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“Shared Services”: The Very Latest in Driving Down Wages and Conditions

Shared services are, simply put, a method for universities to outsource workers to private employers more brutally and cheaply than before. Labelled ‘Shark services’ by the London Met Unison branch, this is a technique which is likely to spread through the public sector (starting it seems with education) and as such is worth close examination. The merger between the Institute of Education and UCL also brings prospects of Shared Services, as they will “seek to save money by merging administrative and professional services.” 

There already are shared-services in Bloomsbury. ‘The Bloomsbury Colleges’, established in 2004, incorporated a selection of the institutions on campus (excluding UCL) into one body which employs staff for administrative labour across those different institutions.1 It’s no secret that there are two big players in Bloomsbury’s microcosm of the HE sector: UCL and the University of London. Both are surely interested in shared services as a means of capitalising on their already substantial workforces. The term has also cropped up in discussions at SOAS. For all the universities, shared services is seen as a means by which they can outsource as many of their workers as possible, and potentially merge workforces across the Bloomsbury campus in order to make savings.

This is far from simply a Russel Group affair however. London Metropolitan University, always at the forefront of changes in labour in the HE sector, has passed through corruption, wage cuts and the instigation of mass deporatation of its ownr students; this avant garde of the recession has now flung itself into the latest mechanism of social immiseration.2 Now that the legislation is in, at London Met three companies have been short listed: Wipro, BT Global Services and Capita.3 The last of these is the front runner for the bid, and the management have been quite explicit that this is about creating a shared-service.

Shared services are the jargonistic outcome of a piece of legislation introduced in 2011 as part of a fulfilment of an EU directive from 2006.4 The law allows a new kind of legal body to be formed by tax exempt institutions for the purpose of lending out that service to other bodies. So long as the initiating group is supplying a service which is part of its non-taxable activities, it will not be taxed on selling those services. This incentive is there in order to encourage public sector institutions to put their funds into private sector companies. This means that the money which is given to hospitals and universities through grants, fees, etc is then ploughed into private companies.

‘Services’ 

The collective worker at the base of these companies suffer the main effects of the change. An advantage to management is that by finding new employment for their staff they can extract more labour from them for the same pay by ‘rationalising’. For instance, let’s say that both UCL and SOAS have to each employ a computer engineer full time in order to make sure that if there are any problems, then they will get fixed promptly. It turns out the computer engineers are each only engaged in any actual labour on each campus for half the time, because they do the job competently and the computers don’t break much. If UCL were to form a shared-services body, they could then make their computer engineer work at SOAS half the time, and SOAS would sack their employee. This is known as ‘efficiency’.

As with all outsourcing, the transfer is from the structures of the public sector into those of the private sector. What needs to be emphasised is that while the rights of workers in the public sector have been constantly trampled over for the past 30 years, they are still far better than those of private sector workers. Privatisation is perhaps not the best term – universities have always been private, and never nationalised. But what the public/private sector division does reflect is a series of nationally agreed pay deals which were won through mass organisation in the 1970s. These are the same pay deals which the government is now trying to rip up – which is why the failed strike ballots by Unison and UCU members pose a threat to wages across the board. But shared services is a means by which the national fight can be sidestepped on a local level, albeit with a national incentive scheme. It encourages universities to remove those pay deals from all of its workers and invite private shareholders in, without national union agreements or charity law standing in the way.

An example: a cleaner employed by a university might get £8/hr, whereas her equivalent in Ocean or Balfour Beatty Workplaces will usually be paid £6/hr.5 The University employee will be able to take maternity leave and still receive a basic pay and return to her job afterwards; her equivalent will only get statutory sick pay from the benefits office. The university employee is probably in a union which has a legal, binding agreement with the employer, so that if there are any issues over immigration, sick pay, promotions, bullying, harassment etc, the employer is legally obliged to negotiate with paid, trained union officers; the private sector employer probably doesn’t recognise the union, and so the employee is less likely to be a part of any union which could represent her. The university employee will have a pension topped up by the employer; the private sector employee will have none at all.

Cleaners are an apt example. At Hinchinbrooke Hospital in Cambridgeshire, now run by Circle Healthcare, the ‘savings’ have been made through sacking some of the cleaners and reducing their wages.6 As always, the process of capital accumulation starts at the bottom of the labour process. But once there are a minimum number of women of colour doing the maximum amount of corridor mopping on minimum wage, zero hour contracts, these companies will have to work their way up the factory line in order to continue making savings. They have to keep moving up the chain because they are competing with other contractors: if the current company doesn’t make the change, then when the contract is up for renewal a different company will show how they can sell their service to the university for less by making even sharper ‘savings’ and undercutting them.

John Baldwin, outsourcer-in-chief at Warwick university, has this to say: “Shared services will help free up new resources to spend on the student experience.”7 The convenient link presented between student experience and cost-cutting technologies gently glides over the fact that the students, and their sanctified experiences, also bow under the weight of the new labour regimes. This is best seen at nowhere less than Warwick, which boasts of its initial experiment with an early form of shared services in 1997, through the creation of Unitemps – an ingenious company which specifically targets students and graduates to work as zero-contract, no-conditions workers in the universities which trained them.8

‘Sharing’

So much for the ‘service’ – but what of the ‘sharing’? There are two kinds of sharing which are implied. The first is with the private sector company who actually runs the project. Warwick’s pioneering projects – for which their John Baldwin seems to have cast himself as a modern day Benjamin Franklin – are facilitated through a consultancy firm called Tribal Group. Like other leading companies in the new privatising sector, Tribal are mainly a software application company whose ‘solutions’ involve complex databases which ‘do the work for you’.9 HEFCE seem to be extremely excited about the possibilities shared services offer up for cloud computing and data sharing.10 Another good example of such applied software companies is ATOS, well known for it Paralympian hypocrisies.

