OXFORD city councillors agreed it will never enlist the services of companies used by three other Oxfordshire councils because of their current working practices.

A motion, which called that ‘public services must be run for the public benefit, not private profit’, was backed by 29 councillors at a meeting on Monday.

It was critical of the collapsed company Carillion, which was responsible for many critical Government contracts and responsible for some services commissioned by Oxfordshire County Council, and Capita, which provides HR, finance and technical services for South Oxfordshire and Vale of White Horse district councils.

Proposed by Labour councillor Dan Iley-Williamson, it said that collapse of Carillion had left its former staff ‘fearful of their jobs, wages and pensions’.

Fellow Labour councillor Mark Ladbrooke, who previously worked as a union official representing staff at the John Radcliffe Hospital, said: “It is an absolute shame that we live in a city of dreaming spires and Victorian squalor, which is what this involves.”

He said working conditions in some cases were so bad at the JR that Carillion staff – who he said received ‘bare minimum terms and conditions’ – were not as badly off as agency workers, ‘who went to work not knowing whether they would have work that day.’

Carillion was put into compulsory liquidation two weeks ago owing £1.3bn. It also had a pension deficit of nearly £1bn. Oxfordshire County Council had signed a £500m contract with the company in 2012 but had ended most it last year. The council took over direct responsibility for providing school meals and cleaning in schools earlier this month.

South and Vale councils renegotiated their contract with Capita last month.

As part of Mr Iley-Williamson’s motion, he said the company will close its defined benefit pensions scheme in its Life and Pensions Regulated Services division, ‘substantially reducing its employees’ expected pensions.’

Nigel Chapman, the former director of the BBC World Service and Labour member, said outsourcing had been a ‘complete disaster’.

He said: “A lot of that lies in the confusion which meant the cost of everything and the value of nothing. I think that is the misplaced thinking that lies at the heart of outsourcing.”

Five councillors, all Liberal Democrats, abstained. Its leader Andrew Gant said the motion was ‘simplistic’.

The Green Party backed the motion but its deputy leader Craig Simmons said he was ‘unconvinced’ by Labour’s opposition to outsourcing.