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The State as customer: What does government outsourcing mean for human rights?

“We were a customer of Carillion, not the manager and that's a very important difference.”

It was 17 January 2018 and the UK Prime Minister, Mrs Theresa May, was responding to a volley of questions by the Opposition Leader, Mr Jeremy Corbyn, about the implications of the collapse of construction and services giant, Carillion.

As a quick slap down, it seemed to do the job on the day. But these remarks were not bound to inspire a huge amount of confidence in the way the UK government contracts out public services to private businesses. Instead, in her defeatist view of the influence that customers can have, and in her lack of recognition that the State is no ordinary customer anyway, Mrs May accidentally handed ammunition to critics of government outsourcing everywhere.

Many fingers, many pies

Carillion was (and still is at the time of writing) a UK-based plc. Until it went bust in January 2018, after a series of profit warnings in 2017, it had business activities in the UK, Canada and the Middle East. Although its roots were in the construction industry, it was also a significant provider of property management and maintenance services. In the UK, the company was a major supplier to government, deriving almost a third of its 2016 revenue from activities as diverse as school meal provision, facilities management for hospitals, upkeep of homes for military families, railway engineering services, and prison maintenance. As a construction services company it was responsible for delivery of a number of flagship infrastructure projects, including schools, hospitals and libraries, as well as being a key contractor on the £56bn HS2 high speed rail project.

A policy in retreat?

The collapse of Carillion has re-ignited a debate that has been simmering in the UK for several years now about the economics and ethics of outsourcing public services to private companies. The Labour leader, Mr Corbyn, favours the re-nationalisation of the railway industry, the Royal Mail service, and parts of the UK energy sector. He also proposes the re-negotiation of many existing PFI * contracts, with projects and their staff being “brought back in house” (i.e. under government control).

Whether the UK government's current outsourcing arrangements actually reflect value for money is a contentious issue.** Concerns have also been raised, especially in the wake of the Carillion collapse, as to whether government oversight of the delivery of projects has been sufficiently robust.

The reasons for this are more than just financial. For those relying on the services of Carillion and companies like it, the consequences of even a minor corporate foul up – let alone a total wipe out due to insolvency – can be dire.

The buck stops … where?

When it comes to cataloguing corporate human rights risks, it would be difficult to think of a UK company with a more diverse and managerially challenging list than Carillion. Its role as a provider of services to schools, hospitals, care homes and prisons potentially engages a range of human rights – rights to health, food, water, privacy, family life, freedom of expression, non-discrimination and the right not to be subjected to degrading treatment, to name just a few – and brings it into daily contact with some of society's most vulnerable people.

Under international human rights law States are responsible – across all their many functions – for the protection and fulfilment of the human rights of all of their citizens.

But what happens when a State decides to outsource public services to private contractors?

At a conceptual level, these human rights don't just disappear. They still exist – although the accountability picture becomes more complicated. While the State's responsibilities for ensuring compliance by businesses derive from international law, the businesses themselves are regulated by a complex web of domestic legal, regulatory and contractual requirements.

For example, in the UK, as in many other jurisdictions, there are equalities laws to protect against discrimination; labour laws to protect workers from abuses in the workplace and to uphold international labour rights; data protection laws to protect our privacy; environmental laws to help protect rights to food, water and health.

In addition, various regulatory agencies set and enforce detailed standards to safeguard the health, rights and physical safety of different groups of people in situations that may make them vulnerable in some way – for instance because they are in prison, or in hospital, or because they are under-age, or because they are elderly, or because they are reliant on social care services. In the case of providers of public services, legislative standards can be supplemented by further contractual or licence obligations (or both).

Mind the gaps

While these various regimes can function well individually, from a human rights perspective the overall effect can be uneven and piecemeal. Legislators and regulators won't always anticipate everything that could possibly go wrong, and won't necessarily have the capacity and inclination to recognise, let alone enforce, every breach. The “corporate responsibility to respect” – explained in the UN Guiding Principles on Human Rights as “a global standard of expected conduct for all business enterprises” – is intended to help fill in the gaps, but in the absence of legal backing it is not enforceable by anyone.

Blurred lines

A recent row over a decision in November 2017 by Virgin Trains not to stock the Daily Mail (a well known UK tabloid newspaper) provides an example of how gaps, anomalies and confusion can creep in to the system.

