MoD housing

Actually, the maintenance of the barracks has already been "outsourced" to a private consortium - Modern Housing Solutions, consisting of Carillion, Enterprise and Atkins. It may be coincidence, but they were awarded a seven-year contract worth £690m, which sounds suspiciously like that £700m you quote. Where did you get that figure from? If it is the same, it is typical government spin to claim that they have "spent" £700m, when what they have really done is commit to spending that amount in the future. The Telegraph report that the joint venture has so far received £70m. 

Moreover the ownership of the buildings is also outsourced, to Annington. So the MoD has sold the properties, leased them back, and then outsourced the maintenance. That is an organisation desperately trying to squeeze every drop of current value out of their portfolio, at the expense of future costs. The extent to which this Government has mortgaged this country's future is quite frightening.

There is furious spinning going on from all sides in this story. Gordon Brown, in his interview with Andrew Marr on Sunday AM this weekend, claimed that the forces were receiving an extra £5bn over the next few years. But he didn't say whether that was in real or nominal terms, nor whether that was additional to if the budget grew in-line with total government expenditure, or assuming it would otherwise have been frozen. Given the total defence budget of £30bn, that £5bn could well represent absolutely no real growth and a further contraction as a proportion of government spending. Or it might genuinely be additional money, but if so, you have to wonder where all the extra money is coming from for all Gordon's promises at the moment, given that he's mortgaged or sold almost everything available, raised taxes as much as people can stand, closed every loophole, and still delivered almost nothing.

The Telegraph reported on Sunday that the defence chiefs "fear that relations with Labour are so bad that the Chief of the Defence Staff will have to issue official orders to stem the leaking of stories damaging to the Government." Are all soldiers not under permanent orders not to leak stories damaging to the Government? In fact, is that something for which orders should be required at all? Though there can be no doubt about the Government's failure in its duty to our Armed Forces, there should also be little doubt that this is a carefully-orchestrated campaign by the military to fight for a bigger share of the national budget. How sad that they have been reduced to this, and how sad that they have given in to temptation.

No one is emerging with credit from this affair. But what can we learn from it?

Firstly, that our priorities (and it is ours, not just the Government, as we elected them knowing their spending plans) are completely wrong, with too much money being thrown at bottomless pits like health and education, and not enough on the principle duties of any government - protecting person, property and nation, i.e. defence and law and order. Their relative shares of the national budget, as I pointed out ten days ago, are so disparate that a small cut in one or the other of health or education would pay for a big increase for the military and or the police.

Secondly, that outsourcing is not a panacea. It may be too early to blame Carillion and co, although they have admitted that "there has been some confusion about the nature of this contract", which sounds like the sort of excuse you don't make if you are talking from a position of strength. But even if we give them the benefit of the doubt for the timebeing, there is another case looming for which no such excuse can be made. It is also reported in the Telegraph today that workers at EDS, the private IT firm that handles the wages of the Armed Forces, have voted almost unanimously for strike action, a motion proposed by the PCS, the biggest civil service union. This heralds yet more problems for an IT contract outsourced by this Government, and yet more problems for the Armed Forces (though EDS promises it won't affect them). [And it is another sign that inflationary pressures are building, as the workers refused an offer that was "significantly above inflation", according to the management.]

Dragging businesses in to carry out activities for the government under contract to the government does not automatically introduce the discipline of the market into those activities. The government is a monopoly buyer, so the bidding process is not a true market process. The contract obtained may be cheap, but is it good value? The winner inherits many of the staff and problems of the old civil service departments they replace. Having secured the contract, competitive pressures are very much reduced, which is why it is so commonplace to underbid for government contracts, intending to drive up costs later, knowing that the government cannot easily back away from a contract that is well under way. The history of sub-contracting government responsibilities is not a happy one.

We don't need sub-contracted government, any more than we need better government. We need less government, so that it can focus on what it is supposed to do and do it well, rather than doing lots of things it doesn't need to do and doing them badly. The defence of our nation, and the provision of services for that purpose, is emphatically something the government should be doing, should be taking full responsibility for, and should be getting right.

This isn't rocket-science. Mises explained it quite clearly (see the quotes in my earlier post on wages). That which can be done effectively in the market is best done in the market, because bureaucratic management does not provide the tools that are available to the businessman. Anything which cannot be done effectively in the market, principally the running of the bureaucracy, should be run according to bureaucratic methods. There is no middle-ground, no third-way. The liberal answer is not simply "business will make things better", regardless of circumstance. It is to understand the limited role of govenment, insist that government limit itself to that role, and expect government to be adequately funded and managed according to bureaucratic principles for those things which fall within its limited role.