Union mourns Walsall's aborted IT privatisation

Walsall Council has been such a shambles that even its union was looking forward to washing its hands of them, it has emerged.

Now it looks as if the two are stuck with each other after the council cancelled its plans to outsource key unionised services to the private sector. Unison, which represents the council's workers, is unhappy about the reversal - and not only because it was looking forward to doing business with smooth private sector operators.

Unison is so puzzled over the aborted deal, says regional organiser, Rick Tudor, that it will be asking official questions about the pre-sales expenditure at the next appropriate council meeting.

The reasoning behind the pulling of the privatisation is curious and the council has refused to adequately explain the arithmetic behind it.

Three years ago, when Walsall Council started negotiating a deal to give 1,500 staff and £500m to a private sector consortium, there was natural trepidation at Unison.

But union reps were soon won over by the men in sharp suits. Relations with the council had been so sour that the consortium, whatever its motives for a charm offensive, could reassure the union by merely treating its members civilly.

Walsall Council spent £1.4m and three years negotiating the deal, which would have seen Fujitsu Services manage certain council services with its partners Vertex and United Utilities. Neither Walsall nor Fujitsu will say how £1.4m could be spent on a deal that had yet to be signed.

Indeed, both parties gave excuses earlier this week ("confidential" and "don't know") for not revealing how much they had spent during the three years of negotiations, let alone what it went on. The answer to the latter is, presumably, pre-sales consulting - the sort of thing services companies like Fujitsu usually do free of charge in order to sweeten the deal makers.

The suppliers are a little confused as well. The reasoning the council gave for reversing its decision may need a little explaining. In a letter purporting to explain the decision to staff last week, council leader Tom Ansell complained about a £2m cut in 2006/07 financial settlement from central government.

It is not clear how a £2m cut in a gross budget of £580m could scupper a 12-year, £500m deal. Walsall Council even keeps a tidy financial reserve for use in emergencies. The council drew almost £2m from this fund in 2005 without causing any strain.

If, as the council and the companies claim, the outsourcing deal would have saved money over the medium term, it would have made sense to proceed with it and a £2m shortfall could have been absorbed by the savings made from the outsourcing - another figure the parties will not discuss.

Nevertheless, said Ansell's letter, as the £2m reduction would force Walsall Council to make cuts, especially in those under-performing services it had intended to outsource, it was implied that the Fujitsu deal could no longer stand up. It had been ring-fenced, said Ansell, so any cuts the council needed to make would fall disproportionately on those services the council retained.

Neither does this argument stand up to scrutiny. The only doubt the union expressed about the deal was that it would inevitably lead to "reorganisation" of those staff who were transferred to the private sector. That would have been Fujitsu's business and of no concern to the council as long as the consortium met its service level agreements. Any such reorganisation was expected and would have no bearing on council budgets.

Likewise, routine adjustments to the council budgets should have had no bearing on the Fujitsu deal.®