UK government vows to reclaim services from outsourcing giants

The UK government is setting up a new unit it promises will "bring forward the biggest wave of insourcing in a generation." Government outsourcing has long attracted criticism over value for money and service quality, with technology-heavy business processes among the contracts coming under scrutiny. The government said the new …

[elsergiovolador]

Finally

See the title ^^

Just I wonder how long the effort will last until the wine and steak go in the way. As it always do.

[IGotOut]

Re: Finally

Oh bless. The nasty civil servants have you upset again ?

[Anonymous Coward]

Re: Finally

"show me on the teddy where the civil service touched you"

[Anonymous Coward]

Re: Finally

At the very least they need to invest to build out of the capability. Some shared government services for Big IT Projects and some Sovereign Cloud.

Just like the CCTA that a former bunch of Tory wankers abolished…. With the rump doing endless rounds of procurement frameworks at The Cabinet Office.

https://en.wikipedia.org/wiki/Central_Computer_and_Telecommunications_Agency

[Tron]

Awkward...

The story next to this was:

HMRC vowed to break up with Capgemini then paid it another £4.2B

[AMBxx]

Re: Awkward...

Then there's the new SaleForce contract.

[Stumpy]

It's about bloody time, but in all honesty, if uk.gov want to start insourcing capability, then they're going to have to start paying rates competitive with the private sector to attract competent techs.

[elsergiovolador]

They pay consultancies way over the market. Big consultancy has a large markup and then they have to pay market rate to bums on seats they send to do the work.

Government can pay over the market for talent they want and still save money.

[IanRS]

Only one problem.

I agree with you that it should be possible to pay the same people that the consultancies use the same rates to do the same job, without the consultancy overhead. Unfortunately all the unions will throw all their toys out of the pram over somebody in a relatively junior civil service banding (because techies with no managerial responsibilities will be considered low rank) gets paid that much compared with the union members at the same band.

[elsergiovolador]

Re: Only one problem.

The key to resolve this without changing the bands is to create government owned company that will be supplying services to departments.

[Like a badger]

Re: Only one problem.

You don't think government owned anythings have been a hallmark for inefficiency since forever?

[elsergiovolador]

Re: Only one problem.

Government is very efficient at corruption.

That aside, this will require a change of culture and incentives. Not an easy way and will fail a couple of times more. But the current way is much worse.

[breakfast]

Re: Only one problem.

Government inefficiency is not so a magical aura created by the mystical presence of civil servants, it's more a consequence of organisation size. Businesses seem more efficient because they tend to be smaller and serve smaller audiences - a business can afford to ignore inconvenient potential customers, but a government must work for everybody.

When businesses get closer to the size of government departments, the imagined efficiencies tend to vanish. They'll still talk about how efficient they are, but if you look at how they operate it tends to be just as bad, sometimes worse.

Also, why is efficiency the only criteria that matters? As we saw during the start of the pandemic, efficiency exists on the same axis as resilience, but at the opposite end. Do we want the cheap fragility of pure efficiency or do we want a more resilience at the cost of a bit of redundancy?

[breakfast]

Re: Only one problem.

Having looked at where civil service job payment bands sit, I don't think it would be a bad thing if they could pay enough to be desirable jobs again. Maybe this is crazy mooncalf talk but I think it would be good if our civil servants were actually good at their jobs and got paid accordingly.

[Boris the Cockroach]

Re: Only one problem.

This is what drove a fair number of us technical staff out of government service all those years ago (as well as some of the sciencey type guys)

That we were deemed 'industrial' and therefore unable to be promoted unless you wanted to stay within the technical jobs (or even the sciencey jobs if you wanted a transfer to that area, although you had to accept a demotion to ASO with a reduction in pay) where as if you were the 'admin' or 'non-industrials' and you saw another admin job , you could go for it regardless of area. which led to a lot of the 'technical' or 'science' managlers having no qualifications for the job they were doing, and if you started on about fluid dynamics, or tensile stress tests , their eyes would glaze over and they'd start ignoring you.

