A scandalous racket is unfolding in the UK's rail industry, and it's time to shine a light on it. The rail minister has called for a fresh approach to outsourcing contracts, highlighting the potential for better service delivery. But here's where it gets controversial: union research reveals a shocking truth about private suppliers' profits.
Rail unions are leading a campaign to end the outsourcing of essential jobs, from cleaning to security and catering. They argue that outsourcing leads to poorer working conditions and that profits could be reinvested to improve the railway system. An analysis by the RMT union estimates that six major outsourcing companies in the UK rail sector made a staggering £152 million in profits last year, with an average profit margin of 11%.
The RMT's research further uncovers a concerning practice: many outsourcing contracts contain clauses that pass on additional costs, such as minimum wage increases or national insurance contributions, back to the government. In essence, this means that the taxpayer is indirectly subsidizing the profits of these outsourcing firms.
One of the companies involved, Carlisle Support Services, is owned by a well-known figure: Michael Ashcroft, a former peer and Tory donor who has chosen to live as a tax exile. Another company, Mitie, has paid its CEO, Phil Bentley, a whopping £20.5 million over the past two years.
Labour has promised to bring about a significant shift towards insourcing public services, but the government's approach to rail has been more cautious. While passenger train operations will be nationalized under the Great British Railways (GBR), the government has not yet committed to further insourcing in the rail sector.
Carlisle Support Services declined to comment, but their annual report suggests they are confident about the future of their contracts, stating that supply chains are expected to remain in place for the foreseeable future.
Peter Hendy, the rail minister, emphasizes the complexity of the railway's contracting system, with numerous small and large contracts creating confusion. He believes that individual entities should take control of specific railway aspects to improve service delivery for customers and the country's economy.
Hendy supports GBR in making bold choices about the future of the railway, including whether outsourcing is the best approach. He acknowledges the trade unions' insights but leaves the decision-making to GBR's management, encouraging them to rethink their customer service strategies.
The RMT union sees this as a historic opportunity to bring an end to outsourcing on the railway. Eddie Dempsey, the general secretary, emphasizes the need for a comprehensive insourcing program, stating that contractors have siphoned over £1.6 billion from the railway since 2016, with £152 million taken in the last year alone.
Dempsey argues that this money should benefit passengers and staff, not line the pockets of hedge funds and private equity firms. He criticizes the outsourcing companies for suppressing wages and shifting costs onto the taxpayer while their directors profit.
While GBR is a significant step forward, the Labour government is urged to fulfill its manifesto commitments and lead the biggest wave of insourcing in a generation, including in the rail sector.
A spokesperson for Mitie defends their role, stating that they are proud to support the UK's rail network by providing essential services that ensure safe, secure, and efficient operations. They claim to bring innovation and value to taxpayers.
ABM disputes the RMT's figures but emphasizes its commitment to a collaborative relationship with the union. An ABM UK spokesperson highlights the vital role of their team members in keeping the London Underground clean and expresses pride in the service they provide to millions of commuters daily.
OCS, Bidvest Noonan, and Churchill have not provided comments at this time.
