UK government should end rail outsourcing ‘racket’, says union | Rail industry
Rail leaders need to “think again” about outsourcing contracts and try to run services better, the rail minister said, as union research showed six major private suppliers made profits of £150 million last year.
Railway unions are campaigning for an end to the widespread outsourcing of work such as cleaning, security and catering, arguing that staff employed by third-party companies have worse conditions and that profits can be reinvested into the railway.
Analysis by the RMT union estimates that six of the largest outsourced facilities management companies in the UK’s rail sector – Mitie, OCS, Bidvest Noonan, Churchill, Carlisle and ABM – have an average profit margin of 11% on contracts and made a combined profit of £152 million on national rail and the London Underground last year.
The RMT said many contracts contained clauses that returned extra costs to the government, such as increases in the minimum wage or employers’ national insurance contributions; This means that “the profits of outsourcing firms are protected at the expense of taxpayers.”
One of the companies, Carlisle Support Services, is owned by his former colleague, Tory donor and tax exile Michael Ashcroft. Another, Mitie, paid its chief executive Phil Bentley £20.5 million over the last two years.
Labor has vowed to bring “the biggest wave of outsourcing of public services in a generation” ahead of the 2024 election. But while passenger train operations will be nationalized under the reformed Great British Railways (GBR), the government is not so far seeking to go further with rail.
Carlisle Support Services did not comment but noted in its annual report: “Whilst train operating companies have been advised that their contracts will be transferred in the next parliamentary term, we are comforted by the widespread recognition that supply chains will remain in place for the foreseeable future.”
But rail minister Peter Hendy said: “Rail is absolutely inundated with contracts large and small, all with different terms and all creating real confusion about how we serve customers and passengers better. And I’m certainly in favor of enabling individual people to take over parts of the railway and run them better for customers and the national economy.”
He said he would support GBR “making some real choices on the railway about what is best to do for customers, in a way that has not been made for over 30 years, including whether work is best to outsource”.
Lord Hendy said the unions had “raised some interesting points, but it will be up to GBR management to consider this and rethink how we best serve customers”.
RMT said this was a “historic opportunity”. General Secretary Eddie Dempsey said: “Rail outsourcing is a racket that must end with a comprehensive resourcing programme. Since 2016 contractors have siphoned more than £1.6 billion from our railway, including £152 million last year alone.
“This is money meant for staff and services to benefit passengers, not to line the pockets of hedge funds and private equity firms. While their managers cash out, they suppress fares and pass the costs on to taxpayers.”
“Great Britain is a huge step forward, but the Labor government must deliver on its manifesto commitments and undertake the biggest wave of funding in a generation, including for rail.”
A spokesperson for Mitie said: “We are proud to support the UK’s rail network by providing essential services that enable operations to continue safely, securely and efficiently.
“By leveraging our expertise, we bring true innovation to deliver high-quality service while delivering value to taxpayers.”
ABM disputed the figures quoted by RMT but said it was “committed to building a collaborative relationship” with the union. An ABM UK spokesperson said: “Our team members play a vital role in keeping the London Underground clean and we are proud of the service they provide to millions of passengers every day.”
OCS, Bidvest Noonan and Churchill have been approached for comment.
