Category Archives: Finance
In 2018, the Times (paywall) reported the verdict of MP Meg Hillier, chair of the Public Accounts Committee: “The apprenticeship levy is not working. It was meant to incentivise large employers to invest more in apprenticeships by requiring them to pay into a central fund from which they can claim back some or all of their training costs.
Instead it has led employers to recoup the cost of existing in-house training schemes by relabelling them as apprenticeships.
She noted that more companies are setting themselves up as training providers and that Ofsted says that it will struggle to keep tabs on these. The following year her report pointed out that too many apprentices were still being trained by sub-standard providers.
Around a third of apprentices covered by Ofsted inspections in 2017/18 were being trained by providers rated as ‘inadequate’ or ‘requires improvement’. The poor quality of some contributed to a situation where over 30% of apprentices fail to complete their apprenticeship successfully each year.
A letter to the Times editor added: “The Learndirect scandal serves as a stark case: an organisation was allowed to take on more and more learners (reaching 75,000) when warning signs of inadequate training and poor financial management were already being issued”.
The Financial Times reminded readers that Learndirect was privatised and sold to the private equity arm of Lloyds Bank in 2011 but is still reliant on government funding. When the Public Accounts Committee questioned Learndirect and Ofsted, Ofsted revealed the findings of Learndirect’s “inadequate” performance and the ‘legal shenanigans’ used to prevent earlier revelations. The findings included:
The National Audit office’s 2019 report focussed on the cost of apprenticeships and the low rate of uptake. In its first full year of operation, the apprenticeship levy raised £2.7 billion and this is expected to rise to £3.4 billion by 2023-24. However, there have been repeated warnings in recent months that the funding pot generated by the levy is about to run out
Earlier this month the Financial Times reported on an Education and Skills (EDSK) report, based on official data, which has investigated what is happening with the apprenticeship levy and the apprenticeship system in England more broadly.
It found that 50% of apprenticeships funded by the levy are ‘fake’, citing figures which relate closely to those reported by the Public Accounts Committee, recorded in the FT box above:
- Some £1.2bn of the £2.4bn money raised since the levy was introduced in April 2017 had been spent on “fake” apprenticeships, rebadged MBA courses and low-skilled jobs training,
- £550m of levy funding had been spent on management training courses for experienced employees, which previously would have been funded from professional development budgets.
- Highly qualified academics, many of whom already have PhDs, had been relabelled as apprentices in order to put them through levy-funded professional development courses.
- And £235m had been used to teach people in low-skilled jobs, including working at a shop checkout or serving in a bar, often requiring minimal training, which pay low wages and do not meet any established definition of an apprentice.
Last July Boris Johnson said that, while he will always “defend and extol the advantages of having a degree, there are far too many young people who leave university with huge debts, and no clear sense of how their academic qualification has helped their career.” He has pledged to “elevate practical and technical qualifications” to “recognise their immense value to society and to the individual” and to raise funding for apprenticeships.
As – regrettably – Learndirect has re-emerged in the apprenticeship sector under a new name: Learndirect Apprenticeships Ltd., EDSK reflects that government pays private providers taxpayers’ money to deliver public services but can fail to monitor the results or truly penalise those that do not deliver. It recommends the Department for Education to tighten rules to stop financing of rebadged MBAs and low-skilled training and introduce a new definition of apprenticeship, benchmarked against the world’s best technical education systems.
As Paul Halas writes (Western Daily Press, 7 December 2019, p. 30):
“Over the past few decades privatisations have included Royal Mail, British Gas, electricity, water and sewage treatment, the 999 calls service, much of the ambulance service, the NHS appointments service, British Steel, large parts of the education service, the Coal Board (as was), the probation service, many prisons and detention centres, large chunks of the care services, British Airways, British Rail… ad infinitum”).
Martin Rudland draws attention to the ‘we own it’ website which focusses on privatisation of public services which wastes billions each year on shareholder dividends and high borrowing costs, giving links to research into costs in several sectors including water, energy, transport, broadband, Royal Mail and NHS.
Transnational Engie is on the list of Luton and Dunstable University Hospital’s suppliers of domestic, catering and cleaning services. Unison and GMB are calling for these services to be brought back in-house once Engie’s contract ends next year.
UNISON, the union representing workers at Luton & Dunstable Hospital, points out that staff who were transferred from the NHS in 2015 are being paid NHS rates of £9.02 an hour but anyone who started since is paid the legal minimum of £8.21 an hour.
