Category Archives: Outsourcing
Current trade negotiations: government is ‘presently’ not adjusting its food welfare and safety standards to align with the US
Last week Rachel Wearmouth reported that UK chief trade negotiator Oliver Griffiths, in a letter to his US counterpart, agreed that anyone given access to information about any agreement reached will be warned that they cannot share it with the public. Moreover, the information will be held in confidence for five years after a US-UK trade agreement enters into force, or five years after the close of negotiations – a proposal made during the failed TTIP negotiations between America and the EU.
The government said agreeing terms on confidential documents was standard practice and that negotiators had committed to updating the public after every round of talks.
Liz Truss, international trade secretary, is overseeing the UK-US negotiations.
Today, an FT article reports that Liz Truss (Department for International Trade) is preparing to offer a “big concession package” to US negotiators and drawing up plans to slash tariffs on US agricultural imports, despite concerns from some ministers and Conservative MPs about the damage they could cause to British farming.
This measure has divided Conservatives; it is said to be opposed by Cabinet office minister Michael Gove and environment secretary George Eustice, who is concerned that cheaper US goods may undercut UK farmers. The FT also reports that senior DEFRA figures are concerned that reducing tariffs could be “the thin end of the wedge”, leading to further UK concessions on animal welfare standards, but officials added that government was ‘presently’ not adjusting its food welfare and safety standards to align with the US.
Nick von Westenholz (above), director of EU exit and international trade at the National Farmers’ Union, said that any concessions UK negotiators give on market access must be accompanied by clear conditions on how those goods have been produced, in line with the government’s own red lines in trade negotiations, repeated in their 2019 election manifesto. The Tory pledge:
“In all of our trade negotiations, we will not compromise on our high environmental protection, animal welfare and food standards.”
Before 1990, healthcare in the United Kingdom was provided by health authorities which were given a budget to run hospitals and community health services in their area. The National Health Service and Community Care Act 1990 introduced an internal market into the supply of healthcare in the United Kingdom, making the state an ‘enabler’ rather than a supplier of health and social care provision.
Care homes were then outsourced by local authorities to the private sector which employed large numbers of low-paid workers with weak representation by unions and professional organisations. Spending on social care is now below 2010 levels.
Gill Plimmer describes the way in which global private equity, sovereign wealth and hedge funds have piled into the sector in the past three decades, lured by the promise of a steady government income and the long-term demographics of Britain’s ageing population.
Three of the biggest chains — HC-One, Four Seasons and Care UK — are in the hands of buyout groups.
At the Four Seasons Whitchurch Care Home in Bristol (above), emergency buzzers went unanswered, some medicines were not dispensed and many of its frail and elderly residents had not been given a bath, shower or a wash for a month, an official inspector’s report found. A broken elevator meant residents on the second floor could not be taken to hospital appointments.
Problems are in part a result of:
- a long-term decline in fees paid to providers for social care,
- a state mandated rise in the minimum wage,
- a decline in state funding for local governments, which pay for 60% of their residents,
- short term investment and speculation,
- larger private equity-owned care homeowners have a short-term investment focus and complex structures, involving scores of subsidiary companies, many of which are listed offshore and
- the money to fund the trading coming from taxpayers or from middle class people running down their savings.
When Terra Firma (building better businesses) bought the Four Seasons chain in a £825m deal in 2012, there was still £780m of outstanding borrowings hanging over the business. Now around £1.2bn of interest-bearing debt and loans from unspecified “related” parties.
Nick Hood, analyst at Opus Restructuring & Insolvency, which has advised several care home chains, said “owners are playing with the debt and expecting returns of 12 or 14 per cent and that is simply unsuitable for businesses with heavy social responsibilities”
He adds that the watchdog — the Care Quality Commission — should require the entire corporate structure to be held within the UK
Jon Moulton, the private equity veteran who ran Four Seasons in the early 2000s recommends that care home chains should hold a certain amount of capital, just as banks are requited to do by the Financial Conduct Authority.
