Carry on Up the Khyber

Outsourcing appears to be the subject that is most likely to have you writing to offer your own opinion and in every example I have seen, readers are not happy about the situation as it stands today, with company after company, among them, pillars of the UK economy, entirely free to swap their call centre workforce in Margate for one in Madras.

I’m making such a noise about what I regard as economic myopia or even injustice, that one of the world’s largest providers of outsourcing services to India has invited me to lunch, which is nice but unlikely to change my mind on the subject.

If for a moment, we look at the maths for the UK economy, then I’ll leave it to you to decide who benefits from the indecent haste in which we are moving our IT and call centre workforce abroad.

If you happen to be a large telecoms company or a bank, then you might be paying each of your call centre operatives £15,000 a year. You’ve already outsourced as far away from London as you can possibly go without getting your feet wet and salaries reflect the local cost of living, as in Kent, where I’m writing, where my weekly supermarket shop costs 30% less than the city.

For each employee, you have to pay your national employment contribution and then of course, there may be a pension contribution too. The employee has to cough-up PAYE and NI and this keeps Gordon Brown relatively happy and the British economy keeps its head above water, just.

If , like me, you are an employer, you aren’t so happy, because salaries and taxes are relatively high. Not as bad as they are in Europe but it hurts and being competitive is tough. So of course, the idea of moving the workforce to India, where salaries are low, employment rights are debatable and the Inland Revenue is relieved of the National Insurance and PAYE collection burden, does seem rather attractive. If you happen to be one of the many new 118 Directory Enquiries companies fighting for a niche in the market, then you can be very competitive, as after all, your only physical presence in the UK might only be the nameplate on your registered office and the physical switch in an exchange which routes your incoming calls to your South African or Indian call Centre.

The customers are happy because they receive a cheaper and more competitive service and the shareholders are delighted because they see a better dividend. The Indians, Mexicans and Russian have jobs to go to and indirectly, this is being subsidised by the Inland Revenue and the potentially unemployed UK taxpayer in the IT or call centre industries.

Taking the predictions of Gartner and other forward to their natural conclusion, within a decade, there may be no large domestic call centres in UK banking, IT and telephony and even the public sector may be outsourcing significantly. Much if not all IT programming and R&D work will be carried out ‘offshore’ and my column will be written by a chap in Bangalore. In the meantime, the UK will continue to be flooded by unskilled immigration from the troubled countries of the Middle East and Africa, services for which will have to be paid for out of National Insurance contributions.

I’m asking government if this makes sense. I agree that legislation against outsourcing is impractical but I do see the UK rapidly painting itself into a corner unless we think clearly about the consequences. Where are tomorrow’s jobs for those people in society who don’t carry ‘professional’ qualifications? They are certainly not in manufacturing industry and they won’t be in IT or call centre services either, so what does tomorrow’s Britain look like from an employment perspective because if 40% of the population are going to be working for the government and paid for by everyone else’s taxes, what will the remainder be doing?

Answers on a postcard please.


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