And after we left....... "We cant get any skilled staff to do the secret work" comes the call.... closely followed by "if you paid the going rate for the job, none of us would have left"

And this was 30 odd years ago.

So I foresee a disaster of a recruitment campaign, followed by the usual suspects (Crapita , fushitshow et al) getting consultancies galore.....

[Anonymous Coward]

Government can pay over the market for talent they want and still save money.

More like "could but won't".

As things stand, they've announced a new unit in Cabinet Office. That'll be five men and a dog. Some will be civil service generalists unlikely to have any useful experience, some will be from the government's various procurement services, and they'll be reasonably good at procurement but probably won't understand how and where value is created in services, and perhaps not be very good at managing around low-ball bids (as for example, Crapita used to get the pensions racket). The chances are that there's nobody with the experience of the private sector, of managing support services, of developing IT strategies, of benchmarking service performance, running make versus buy, or of critically dismantling a commercial bid. Amusingly I can tick most of those boxes, but I'm not part of that new function.

And all of that is BEFORE we get onto true IT roles that are cost-constrained such as IT architects, BAs, design leads, developers, testers, ITSec specialists, sysops leads etc etc.

[Anonymous Coward]

Careful what you wish for ...

If I was in charge my first act would be to employ you, and then I'd go for lunch.

[Sproggit]

Possibly Fortuitous Timing

As a career technologist, I really don't like to point this out...

... but there do seem to be an awful lot of private sector firms shedding entirely competent technical staff as more and more of their operational practices get absorbed by AI. Perhaps that would be a step too far for central government to take with "front line services" and the infrastructure on which those services depend... but it's possible that there will be resources coming available who will be able to inject some much-needed "new ideas" in to some of the dark and dusty corners of government-think...

[beaker_72]

And next week's news will be all about the consultancies that are lining up to tell the govt that they don't have the skills to successfully insource and that they really need to bring in outside help.

I challenged someone in a consultancy on this exact subject a few years ago, just went and got their response - copying it here verbatim:

I wish it were that simple. There's a systemic issue in that required skills are relatively scarce in Scotland and sit in sectors that historically pay more and offer more interesting opportunities than the civil service could, or at least that's the perception. I also think (perhaps with bias) that there are consultancies that are more pragmatic and purposeful than others so we shouldn't assume all consultancy use is a waste of public money.

That being the case, I would still argue that civil servants in central or devolved governments are not best placed to lead complex transformation, because they aren't close enough to the problem and favour an end-to-end highly governed approach that we know doesn't work in complex environments. So, if anything, public bodies and local authorities need to be empowered to jointly solve the problems.

[IGotOut]

Wait for next year's article.

It's been a year and only 10% has been done.

Ignoring the fact, many contracts will have years left to run and it's going to take a very long time to get done.

[elsergiovolador]

Re: Wait for next year's article.

Government could change IR35 to include big consultancies. Once they lose ability to make profit, they'll drop the contracts themselves.

[Androgynous Cupboard]

Re: Wait for next year's article.

Er, I don’t think that makes any sense. The big consultancies employ their staff directly, so they’re already taxed as employees.

[elsergiovolador]

Re: Wait for next year's article.

IR35 is based on ownership. If small business also employs their staff directly, under identical conditions, except the staff also happens to own the supplier, IR35 apply and such company cannot make profit.

The legislation was designed in such a way so that the staff couldn't leave big consultancy and start competing business.

[Androgynous Cupboard]

Re: Wait for next year's article.

IR35 was based on disguised employment, and I can explain it in detail but this is a 20+ year old piece of legislation and well understood by most of us here so I'll skip that for now. Maybe you could explain what you're proposing.

If I'm an employee of Capita working for UK gov, Capita is paying me a salary (not a nominal one, one that properly reflects my time and expertise) and covers sick and holiday pay. I'm paying income tax on the salary and Capita and myself are both paying NI. The Govenment is paying Capita as a business expense. Any dividends from Capita's profits - which was what IR35 was really targetting when it was introduced - go off to some hedge fund probably, or somewhere other than my pocket.