New starters are paid at least £1,400 less than colleagues who were at the hospital before cleaning services were sold off. Engie employees have also told UNISON that they are being denied leave and being made to take the blame when the contractor is pulled up by the Trust for any shortcomings in service.
UNISON’s Eastern regional organiser Winston Dorsett said, “Engie has confused and demoralised its staff further with a third set of pay and conditions brought in last year to squeeze a bit more cash out of the taxpayer. This firm is making its profits off the backs of some of the lowest-paid workers in our NHS”.
GMB regional organiser Hilda Tavolara agrees that the workers “deserve to be treated fairly by their employer” and points out that last year, housekeepers’ working hours and wages were cut, yet they were still expected to do the same amount of work. This has had a knock-on effect on the patients, their families and visitors.
Hospital chiefs are offering Engie a new 10-year contract to provide the services, proposing to outsource a number or employees currently working for the NHS but UNISON is calling on the Trust not to renew Engie’s contract next year and bring cleaning, catering and housekeeping back in-house.
This week an IPPR study revealed the cost of private finance initiatives (PFI) contracts in the NHS.
These contracts brought £13 billion of initial investment capital into the health system but by the time they have ended the NHS will have spent £80 billion on them.
This is money which could have been spent on doctors’ and nurses’ salaries, on improving treatments, or on making sure young mental health inpatients don’t have to stay in hospitals hundreds of miles away from their family and friends.
The IPPR report reveals that £55 billion of this debt is still outstanding – representing a huge burden on tight NHS resources if the government does not take action. It recommends that bad deals be brought back into public ownership.
After wondering whether what’s left of the NHS is really going to remain in the public domain under the Tories, Paul Halas adds: “What they (private companies) all have in common is poorer service, higher prices, worse wages and conditions for employees, and a haemorrhaging of money to highly paid executives and shareholders, many of them based overseas and avoiding tax in this country”, ending:
“The Tories’ long-term goal has always been to shrink the public sector to the size of a walnut and until the NHS, the last of the public service dominoes, is toppled it’ll remain a thorn in their ideological flesh”.
There are many forms of outsourcing, defined here, but in this post we refer to the practice of handing over control of public services to private enterprises. Many adverse references to the practice of outsourcing may be seen by searching this site.
The Information Services Group consultancy reports that the UK outsourcing market is now the second largest in the world outside the US; under the coalition government the number of outsourced contracts rose 125% from 526 under the last Labour government to 1,185. Justice, defence and welfare are the biggest ‘markets’
‘HGS seamlessly supports your business behind-the-scenes’ . . .
The Ministry of Justice (right), which had serious IT problems earlier this year, is handing over its outsourced system, designed to help police to book local duty solicitors and co-ordinate payments from the existing supplier, from Capita to HGS UK. After a week-long transition period solicitor Kerry Hudson, vice president of the London Criminal Courts Solicitors’ Association, said that police are struggling to log cases with the Defence Solicitor Contact Centre (DSCC). Bethan Staton reported on the problems experienced, including 30-minute hold times, staff who cannot operate the bookings system and requests being sent in error or after suspects had been released under investigation.
David Greene, vice-president of the Law Society of England and Wales, said that the service administered by Capita, had previously been plagued by faults:
- reports of wrong or missing names of detainees,
- cases given to incorrect firms,
- solicitors directed to custody suites — only to find the detainee isn’t there.
He added that the call centre “appears to have undergone a complete system meltdown” during the contract changeover.
The Law Gazette reports that Kerry Hudson wondered how many detainees across the country had gone into interview alone, having been told the police cannot get through to request a solicitor to attend. Kerry Hudson said that even when they do manage to get through, there are said to be:
- delays of four or five hours between the police first call and the DSCC then contacting the solicitor and
- when they are contacting the solicitor, much of the key information is missing (including the detainee name in some cases) and the crucial DSCC reference number.
Law Society vice president David Greene added that denying suspects the right to legal advice risks miscarriages of justice.
Public Finance, which provides news and analysis for professionals in public finance, has commented that a series of botched UK government contracts, including a Serious Fraud Office investigation into Serco and G4S for overbilling on a deal to monitor offenders, has raised concerns over whether the taxpayer receives the best value for money and the National Audit Office has called for closer scrutiny of government contracts.
This is the latest in a series of debacles linked to government outsourcing of some parts of the law enforcement system; last year the government had to reverse its decision to use private companies to run probation services.
