11 training centres to in-house provision. The South East train franchise was terminated in 2003 following years of poor performance and the company operating the London-Edinburgh franchise defaulted in 2006. Poor performance and overcrowding continues on many services despite large public subsidies.


Hospital cleaning

The NHS market testing programme led to a series of contract failures and reduction in cleaning standards in the 1983-2000 period (Public Service Action, 1983-1997). By 2002 some 52% of domestic services contracts were outsourced with an estimated value of £94m according to an unpublished NHS outsourcing study. However, standards had declined to such an extent that by 2004 an additional £68m had been invested in higher standards, revised frequencies and best practice guidance to control infection, thus eliminating so-called savings.


British Energy

The privatised nuclear power generator, supplying 20% of Britain’s electricity, had to be bailed out by the government to the tune of £410m in 2002 to meet the company’s debts. A restructuring deal was agreed in which the company’s creditors agreed a debt-for-equity swap leaving the existing shareholders with just 2.5% of the shares. British Energy was delisted from the London Stock Exchange.


Bus services, prisons and social care

The deregulation and privatisation of municipal bus services, new private prisons built by public private partnerships and the transfer of social care to private companies and voluntary organisations were all declared ‘successful’ because they achieved ‘savings’. But staff wages were cut between 15% – 25% with longer working hours and frequently no pensions..


Public Private Partnerships fail information technology

Following a series of major failures Public Private Partnerships have not been used for information technology projects since 2003. A hundred outsourced public sector information technology contracts have suffered long delays, cost overruns and system failures.


Strategic partnership failures

Three large long-term local government contracts (14%) for corporate services with a £685m value have failed since 2005. Two contracts, Bedfordshire County Council and West Berkshire Council, were terminated and a 1,000 staff transferred back in-house and a third, Redcar and Cleveland, has been substantially reduced. In addition, a £100m education contract to manage the education service in the London Borough of Southwark was also terminated because of poor performance.


UK: 105 public sector ICT contract failures

The Research Report identifies the scope of major cost overruns, delays and terminations in 105 outsourced public sector ICT projects in central government, NHS, local authorities, public bodies and agencies in the last decade. There has been wide reporting of individual and department or authority-wide project failures in the national and ICT press but little analysis of the overall scope and evidence. The value of contacts is nearly