Having initially explained its decision as responding to a lack of customer demand, a Virgin Trains internal memo subsequently emerged suggesting that the decision was made because the stance taken by the newspaper on a range of issues, including immigration, LGBT rights and unemployment, was “not compatible with the VT brand and our beliefs”.

Of course this was hardly a “ban”. Daily Mail readers could still enjoy their newspaper on Virgin Trains, whether on-line or having picked up a copy from the railway station shop. It was simply a refusal by one private company to sell or promote the products of another.

Or was it?

In the end, the decision was quickly reversed after Virgin Company founder Sir Richard Branson recognised it for the PR disaster it was.

But there were some lingering and unsettling questions raised by the row. Is Virgin Trains – a State-licensed provider of a privatised service – really a “private” company in every sense of the word? If another company in a similar position, whether a train operator or a provider of hospital or social care services, felt similarly exercised about its clients' reading matter or political views, how far could it go? Would such a company be entitled to censor material deemed to be “not compatible with its brand or beliefs” - or worse, deny services altogether?

Regardless of whether Virgin Trains had acted within its legal rights in saying it would not stock the Daily Mail, sections of the UK media clearly felt that the company's decision had crossed a human rights line, the Society of Editors condemning the decision as one that “smacks of censorship”. The Daily Mail itself invoked human rights ideals when it hailed Virgin's eventual U-turn as a victory for “freedom of expression, which is the cornerstone of our democracy”.

Public or private?

As public services are subject to binding human rights standards, and private business activities are not (at least, not directly and automatically), then the distinction between public and private activities is an important one with legal consequences. But how do you tell one from the other?

The 1998 UK Human Rights Act represents an attempt to shed light on this, although it was an unsuccessful attempt as things turned out. The Act makes it unlawful for UK public authorities to act in a manner inconsistent with the European Convention on Human Rights. Then, to head off the possibility that governments could avoid responsibilities simply by contracting out services, the Act defined “public authority” to include private entities which carry out “functions of a public nature”.

Unfortunately, though, the question of when a private company is carrying out public functions was left up in the air and the relevant provisions in the Act have been interpreted by the courts very restrictively. As the law stands at present, there is little chance of courts being persuaded that Virgin Trains, for example, is a “public authority” within the meaning of the Human Rights Act (and hence bound by European Convention provisions on freedom of expression).

This is a pity from the perspective of anyone who might wish to challenge the behaviour of providers of outsourced services on human rights grounds. Though whether expanding the scope of the Act in this way would be enough to persuade the Daily Mail and its readers that the Human Rights Act is something other than “a charter for criminals and parasites” (Daily Mail, 15 th July 2012) and therefore worth preserving is another question!

Spelling it out

The blurred lines between “public” and “private” domains in the context of contracted-out services make it all the more imperative that States clearly spell out to providers of outsourced or privatised services – whether by way of contract, licence or PFI-type arrangements – what their expectations are as to their responsibilities for identifying and addressing human rights risks.

As the Commentary to the UN Guiding Principles on Business and Human Rights puts it:

“States do not relinquish their international human rights law obligations when they privatize the delivery of services that may impact upon the enjoyment of human rights. Failure by States to ensure that business enterprises performing such services operate in a manner consistent with the State's human rights obligations may entail both reputational and legal consequences for the State itself. As a necessary step, the relevant service contracts or enabling legislation should clarify the State's expectations that these enterprises respect human rights. States should ensure that they can effectively oversee the enterprises' activities, including through the provision of adequate independent monitoring and accountability mechanisms.” (UNGP 5, Commentary).

“Effectively overseeing enterprises' activities” includes implementing the necessary checks to make sure that a company is not just technically capable of ensuring that human rights risks are adequately identified and addressed, but financially capable too.

The case of Carillion shows there is no room for complacency.

© Jennifer Zerk

* PFI = Private Finance Initiative. A system of government procurement whereby private companies are contracted to build, deliver, maintain and service public facilities using their own money, rather than the Government raising the money for the facility up front. The government then pays the private company for the use of the facility and the benefit of the services over a period, often decades.

** A report by the UK National Audit Office published in January 2018 found that “private finance procurement results in additional costs compared to publicly financed procurement, the most visible being the higher cost of finance”. See https://www.nao.org.uk/wp-content/uploads/2018/01/PFI-and-PF2.pdf .

 

 

 

 

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