Andrew Pendleton (New Economics Foundation) reminds us that since Margaret Thatcher first stood on the steps of Number 10 in 1979, successive UK governments have chosen to withdraw all but the barest bones of support from Britain’s foundational industries, of which steel is one. He questions whether any owner of steel manufacturers in the UK could thrive in the hostile environment UK governments have created.
Failed by the current government’s blind faith in markets, Pendleton writes, the people of Scunthorpe and many other places have had no voice whatsoever in how the economy was run, until ‘the blunt instrument of the EU referendum’. The loss of this significant company will intensify the sense of loss that contributed to the Brexit vote
There are risks in selling to the Turkish Military Pension Fund or to the Chinese Jingye Group, about which very little is known, industrially, but the interest of foreign buyers suggests that British Steel is seen as a potentially viable asset.
Many tonnes of steel will be needed to build a cleaner economy – for wind turbines, electric vehicles and the rail lines made in Scunthorpe, critical to a decarbonised economy. As Pendleton points out, steel production is ‘problematic’ for climate change – but steel production in Scunthorpe can be ‘greened’ by investing to reduce its carbon emissions, eventually reaching zero as coal-free production (below) becomes the norm.
In Germany, Thyssenkrupp recently demonstrated running a steel blast furnace completely on hydrogen – opening up the prospect of zero-emissions steel production by using renewable hydrogen.
Hydrogen will become cheaper as current methods, which rely on creating hydrogen fuel from purified water, are superseded by less expensive technologies such as one being developed by Stanford researchers, who have been separating hydrogen and oxygen gas from seawater via electricity.
And millions of tonnes of carbon used in shipping will be saved by using steel close to where it is manufactured
Pendleton sees the current economic model, ‘now the default preference of our policy-makers’, as absurd; in Fife, steel fabrication firm BiFab is in mothballs (right) while energy giant EDF imports the casings for the turbines on its new offshore wind farm from Indonesia.
He points out that Indonesia and some of our European neighbours’ governments habitually intervene to ensure that ‘foundational industries’ have guaranteed supply chains and amply-filled order books.
British Steel owners Greybull, a private investment company which owns many other industries, are unlikely to be seriously affected, but the company’s workforce, its suppliers, Scunthorpe and the wider economy will. It will be a disaster, politically and economically. Andrew Pendleton ends:
“Nothing short of immediate nationalisation is needed; anything less will be a betrayal of a whole town and will send shockwaves through the UK’s industrial heartlands . . .
“It is not too late for the government to step in and take the company over, which would have the immediate effect of keeping people in work and the economy of a town afloat. This is absolutely government’s proper role. But it shouldn’t stop there. After nationalisation should come a three-pronged approach:
- focus on industrial strategy for British Steel in order to secure its supply chains
- fill up its order book with a proactive procurement policy.
- and create a worker owned company who could then benefit from an ownership dividend
“Given the UK’s need to invest and build green infrastructure, such as railways, steel is of national strategic importance”.
Read Andrew Pendleton’s article here.
Patrick Jenkins (Financial Times) attended a debate held by the FT City Network, a panel of more than 50 senior figures from across the City of London, during which ‘two of the world’s biggest fund management bosses’ pleaded for reform.
He reported that these pleas were made in response to an address by Gail Bradbrook, co-founder of Extinction Rebellion, in which she called for wholesale reform of the current economic system to avert global disaster.
Recent protests have focussed in part on the City of London and the role that banks, asset managers and insurers play in financing and sustaining some of the world’s most environmentally damaging industries, from oil extraction to vehicle manufacture.
Several participants praised the part that UK-based climate change activist group Extinction Rebellion has played — alongside others, including Swedish teenager Greta Thunberg and film-maker David Attenborough.
Anne Richards, chief executive of Fidelity International, said the world must end “our obsession with ever-increasing GDP” and the “primacy of shareholders” to foster the kind of long-term thinking that would help protect the environment and “pivot [away] from the Milton Friedman concept of capitalism and the primacy of shareholders, who may have a very short-term involvement with an individual company, towards a wider stakeholder approach”.
Andreas Utermann, CEO of Allianz Global Investors, said that the world’s growth mania — “nominal GDP growth, supported by population growth, [and profit] growth” — was clearly unsustainable, and suggested that capitalism in its current form is “borrowing from the future while destroying the environment . . . A more holistic approach to ‘growth’ needs to evolve, looking to capture societal and environmental benefits and costs . . . More sophisticated measures than GDP per capita are required to determine whether capitalism is delivering to all stakeholders without borrowing from the future while destroying the environment. It was self-evident that this is not sustainable”.
