Key Points
- London councils spent £555 million on private consultancy and outsourcing firms in 2024, continuing a trend exceeding £500 million annually since 2022.
- The Autonomy Institute and CADA Network report reveals a 76% rise in consultancy spending by London councils between 2013 and 2023.
- Funding cuts to London councils from central government fell by a third post-2010, correlating with increased outsourcing.
- Private firms provide services ranging from IT leasing, temporary staffing, to planning and budget advice.
- Matrix SCM, Capita, and Serco are key contractors, with Matrix SCM receiving £2.1 billion in contracts from 2010 to 2024.
- Barnet council’s large-scale outsourcing, especially with Capita, has been controversial and is being reversed as of 2022.
- Lambeth council spent over £80 million on such firms in 2024, though the council disputes some of the report’s claims.
- Concerns are raised about local government capacity erosion due to outsourcing and austerity measures.
What does the new report reveal about London councils’ spending on private firms?
A joint report by the Autonomy Institute and the CADA Network exposes extensive reliance of London councils on private consultancy and outsourcing firms. According to their findings, London’s local authorities spent a staggering £555 million on such companies in 2024 alone. The report highlights this figure as part of a larger upward trend that has seen spending exceed half a billion pounds each year since 2022.
Will Stronge, Chief Executive of the Autonomy Institute, warned: “This research shows how local government capacity has been hollowed out by years of outsourcing and austerity. London’s councils are now structurally dependent on private consultancies for core functions, and that should worry all of us.” He added that rebuilding public capabilities is essential for resilient, democratic local government in the future.
The report points to a 76% increase in average annual consultancy spending per London council over the decade between 2013 and 2023, rising from £11.5 million to £20.2 million.
Why has spending on consultancy and outsourcing firms increased?
Cuts to council funding have significantly shaped this trend. The Institute for Fiscal Studies documented that since 2010, London councils’ funding from central government has been cut by about a third. Faced with declining budgets, many councils turned to outsourcing to maintain services.
These private firms offer a wide array of services, including leasing software, supplying temporary workers to cover staffing shortages, and advising on budgets and planning. The report suggests that such spending “reflects systemic, long-term outsourcing of core council functions, not short-term specialist advice.”
Who are the major contractors involved and how much have they been paid?
Among the companies profiting from council contracts, Matrix SCM stands out, having been awarded contracts worth over £2.1 billion between 2010 and 2024. This managed service firm provides services such as temporary worker recruitment and screening software.
Outsourcing giants Capita and Serco have also received substantial contracts. Capita was paid £1.1 billion and Serco nearly £500 million during this period. Serco’s contracts notably included waste management services.
Matrix SCM previously faced criticism for its role in enabling “auctionyourgranny.com”-style tendering systems, where care packages for vulnerable people were put out to eBay-style timed auctions. This practice was covered extensively by The Guardian in 2014.
What lessons can be drawn from Barnet council’s outsourcing experience?
Barnet council’s outsourcing saga illustrates the risks and drawbacks of heavy reliance on private firms. As reported by Alan Travis of The Guardian, Barnet famously branded itself as the UK’s first “easyCouncil” in 2013, cutting service delivery to the legal minimum and outsourcing the remainder to Capita under two contracts worth a combined £300 million over a decade.
However, this experiment faced numerous issues. By 2017, council finances were so precarious that regulatory intervention resulted in Capita being fined. In 2018, a Capita employee was jailed for defrauding the council to the tune of £2 million, a loss unnoticed by both Capita and the council itself until alerted by a bank. Capita compensated the council for the loss.
Additional financial misconduct came to light when, in 2020, another Capita employee in Darlington was caught stealing £70,000 from the council’s pension fund. The council ultimately faced a £62 million budget shortfall and had to cut services.
Following a change in political control in 2022, Barnet began reversing its outsourcing decisions. A new Labour administration committed to bringing most frontline services back in house, though some contracts with Capita remain until 2026 due to “the complexities and scale involved,” according to the council. One councillor emphatically declared, “Caxit means Caxit,” signalling intent to fully end these agreements.
How have Lambeth and Barnet councils responded to the report’s findings?
Lambeth council, which spent over £80 million on consultancy and outsourcing in 2024, disputed the report’s characterisation of its spending. A council spokesperson told the press:
“The majority of council spending highlighted in this report is inaccurately described as consultancy spending, when in reality it refers to public services such as waste collection and renting properties to house homeless families.”
The spokesperson noted that growing numbers of families in temporary accommodation due to the national housing crisis forced the council to rely on private accommodation providers.
Lambeth also clarified that costs attributed to agency social workers in the report were not consultancy fees but were driven by a national shortage of social workers, though they said progress has been made to reduce reliance on agency staff.
Barnet council emphasised that its use of external suppliers and consultants was limited to specialist areas such as social care for older residents and technical support for capital projects. The council highlighted its progress on ending the historic mass outsourcing contract, expecting the Capita deal to conclude by 2026.
What do the major firms involved say about the situation?
Requests for comment sent to Capita, Serco, and Matrix SCM received no responses. This silence around accountability contrasts with the detailed disclosures and criticisms found in earlier reports.
What are the wider implications of this trend for London’s local government?
The sustained and expanding use of private firms signals a structural shift in how local government functions. As austerity measures have squeezed budgets, this approach has arguably hollowed out councils’ in-house expertise and capabilities. Critics argue this creates long-term risks around service quality, democratic oversight, and cost-effectiveness.
The Autonomy Institute’s Will Stronge advocates for “rebuilding public capability” as the only sustainable way forward, cautioning that paying a premium for outsourced functions may weaken local democracy and public resilience.
