A damning new report has exposed the vast and growing dependence of London's local authorities on private consultancy and outsourcing firms, with payments exceeding half a billion pounds in a single year.
Half a Billion Pound Bill for Core Services
Research conducted by the Autonomy Institute and the CADA Network found that London councils paid private companies a staggering £555 million in 2024. The analysis warns of a "sustained reliance" on these firms to perform fundamental council duties, a trend that has escalated dramatically since 2010 following deep cuts to local authority budgets.
According to the Institute for Fiscal Studies, funding from central government to London boroughs was slashed by a third after 2010. In this climate, payments to private providers have surpassed the £500 million mark every year since 2022. The services bought in range from IT systems and software leases to temporary staffing for under-resourced departments and expert advice on budgets and planning.
A Systemic Shift, Not a Temporary Fix
The report argues this spending indicates a deep, structural change in how local government operates. Between 2013 and 2023, the average annual consultancy spend per London council rose by 76%, from £11.5 million to £20.2 million. This pattern, the authors state, "suggest systemic, long-term outsourcing of core council functions, not short-term specialist advice."
Will Stronge, chief executive of the Autonomy Institute, said: "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." He added that rebuilding public sector capability was the only sustainable path forward.
Major Contracts and Council Case Studies
Some companies have received colossal sums from London authorities over the past decade and a half. The managed service firm Matrix SCM was awarded contracts worth over £2.1 billion between 2010 and 2024. Outsourcing giants Capita and Serco were paid approximately £1.1 billion and nearly £500 million respectively in the same period.
Individual council spending highlights the scale. Lambeth council paid over £80 million to consultancy and outsourcing firms in 2024. Barnet council spent more than £40 million, though this represents a significant reduction from the £80 million it paid in 2014 and 2016.
Barnet became a flagship example of mass outsourcing in the early 2010s, branding itself an "easyCouncil" and handing most frontline services to Capita in deals worth £300 million over ten years. The arrangement led to significant problems, including a £62 million budget black hole and fraud cases. In 2022, a new Labour administration voted to bring most services back in-house, committing to end the Capita contract by 2026.
Lambeth council disputed the report's characterisation of its spending. A spokesperson stated that much of the cost attributed to consultancy was actually for essential public services like waste collection and renting properties for homeless families, driven by unprecedented demand. They also argued that spending on agency social workers was mislabelled as consultancy and was due to a national staff shortage.
A Barnet council spokesperson said its use of external suppliers was now limited to specialist areas and that it was on track to end its Capita contract in 2026.
Capita and Serco declined to comment. Matrix SCM did not respond to a request for comment.