A number of City Network contributors said that, while it was impossible to blacklist climate unfriendly firms instantly, it was vital that companies set tough environmental targets, measure whether they were met and reward managers on their performance, rather than on short-term profit. Other interventions showed that a wider range of contributors to the debate believe that business and government must urgently improve their response to the growing evidence of environmental catastrophe.
On 14 September 2017 The Grenfell Tower Inquiry began to investigate the causes of the fire and other related issues. The chairman, Sir Martin Moore-Bick, issued the phase one report on Wednesday 30 October 2019. In it, he concluded that the tower’s cladding failed to comply with building regulations; the principal reason the fire spread was the use of aluminium composite cladding filled with plastic on the building’s exterior.
In the dock?
- Past and present governments’ erosion of safety standards through programmes of deregulation, privatisation, outsourcing/subcontracting, localism and austerity: “Regulations were relaxed and eliminated, warnings were ignored and costs were cut, while profits and council reserves.
- David Cameron, as prime minister, promised and delivered a “bonfire of regulations” in the construction industry.
- Boris Johnson, as mayor of London, closed 10 London fire stations, took 30 fi re engines out of service and slashed over 500firefighter jobs to “save money” (charges made by Yvette Williams)
- The Conservative members of the Royal Borough of Kensington and Chelsea (RBKC) who covered the homes of working-class people with flammable tiles rather than fire-resistant tiles because they were cheap, prepared the way for the Grenfell Tower fire (Sasha Simic).
- “The true culprits of the fire are those who wrapped the building in flammable cladding, who gutted the UK’s fire safety regime, who ignored the warnings from previous fires, and who did not hear the pleas of a community worried for their safety”, Fire Brigades Union (FBU). Below left, see a brief video of firefighters during the fire
* In the 2012 Grenfell Tower Regeneration Project’s public consultation, which may be read here, residents were asked about the cladding’s colour and finish, but the issue of fire resistance was never raised.
The planning application’s engagement statement records that the choice of cladding – zinc or particle board was investigated and the final choice was Reynobond PE with a plastic filling – a cheaper option, saving nearly £300,000 – placed around flammable foam insulation.
The establishment – elite networks who close ranks to protect their own interests – spared the government & cladding company and scapegoated the Grenfell firefighters
Despite the Grenfell Inquiry’s finding that the principal reason the fire spread was the use of aluminium composite cladding filled with plastic on the building’s exterior, mainstream media chose to highlight criticism of the fire-fighters’.
The FT, though focussing closely on the performance of firefighters, did at least give details of the other companies involved, prudently noting that the report does not assign blame to any individual companies.
Hotpoint, a division of Whirlpool, made the fridge-freezer in which the fire began. Celotex, a division of the French multinational Saint Gobain, made the foam insulation used on the tower; Rydon, the design and build contractor on the refurbishment subcontracted the cladding installation; Harley Facade, and CEP Architectural Facades manufactured the cladding into “cassettes” for use on the tower.
The BBC (warned off after publishing this outspoken article about the cladding?), the Guardian and the Independent opted to focus on the fire service, the Metro achieving some balance by publishing a fiery article by Yvette Williams and one focussing on the fire service in the same issue.
Yvette summarised the feelings of many: “the real ‘villains of the piece’ should be in the media headlines, rather than the firefighters who risked their own lives to save people in a building that no-one should have been living in, with a fire that was unprecedented”.
Since the Grenfell disaster, Arconic has withdrawn Reynobond PE from the market for all building uses. The company is now being forced to disclose evidence to investigations by the police and the Grenfell Tower public inquiry and a second phase to investigate the broader causes will begin in 2020.
But, as the FBU concluded, “We cannot wait for years for the Inquiry to conclude. Change is needed now.” The Grenfell question: will Britain elect a government that puts people before profit?
* As with some other ‘sensitive’ documents, this link will not open. To read the report, the link has to be copied and pasted: https://www.rbkc.gov.uk/idoxWAM/doc/Other-960662.pdf?extension=.pdf&id=960662&location=VOLUME2&contentType=application/pdf&pageCount=1
Shocked by the unbridled tone of the Attorney General in the Commons today – recorded here – his fury mounting after the second minute – I searched online for information which would shed light on his character.