The new legal body is owned by the university – which is why they get to claim that they are still the employer.11 This body is in partnership with a private sector company (like Capita), who essentially runs everything it does. The advantage for the university is that it gets to ‘save’ on paying for its contractors, because they don’t have to pay VAT on the deal. The advantage to the private sector company is not only that there’s a whole new, vast swathe of labour to take on (and exploit), but that it also doesn’t bear the full brunt of the financial responsibility. If the new body goes bust (due to mismanagement and corruption, more common that we might like to think), presumably the University will be liable, and the rest of the private company’s projects remain intact.

A second kind of sharing are the ‘efficiency savings’ made by sacking superfluous workers during the initial setting up of the body, explored above as ‘efficiency’.

A third and final kind is between the different institutions who pay for the service after it has been set up. It’s easy to imagine that universities, schools or hospitals might see an attractive option in bringing in a company (say, UCL services) which has the veneer of a public body but is actually a method of driving down workers’ conditions and pay. However, historically there are two general groups which have been exempt from VAT. On the one hand, there are tax-funded bodies which qualify as a public good – universities, hospitals, housing associations etc.12 On the other hand, however, in order to facilitate financial flow, credit transactions and certain banking activities are also exempt.13 It seems possible then that universities could team up with banks and insurance companies to ‘share services.’ Time will tell, though its unlikely that the charity commission would be sympathetic to the argument. Perhaps it’s more likely that a university could team up with a Housing association in order to manage student accommodation.

What’s more certain is that the new company created for the shared-services can sell shares – something which a university, as a charity, can’t do.14 By selling shares, the university would then be able to make steps towards being a truly private company, sidestepping the inconveniences of charity law.15 The creation of a new legal body also means that the entire entity could be sold on, which is arguably the plan at London Met.16

What will management say?

University managements will tell us that shared-services are good for students because it means saving on space, money and resources, and that it’s good for staff because it might even bring a pay increase. These savings, however, will be due to redundancies and the VAT exemption – and will be short lived. Over years, workers and students have demanded that staff be brought back in house, employed directly by the university for the reasons given above: the better conditions, won through a previous round of struggle. This demand is now being met in a distorted form – through a subsidiary vehicle which will ensure that the benefits of direct employment (and 20% increased profit margin) only accrue to the institution, and to dividends for its shareholders.

It should be clear that this is a private sector solution to a problem brought about by previous rounds of marketisation. With London Met’s finances crashing on the rocks of marketisation, management probably believe that selling on their new shared services body will be the only way to bring about financial security.17 Similarly, Hinchingbrooke Hostpial was handed over to Circle HealthCare in order to ‘deal’ with the enormous debt inherited from the toxic private finance initiative in which the hosptial is embroiled.

The differences between the institutions are irrelevant from the standpoint of capital- whether rolling in a turnover of nearly a billion (UCL), or bowing under a debt of millions (London Met), shared services are being proposed as a solution. The parallels to national economies are striking and not coincidental: UCL is the Uk to London Met’s Greece. London Met’s vice-chancellor provides another good parallel: “What underpins the recent stories about the institution is one impulse: affordability. A university that lived beyond its means must now pay its way.”18 This is, of course, the same argument being used against workers throughout Europe to stamp down wages and smash collective organisation, both in Greece and the UK.

 

2 London Met is certainly the great experiment ground for what’s possible in the new HE sector, and the scientist connected to the laboratory is Jonathan Woodhead, former researched to David Willets, and now aide to the Vice-Chancellor of London Met (to the tune of £75k/annum)
http://www.londonmetunison.org.uk/2012/08/shared-services-press/

3 http://www.guardian.co.uk/education/2012/aug/14/london-metropolitan-university-outsourcing-plan?

5 Yes, the Senate House cleaners (and others) have successfully fought for and won the London Living Wage and trade union recognition. But they still have less rights than other workers directly employed by the University of London, and less than they had before they were outsourced.

6 http://www.bbc.co.uk/news/uk-19073700

7 http://www.guardian.co.uk/higher-education-network/2011/jun/13/university-of-warwick-shared-services. Having now jumped ship for the Antipodes, Baldwin, in an admirable example of how to lack all self awareness, laments the over regulation and deplorable economic outlook of the UK, ignoring his very active hand in pushing forwards the mechanisms which have led to the “policy mess.” see http://www.timeshighereducation.co.uk/story.asp?storycode=418976

8 https://www.unitemps.co.uk/

9 http://www.tribalgroup.com/ourwork/Pages/Universities.aspx

11 Exaro: “The successful tenderer may be required to become a service provider to a special-purpose vehicle created by the university, and any resulting contracts may be between the university’s service company and the chosen service provider.”

12It should be noted, however, that the government has listed ‘providers of education’ as exempt, which possibly also includes private companies specialising in education, such as the New College of the Humanities. http://andrewmcgettigan.org/2012/03/22/the-budget-and-universities/

14 http://andrewmcgettigan.org/2012/08/21/london-met-outsourcing-or-something-else/

15Something the government is trying to find ways to do through a review of the Charities Act: http://andrewmcgettigan.org/2012/07/21/charities-act-review-university-constitutions/#more-593

16This is the same argument made about ALMOs for council housing: http://www.defendcouncilhousing.org.uk/dch/dch_ALMOs.cfm

17London Met’s finances are probably more likely now in trouble not because of too many, or too expensive staff, but because of a potential huge loss of international students due to having had their visa fast-track service revoked: http://www.timeshighereducation.co.uk/story.asp?sectioncode=26&storycode=420639

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Bloomsbury Fightback

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