Sam Freedman is a former senior Whitehall insider and now one of the most astute commentators on British politics. Recently he published a book – Failed State: Why Britain Doesn’t Work and How We Fix it. The book’s first chapter analyses how the UK has become over-centralised, with the prime minister’s office and the Treasury becoming hugely dominant.
Freedman’s second chapter ‘How local government was destroyed’ tells the history of central government hoovering up many of the responsibilities that were previously the remit of local government. That shift was used to justify the reduction of funding to local government.
Outsourcing: the crux of the matter
The above sets the scene for the third chapter: ‘Contract Killings’ or ‘How we became dependent on private firms to run the state, regardless of how often they fail’.
The 1980s saw the privatisation of utilities and 1990 the start of compulsory competitive tendering. Before that time, local authorities carried out most of their functions in house. These included, for example, bin collections, office cleaning and the provision of homes for those children who had been placed in the care of the local authority, and where the council acted as the corporate parent.
All these functions now had to be market tested – to see if private provision could do the job better and more cheaply. Conservative government ministers in particular were keen to see as many functions as possible outsourced. Freedman’s chapter looks at several areas of privatised provision, and the outsourcing of the provision of children’s homes is a particular horror story.
Childcare for profit, big profit
Over the years the number of children in the care of local councils has risen (a 14% increase in demand 2016–2020 alone). Private equity firms saw this as an opportunity to make a killing and put in aggressive, successful bids. In consequence councils’ own provision slowly dwindled, with three quarters of places now being provided by for-profit private equity firms.
If a council has closed its own children’s homes, it becomes a captive market with few options. In the past five years council spend on this function has risen by 72%. The average weekly bill per child is now just under £6,000, allowing an average rate of profit for providers of 23%. Freedman writes of these private equity providers:
“They are typically laden with debt and making frankly obscene profits in order to cover that debt.”
Councils and taxpayers are being held to ransom where they are charged more than a room at The Ritz would cost.
High charges are only part of the problem. To minimise costs, private providers seek out properties in the cheapest parts of England – for example, Blackpool and Burnley. When a council in the Home Counties entrusts a child to one of these homes, the child is then removed hundreds of miles, away from family and friendship groups. This increases the danger of the child later drifting into crime or being targeted by grooming gangs.
How outsourcing can succeed
Not all competitive tendering is bad. Freedman identifies three criteria that must be met if outsourcing is to be successful. These are first, that there are a number of potential suppliers, to ensure competition among those bidding. Second, it must be possible to measure success (or failure) in meeting the specification. Third, the risk of failure must sit with the provider – it is transferred out.
For example, if we consider office cleaning, all three criteria can be met. Here is an activity where transfer works.
In contrast, none of the criteria is met with regard to current provision of places in children’s homes. Over the years, a few large providers have bought out some of the smaller providers, reducing the number of firms in the market. It is less a competitive market and more an oligopoly.
Next, it is difficult to evaluate success or failure in the bringing up of that child. And finally, if the placement fails, the local authority, as the corporate parent, retains responsibility for the child. The council cannot (unlike the private equity firm) walk away scot-free. In short, the risk has never left the council.
Failures in outsourcing security and safety
In 30 pages, Freedman provides a catalogue of gross failures of outsourcing. Both Serco and G4S were involved in the electronic tagging scandal, where the firms had continued to charge for electronic tagging of ex-prisoners who had either died or left the country. In 2012 G4S hit the headlines when it messed up on providing security at the London Olympics (the situation was rescued by bringing in the army, the risk having remained with the government). Atos attracted huge public criticism for the way it handled work capability assessments.
Procurement doom-loop
Freedman is scathing about the attempt by then Justice Secretary, Chris Grayling, to part-privatise the probation service. Every informed source warned Grayling that the result would be a disaster, and so it proved to be. The whole exercise had to be reversed a few years later, but the probation service had been badly damaged along the way. Freedman’s comment is:
“As Justice Secretary Grayling is high up in the line of the least competent people to be given high office in British history.”
There would seem to be a sort of doom-loop associated with government procurement and its relationship with the major holders of contracts. Parliamentary select committees have produced unanimous scathing reports of really poor performance by a provider, only for the government to issue further contracts. In the short run the government can see no alternative (a consequence of having dispensed with its own in-house provision over the years). And so, the cycle repeats itself. Freedman is worth quoting here:
“We have a small group of vast conglomerates, with minimal expertise in any given area, but well-practised in bidding for contracts, that the government has become entirely reliant on. But despite repeated failures they are now so embedded into the state that they are effectively part of it, except without any of the accountability or transparency that should come with that. So they cannot be jettisoned without completely rethinking the way the state works.”
There would seem to be an unquestioned belief across Whitehall that the private sector can provide better-quality services at lower cost. Evidence of the past 30 years is that frequently this is not the case. Where outsourcing has not proved successful the cry goes up: ‘The government is not good at procuring’ – as if better procurement will see us home. Not true. Where the three criteria for what constitutes a market are not met, outsourcing as a policy will not work. In these circumstances it is up to the government to devise other solutions – including, possibly, providing in house.
Parliament under pressure: when accountability falters
In chapter four, ‘Democracy Bypass’, Freeman lays bare the extent to which the government dominates the Commons, meaning that MPs struggle to hold the government to account. The executive exerts control via the Whips’ Office, as well as through patronage (a route onto the ministerial gravy train). Boris Johnson’s attempt to marginalise parliament by proroguing it had to be stopped by the supreme court.
That brings us neatly to chapter five ‘Enemies of the People’. This discusses the role that the courts play in holding the government to account – for example via judicial review and most significantly, putting an end to the attempt to prorogue parliament. There is a good debate here about the difficulty of achieving a balance between parliament and the courts in the situation where the UK lacks a full written constitution.
Chapter six ,‘Civil War’, identifies how successive governments have failed to bring the civil service into the 21st century. Apparently, Whitehall was shocked to the core by the 2016 referendum result. Additionally, Freedman has a nice anecdote about how unpopular Dominic Raab was to work for, with staff very reluctant to go into his office. To resolve this, a premium was apparently paid privately to civil servants working for Raab. This was badged as ‘danger money’.
Governing by headlines: the tyranny of the news cycle
In Chapter seven, ‘Random Announcement Generator’, Freeman describes how successive governments have allowed themselves to be caught up in the 24-hour news cycle. The media are hungry for stories and ministers feel an obligation to feed the beast. If government has nothing major to announce, it feels obliged to fill the space with a random announcement.
The key point here is that government thinking has become focused on the short term and tactical. As a result, bandwidth for longer term strategic thinking has been lost. Ministers feel obliged to react to the latest news item stuck under their noses by reporters.
Chapter eight works on the same theme, describing how social media is turning politics into a frantic mess.
A fractured state
In his conclusion Freedman writes of “our crisis of governance”. Given various crises internationally, the past 15 years were always going to be difficult:
“Even without Brexit and Boris […] The weakness of our institutions has, though, made it so much harder. Worse, it has made it easier for bad politicians to wreak havoc.”
There are some glimmers of hope in this section but Freedman gives us no facile optimism.
Is this book worth a read? Three previous reviewers used the term “excellent” – and I add myself as a fourth. It is excellent.
Freedman comes across as intelligent and personable. This perhaps explains why so many recently retired civil servants or members of parliament have been willing to go on the record and voice their frustrations. The author has gathered together a cornucopia of first-hand evidence to support his themes. This, together with Freedman’s light-touch style makes the book a convincing page turner.
Sam Freedman (2025) Failed State: Why Britain Doesn’t Work and How We Fix it. Pan. ISBN 978-1-0350-2660-9
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