When practising as a barrister, Geoffrey Cox frequently led in commercial actions and arbitrations overseas, appearing in the Dubai International Finance Centre, Mauritius and the Cayman Islands. He served as MP for Torridge and West Devon from 2005-15.
- In September 2014, it was reported that Cox was one of a number of individuals investing in the Phoenix Film Partners LLC scheme run by Ingenious PLC which HM Revenue and Customs(HMRC) had alleged to be a tax avoidance
- In 2016, at that time Britain’s highest-paid MP, it was reported he had a number of office expense claims for items, such as a 49p pint of milk, rejected by the Commons authorities.
- In January 2016, Cox, a landlord, backed the Conservative Government in voting down an amendment in Parliament on rental homes being “fit for human habitation”.
- He was a member of parliament’s Committee on Standards and the Committee on Privileges, ‘the sleaze watchdog’ but was the subject of an inquiry in 2016 after ‘neglecting to register more than £400,000 of outside earnings.
In February 2016, Cox announced in the House of Commons that he supported the case for leaving the EU and would campaign and vote to do so in the forthcoming referendum.
He was appointed to the Cabinet as Attorney General for England and Wales and Advocate General for Northern Ireland by Theresa May in 2018 and, in February 2019, was put in charge of negotiating changes to the Northern Ireland backstop in the EU withdrawal agreement.
On 24 September 2019, minutes of a conference call seen by Sky News revealed that Cox had advised the government that the prorogation was lawful and constitutional and that any accusations of unlawfulness “were motivated by political considerations”.
On the same day, the Supreme Court of the United Kingdom ruled unanimously that Prime Minister Boris Johnson’s prorogation of parliament – as advised by Attorney General Cox – was unlawful.
The reasons for his astonishing parliamentary outburst can now be understood.
A report, Government outsourcing: what has worked and what needs reform? was released on Sunday night by an independent think tank, the Institute for Government (IFG).
Lamiat Sabin reports its finding that the cost savings outsourcing is supposed to deliver have been heavily exaggerated and that public support for renationalising services will increase as a result of “repeated failures”.
In the words of General union GMB national secretary Rehana Azam: “All too often the apparent ‘savings’ from outsourcing take the form of cutting wages, terms and conditions and pensions . . . We need to rebuild our public services and return them to public and democratic ownership, serving citizens and their communities not the shareholders of big business”.
But under the headline: Labour plan to reverse outsourcing criticised by think-tank, Valentina Romei (below right) puts a very different emphasis on the report’s findings, quoting the words of Tom Sasse, senior researcher, Institute for Government:
Noting that the government spends about £292bn, more than a third of all public spending, on goods and services from external suppliers and that a series of failures has brought the system under intense scrutiny, Valentina points out that these often stem from recurring issues and failures, including:
- an excessive focus on the lowest prices . . .
- the finding that some of the people most in need in society — jobseekers, benefits claimants, ex-offenders — have been let down by government outsourcing services. . .
- the outsourcing of probation services which have failed on every measure, harming ex-offenders trying to rebuild their lives . . .
- setting the cost ceiling to provide services in Cornwall in 2011 too low for many GP services providers and
- the repeated failure of the company finally selected to meet both its performance and quality targets.
Valentina concluded that: “Opening up prisons to competition has led to innovations that have improved the lives of prisoners . . . Contracting out waste collection, cleaning, catering and maintenance in the 1980s and 1990s led to significant savings”.
John McDonnell, Labour’s shadow chancellor, also scrutinised this “40-year failed experiment”. He focussed on several points made in the report, including:
- the fact that politicians regularly cite headline savings of up to 30% but recent evidence shows any savings are more typically around 5 to 10%.
- 28% higher rates of MRSA infection were found in hospitals which had outsourced cleaning to companies that often employ fewer staff.
- Private prisons also tend to pay prison officers and support staff considerably less than in public prisons (by 15 and 22% respectively) while paying managers and directors more.
- The fact that NHS will have spent £80bn by the time all the PFI contracts for buildings such as schools and hospitals are paid off, in return for just £13bn of initial investment (IPPR think tank).
The website of public ownership campaign group We Own It, set up in 2013, is well worth visiting. Its founder and director Cat Hobbs (right) said:
“It doesn’t make sense to hand over crucial services to companies that are motivated to make a profit rather than serve the communities.”
(Ed) A statistician could objectively assess the findings of this report which may be downloaded here. Until that is done the public will continue to regard privatisation as an abysmal failure and a gross misuse of tax income by government.