Gross Ignorance About Interserve’s Failure And Outsourcing Of Public Service Provision


It’s entirely true that Interserve has gone under – ‘K, perhaps is slipping below the waves – as a result of that mountain of debt. However, from that to conclude that the outsourcing of pubic services provision should stop is to be grossly ignorant of the matter at hand. For what we’re saying here is that the capitalists who funded those public services have just lost their capital. Meaning, equally, that taxpayers have had the use of that capital in the provision of public services without having had to pay for it.

No, really, that’s it. Someone out there has made a loss on the Interserve adventure. If someone has lost, someone must have gained. Interserve wasn’t charging the taxpayer enough for the services it delivered. That’s why it’s gone bust into a debt renegotiation. So, who gains from Interserve not charging enough? The taxpayer, obviously.

Interserve, one of the biggest suppliers of government services, has confirmed that it has reached an outline agreement that hands banks control of the business in a debt-for-equity swap. Interserve, which employs 75,000 people worldwide, including 45,000 in the UK, said on Wednesday lenders had agreed in principle to a deal that will see shareholders effectively wiped out and left with just 2.75 per cent of the company. Lenders would convert £480m of existing debt to equity to reduce net debt to around £275m under an agreement that will see them write off more than half of the existing borrowings.

The bankers have just lost the thick end of £250 million. The shareholders in Interserve have lost, what, 97.5% of what they thought they had. Even, near everything they put in. Who hasn’t lost from this? The taxpayer. Because that capital, those loans, were consumed in the provision of public services without the taxpayer having to cough up for it.

Thus this reaction is just gross ignorance, isn’t it?

So, another outsourcing company has failed. So shall we just agree that outsourcing does not work any more? And that as a result the whole model of outsourcing to the private sector has failed with it? There is a way to supply public services. And that is to deliver them from the public sector.

If the public sector provides those services then the taxpayer must pay the full cost of them. If a private company undercharges for providing them then that’s a transfer from the capitalist pigdogs to the taxpayer. This is then proof, this transfer, that taxpayers would be better off without it?

Ah well, but it’s only Richard Murphy so our task is, as ever, working out why he’s wrong, not whether. For, really, his complaint here is that the outsourcing companies haven’t been charging the taxpayer enough. Tant pis, eh?

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