Barnet Council signals intention to end contract with Capita

The pledge means the two deals with the firm, together worth more than £300 million, are expected to end within four years, when the services will be fully insourced or delivered in partnership with other local authorities.

One of the contracts, the Regional Enterprise (RE) joint venture which covers planning, highways and five other services, will come back under the council’s control by October next year. The other is the customer support group (CSG) contract, which covers ‘back office’ functions such as IT and customer services, and is expected to be fully insourced by April 2026.

Signed in 2013, the outsourcing deals were designed to save Barnet taxpayers £165 million over ten years. But the contracts were subsequently marred by controversy – including two frauds against the council, a breach of pension law and IT failings – leading to concerns over their value for money and the lack of oversight by the town hall.

A report presented to the council’s policy and resources committee on Tuesday revealed insourcing the RE services could save £204,000 per year after Capita failed to commit to meeting guaranteed income targets. Fully insourcing the CSG services would cost the council more than £2.6 million per year, which was deemed not to be a “viable option” because of the need to make “significant savings” in a short timeframe.

Barnet’s previous Conservative administration had already agreed to insource several more Capita services on top of others that were previously brought in house. But Tory councillors refused to back the level of insourcing proposed under Labour, which took control of the council in May after pledging in its local election manifesto to “work to bring privatised services back in house”.

Speaking during the committee meeting, Conservative leader Dan Thomas pointed out that some of the contracts for CSG services would be extended up to one month before the next local elections and asked council leader Barry Rawlings if he would commit to bringing those services in house by April q 2026.

Cllr Rawlings replied: “Yes. My intention at the moment, but I’m willing to listen to other arguments, is that no services will be run by Capita at the end of this administration.”

The council leader added that some services currently run by the firm could be shared with other local authorities rather than being brought under Barnet Council’s full control.

But Cllr Thomas said that in four years’ time the financial challenges identified in the report would still exist and asked how they would be overcome.

Cllr Rawlings said the plans allowed more than three years’ “breathing space” to come up with a business plan, adding: “This is the prudent, sensible thing to do […] We can get to the condition where we can bring everything from Capita back out of Capita, into the public sector, and thereby keep our manifesto promise.”

Richard Cornelius, another Conservative committee member who was council leader when the contracts began, said the Labour administration had made an “awful mistake” by “committing in public that there will be no Capita contracts in place in three years’ time”.

He added: “You are negotiating with Capita now for an interim contract, and I think the technical term is you are likely to get screwed as a result of saying that. I think that is a terrible mistake, and I would suggest that if you want to ditch the Capita contracts, you just get on and do it.”

But Labour councillors defended the plans. Ross Houston said it was “very clear” that Labour planned to insource services in its manifesto, and Capita would still have to meet performance targets set out in the contracts. He added: “The idea that somehow we have let the cat out of the bag is ridiculous because we are clearly bringing it in house […] and [Capita] knows that full well.”

Labour councillor Arjun Mittra said: “Caxit means Caxit. I am delighted that the council will no longer be using Capita to deliver any services at the time of the next local council elections. I think that’s above and beyond what was in our manifesto but is definitely in line with the spirit of it.”

The eight Labour committee members voted in favour of the insourcing proposals, with the four Conservatives voting against.

A Capita spokesperson said: “Capita is proud to be extending our partnership with Barnet Council into 2026. We will provide further value for money for local taxpayers as we work with the council to continue to deliver top-quality services that make the borough a better place to live, work and study for all.

“In the last nine years, our teams have successfully delivered a range of key services in Barnet. This includes providing vital support to the council over the course of the pandemic where we worked with them to swiftly adapt services to meet the challenges of Covid-19, processed over £113 million of grants for local businesses and issued over £2 million in test and trace payments to residents on low incomes. More recently, we have supported the delivery of the council’s Homes for Ukraine programme.

“We look forward to working with the council to deliver services through Regional Enterprise up until September 2023. The extension on other services will see us build on our track record of delivery and save Barnet Council £254,000 as well as preventing £2.6 million in additional costs per year.”