Toothless regulator/watchdog places all responsibility on Britain’s cash-strapped local authorities
Kate Terroni, chief inspector of adult social care at the CQC, says that for now it has no authority to introduce minimum capital requirements or to intervene to prevent business failure. “Our powers are to provide a notification to assist local authorities who are responsible for ensuring continuity of peoples care
Meanwhile, as Four Seasons “hurtles towards insolvency”, directors are paid lavishly and their care homes continue to close.
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.
The Telegraph reports that MP James Cleverly, who is in charge of the Tory election campaign, says that he is aware of individuals, including entrepreneurs and other business figures, some Jewish, who plan to leave the country if Labour were to win the election.
Would that be noticed? Many – like the Telegraph’s owners – already spend much of their time away from Britain.
Surely they could survive relatively unscathed, despite paying taxes in full and ‘coming to an arrangement’ with the currently short-staffed inland revenue service, paying their workers a living wage and bearing the costs of any pollution emitted by their businesses?
Mr Cleveley shows compassion for those whom he says are planning to leave, but appears to lack sympathy for the less fortunate. The Independent reported that, according to Parliament’s register of interests, Cleverly was one of 72 Conservative MPs voting against the amendment who personally derived an income from renting out property. He opposed – and therefore delayed – legislation which would have required private landlords to make their homes “fit for human habitation”.
When working with mayor Boris Johnson as Chair of the London Fire and Emergency Planning Authority, he was responsible for the closure of ten fire stations in London, after which an elderly man jumped from a burning building in Camden, following delays in the arrival of fire crews. The Fire Brigades Union had repeatedly warned that a tragic death of this kind would occur after severe cuts to funding of the fire service in London.
Under a government led by Jeremy Corbyn, as corporate tax evasion and avoidance on a large scale is addressed releasing funds for education, health and other important services, the 99% on lower incomes will welcome a living wage, a well-staffed fire and health service, homes fit for human habitation, appropriate care for the elderly and disabled and better employment opportunities as manufacturing and services are increasingly in-sourced.
And these millions have one asset: their vote.
All those with an interest in Italy’s Fincantieri, Spain’s Navantia, Japan Marine United Corporation, and Daewoo Shipbuilding and Marine Engineering of South Korea – and their British shareholders – will rejoice as the Ministry of Defence decided to put the £1bn contract for the building of fleet solid support ships out to international tender in February.
France and Italy build their own solid support ships, ensuring that the work remains within national borders. Rodney Reid (Financial Times) responds to the news by describing Britain’s approach as ‘muddled’. He recommends that vessels required for use by the Royal Navy should be built in Britain, preserving jobs and skills in this country. A month later Mr Reid reported that Fincantieri and Daewoo Shipbuilding and Marine Engineering had withdrawn due to the ‘significant’ advance funding required.
Unions and shipbuilders have urged that the vessels to be built under this contract with flight decks, advanced weapons systems and extensive dry storage, to carry supplies needed by the carrier fleet when on mission, should – as in France and Italy – be classed as complex warships. This would enable them to be built in the UK, exempted from EU laws preventing protectionism.
Reid asks: “With the Appledore shipyard in Devon, which has built ships for the Royal Navy for well over a century, likely to close at the end of March without any new orders, is it too much to expect joined-up thinking at the MoD to keep valued jobs in the UK and save a valuable shipbuilding asset?”
Admiral Lord West of Spithead points out a few of the advantages of building these ships in Britain:
- the benefits to the exchequer of tax receipts from the firms involved and their workers,
- the lack of exchange rate problems,
- maintenance of highly skilled workers
- versus redundancy and retraining to be shelf-stackers or something similar.
A false economy?
In an earlier FT article, co-authors David Bond, Henry Mance and Peggy Hollinger assert that the MoD wants to cut costs by using the subsidised shipyards of other countries but defence experts say that might be a false economy. Francis Tusa of Defence Analysis said a report commissioned by the unions will show next week that 25% of the spending on the vessels would return to the government in direct taxes.
Admiral West agrees: “The Treasury is deluding itself if it thinks it is cheaper building them abroad. The fleet solid support ships should be built in the UK.”