London's local authorities paid private consultancy and outsourcing companies more than half a billion pounds last year, a new report has revealed, prompting warnings of a "sustained reliance" on firms to carry out basic council functions.
Spiralling Costs and Hollowed-Out Capacity
The research, conducted by the Autonomy Institute and the CADA Network, found that payments to these firms reached a staggering £555 million in 2024 alone. This trend represents a significant increase since 2010, a period that has seen deep cuts to council budgets across the capital and the nation.
According to the Institute for Fiscal Studies, funding from central government to London councils was slashed by a third after 2010. In this context, payments to private firms have exceeded £500 million for three consecutive years since 2022.
The services provided range from leasing IT systems and software to supplying temporary workers for understaffed departments and offering strategic advice on budgets and planning. The report argues that the spending patterns indicate a systemic, long-term outsourcing of core council functions, rather than just the procurement of short-term specialist advice.
Will Stronge, chief executive of the Autonomy Institute, stated: "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."
Major Contracts and Controversial Cases
Between 2010 and 2024, several companies received enormous sums from London boroughs. Matrix SCM, a managed service firm, was awarded contracts worth over £2.1 billion. The outsourcing giants Capita and Serco were paid approximately £1.1 billion and £500 million respectively.
Individual council spending was also highlighted. Lambeth council paid over £80 million to consultancy and outsourcing firms in 2024. Meanwhile, Barnet council spent more than £40 million.
Barnet's relationship with Capita has been particularly contentious. In the early 2010s, the council infamously outsourced most of its frontline services to the company in deals worth £300 million over a decade, branding itself an "easyCouncil." This led to significant problems, including a £62 million budget black hole and fraud cases. One Capita employee was jailed for stealing £2 million, while another based in Darlington stole £70,000 from the council's pension fund.
In a notable example of questionable charges, blogger John Dix found that Capita billed Barnet £8 for a single phone call from a parent checking if a Harry Potter book was in stock at the library.
Council Responses and a Push for Change
Under a new Labour administration, Barnet council voted in 2022 to end mass outsourcing and bring most services back in-house, coining the term "Caxit." The council is on track to fully end its Capita contract by 2026.
Lambeth council disputed the report's findings, arguing that much of the spending was mischaracterised as consultancy. A spokesperson said it included essential public services like waste collection and renting properties for homeless families, as well as necessary agency social workers due to a national shortage.
Capita and Serco declined to comment, while Matrix SCM did not respond to requests.
Will Stronge concluded with a call to action: "Rebuilding public capability, rather than buying it in at a premium, is the only sustainable route to resilient, democratic local government in the long term." The report underscores a critical debate about the future of public service delivery in an era of prolonged financial pressure.