Now ElSergio is in charge and, lo! He applies IR35 to this situation. What happens? Who pays which bit and why is it better?

[elsergiovolador]

Re: Wait for next year's article.

Perhaps explain it rather than skip it, because “disguised employment” is precisely the explanation I’m challenging. If the issue is someone effectively being an employee of the client, how does somebody else owning the supplier change that relationship? In your example, where you have no relevant ownership interest in Capita, Capita is not subject to Chapter 10 for your services at all. It does not have to pass an IR35 employment-status assessment. That follows from the ownership condition, not how you work for the government.

Now take another company providing exactly the same services, under the same client control, paying the same salary and benefits, but owned by its employee. That company meets the ownership condition. What changed about the supposed “disguised employment” relationship with the client? Nothing. The difference is who owns the supplier. Your observation that Capita’s profits go to outside shareholders identifies that distinction rather than answering it. Repeating “disguised employment” does not explain why identical working relationships are treated differently according to ownership.

In your example, the government would deduct your income tax and employee NI from Capita’s fee for your work, and pay employer NI on top. Capita receives the balance. Crucially, there is no general deduction for Capita’s overheads or profit before calculating that tax. Money needed to run the business and provide its shareholders’ return is being taxed as your wages.

Who funds that difference? The government through a higher price, you through lower take-home pay, or Capita through its margin. Hold the government’s budget, your take-home pay and delivery costs unchanged, and the additional tax comes out of Capita’s profit. Once it exceeds that profit, Capita is paying to deliver the contract rather than making money from it. It would need different commercial terms to make the work viable. The proposed extension would make competing suppliers face the same calculation, rather than employee ownership deciding which supplier faces it. That is the change your “already paying PAYE” answer misses.

[Androgynous Cupboard]

Re: Wait for next year's article.

To flog this horse one last time. That's an interesting take.

IR35 was about closing the tax avoidance loophole of taking dividends instead of salary, one I was very fond of in the salad days of the late 90s.

If I have no ownership I receive no dividends, so I expect a salary and the governments gets my income tax. That's what they care about. If I worked for nothing and Capita doled out my contract fee in dividends to others, well maybe they would talk about applying IR35 to them and we've have a chance to see if you're right. But until then in simple, governent tems, ownership=dividends=income-tax-avoidance. I suspect I know which one the government had a problem with.

[elsergiovolador]

Re: Wait for next year's article.

Apparently a consultancy’s margin is business profit until the person doing the work owns the consultancy. Then it becomes unpaid salary, even though the salary, benefits and work are unchanged. That is what your equation assumes, not what it proves. You recognise that a business can pay properly for the work and still earn a profit, then abandon that distinction when the employee owns it.

“Disguised employment” does not explain that change either: the relationship with the client remains identical. In your Capita example, the ownership condition is absent; the employee-owned competitor can meet it without any dividend being paid or any tax saving having to be demonstrated. That is how the condition operates, not an “interesting take”.

Your “government gets my income tax” test is already satisfied in both examples. Introducing someone “working for nothing” changes the facts. The difference is who owns the business, not whether profits are distributed: the company could retain them all for reinvestment. “That’s what they care about” cannot turn a shareholding into evidence of salary substitution. And even where dividends are paid, you cannot establish that profit has replaced someone’s salary merely because both reach the same person.

[theblackhand]

Re: Wait for next year's article.

The argument is that IR35 forces government departments to hire consultancies because salary bands don't allow them to pay enough for the best talent and IR35 limits how they can recruit/retain contractors without significant scrutiny and it is easier to have consultancies provide a "package" of work using similar levels of talent, only at much greater day rates than individual contractors typically charge (I.e. individual contractors at less than £1k/day are charged out via consultancies at >£2k/day...)

While there is some truth in this, it ignores changes in management practices and risk appetite within government where departments are prepared to pay more for a known outcome versus the management of projects/resources to deliver that outcome.

Being able to respond to political "whim" whether it's the change of government or change of prime minister carries a similar or possibly even greater importance to delivering a working system...

