Labour pledges to bring public contracts in-house

LABOUR is set to mount a fresh assault on business with the shadow chancellor expected to explain plans to bring billions of pounds worth of outsourced public services back in house if it wins power.

John Mcdonnell is understood to have drawn up draft laws that would force government departments to favour providing services themselves unless absolutely necessary.

That would prove troublesome for the likes of Serco and G4S, which run prisons and house asylum seekers, and Capita, which assesses benefits claims and runs Whitehall IT systems. Mr Mcdonnell’s speech unveiling the plans today will come a day after Labour’s London mayor, Sadiq Khan, revealed plans to cap housing rents in the capital.

At a protest outside the Department for Business earlier this week, the shadow chancellor said Labour would introduce new legislation in its first Queen’s Speech “to ensure that no services are outsourced and those services that are outsourced at the moment, we bring them back in house”. Labour has been fiercely critical of outsourcing, particularly following the collapse of Carillion last year. In March it pledged to bring any services involving “at-risk groups” such as prisoners or hospital patients back in house. Industry bosses are privately sceptical of Labour’s ability to “insource” vast swathes of contracts given the cost and complexity involved. Labour has also set out plans to renationalise the water and energy industries, the railways and Royal Mail.

Mr Khan set out sweeping proposals for a “private rent commission” that would create a register of landlords and their properties, and be given the power to demand rent cuts. The plans would need the blessing of the government as the mayor lacks the power to introduce rent controls. However, they have provoked a backlash from landlords who warn the move will lead to fewer homes being built and exacerbate London’s acute housing shortage.

There are particular concerns it could undermine a recent surge of cash from institutional investors such as Legal & General and M&G into so-called build-to-rent properties – typically big apartment blocks that are owned entirely by one landlord.

Ian Fletcher, of the British Property Federation, said: “If investment into new rental housing is deterred, this would take London further away from resolving the underlying housing issue of our time – a lack of supply.”

Build-to-rent homes make up just 2pc of London’s housing stock but account for about a quarter of all new homes last year.