[Androgynous Cupboard]

Re: Wait for next year's article.

IR35 caused a lot of freelancers to push their bands up by 25% or so, but that's not a seismic shift. I doubt it suddenly made consultancies more appealing.

As an ex-government freelancer about the time IR35 came in, I was surrounded by a large team of salaried employees and (at a senior level) a few Capita guys. I've been out of that game a while now but my impression is that the salaried employees have gone as well as the freelancers. We can't blame that on IR35. We can blame it on the usual outsourcing oversell - cutting headcount and fixed costs looks better on the balance sheet, even if the result is you end up paying more in consultancy fees.

If it's not clear I think the direction this is going is good - UK.gov needs in-house IT expertise and supply teams. I'm just fundamentally puzzled by "apply IR35 to big consultancies", because it's a piece of legislation I know well and it doesn't really apply here.

[elsergiovolador]

Re: Wait for next year's article.

The point is not simply whether contractors increased their rates by 25%. A department also has to assess engagements, document its decisions and face potential tax liabilities if it gets them wrong.

In your Capita example, where the employees have no relevant ownership interest, Chapter 10 does not require that employment-status assessment. That can give a risk-averse department a reason to choose the more expensive supplier: avoiding assessment work and potential liability, rather than buying better expertise.

The proposal is to apply the same assessments, tax treatment and liability rules to equivalent work supplied by all businesses. Switching to a consultancy would no longer remove that particular burden and risk merely because different people own the supplier.

And if HMRC’s claimed revenue benefits hold up, extending the same treatment could potentially bring in additional tax receipts too.

[Anonymous Coward]

Insourcing/On shoring/Etc

Whilst I'm definitely not against insourcing (too many TUPE scars!), another important step would be to mandate on shoring of all Gov IT. The benefits would be considerable - eg. increased tax receipts, improved balance of payments deficit, incentive to invest in training, etc, etc

If this can't be achieved over night, then put in a X year plan to get there

[elsergiovolador]

Re: Insourcing/On shoring/Etc

I suspect the reason why government so love foreign corporations is that once the money leaves the country it is almost impossible to audit.

[Long John Silver]

Politicians + global corporations = CORRUPTION

How many parliamentary politicians of the last three decades, those attaining ministerial or sinecure status in government, are, having retired, in receipt of payment from big business through employment, consultancy, or lecture tours? How many wait in the wings in anticipation of promises kept after their retirement?

Who was the chap, once deputy Prime Minister in a coalition government, who upon retirement was propelled to a position in an American company where he was given a titular role having something to do with 'ethics'.

[Anonymous Coward]

Re: Politicians + global corporations = CORRUPTION

"something to do with 'ethics'."

Surely not ?

[Fr. Ted Crilly]

Re: Politicians + global corporations = CORRUPTION

Surely you don't mean 'oven glove' clegg do you?

[sanmigueelbeer]

Cool story, bruh.

[NXM]

letters to your MP

I asked our MP (lib dem so not part of the ruling party) to write to the minister concerned about this a few months ago and got a favourable reply. Now they're actually doing something, which is very encouraging.

So as well as from putting a comment on our favourite tech website, writing to your MP can be worth it.

[Anonymous Coward]

Grasp the nettle

There are years of mismanagement and political blindness to be overcome but you know kudos to somebody, better late than never etc. Simply wanted to say get on with it, there is no time left to delay or endlessly wait for reports. And in the first wave can they review the Advanced Mission Planning Aid (AMPA), built and maintained by DXC for the RAF. One of those bits of key CNI that nobody else can do and that is used for relative trivia such as Defence of the Realm. With DXC teetering on the edge of the abyss, this is now critical. #sortitout

Btw I'm a retired security architect, I won't come back to help with BS schemes but if you genuinely need help to rebuild or train a new generation then give me a route to help with that. I won't be the only one. I'll be watching.

[Anonymous Coward]

Great idea

Until the lobbying really gets going on the golf course (members only, please!)