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Outsourcing 2: government rewards Serco for failure

Gill Plimmer in the Financial Times reports the continued lunacy (or worse) of our government in rewarding failure.

northern rail header

The largest UK government contract awarded so far this year – a £520m deal to continue operating the Northern Rail franchise until 2016 – has gone to Serco in partnership with a Dutch rail operator.

The company is the subject of an ongoing investigation by the Serious Fraud Office for alleged charging for monitoring criminals who were dead, in prison or had not been tagged at all. It has already agreed to repay £68.5m to the government.

A Reuters report said that this had led to a ban on new work, managerial departures and big hits to shares and profits, but a detailed article by Management Today adds that the ban has now ended. Serco’s CEO resigned and Rupert Soames, Winston Churchill’s grandson has been appointed to the position.

Management Today (“Scandals? What scandal) links to an article on outsourcing which notes UK central government payments to outsourcers – each one with multiple failures – including:

£700m to France-based Atos (axed by DWP)
£1.6bn to Capita (MoD computer failure)
£1.3bn to G4S (Olympics)
£3bn to Serco (see above)
And local government spent £506bn with Capita in 2012/13.

Why are companies rewarded for failure?

Though the aim of outsourcing is said to be saving money, other voices – including Management Today’s Jeremy Hazlehurst – allege that it is ‘risk transfer”: “Politicians are keen to shift the risk for some services into the private sector. It’s nice to be able to blame an outsourcer when there’s a prison riot”.

Or is it simply another undesirable, unaccountable, undemocratic feature of the British corporate-political nexus?

George Monbiot: Nothing will change until we confront the real sources of power.

The  words of a local councillor recalled an analysis by George Monbiot in Why Politics Fails; she wrote:

“I don’t trust any politician (except myself that is!). They are all in the pockets of developers or global businesses. The people are just there for fodder to fight wars that corporates make money out of and to service the wealthiest” . . . despite the seven parliamentary principles for public life:

7 principles public life

Corporate power: the lefthand parliamentary glove puppet argues with the righthand glove puppet, but neither side will turn around to face the corporate capital that controls almost all our politics.

It’s the reason for the collapse of democratic choice. It’s the source of our growing disillusionment with politics. It’s the great unmentionable. Corporate power. The media will scarcely whisper its name. It is howlingly absent from parliamentary debates. Until we name it and confront it, politics is a waste of time.

trickle downThe political role of corporations is generally interpreted as that of lobbyists, seeking to influence government policy. In reality they belong on the inside. They are part of the nexus of power that creates policy. They face no significant resistance, from either government or opposition, as their interests have now been woven into the fabric of all three main parties.

Most of the scandals that leave people in despair about politics arise from this source . . .

Last week we discovered that G4S’s contract to run immigration removal centres will be expanded, even though all further business with the state was supposed to be frozen while allegations of fraud are investigated.

Every week we learn that systemic failures on the part of government contractors are no barrier to obtaining further work, that the promise of efficiency, improvements and value for money delivered by outsourcing and privatisation have failed to materialise.

snouts troughThe monitoring which was meant to keep these companies honest is haphazard, the penalties almost non-existent, the rewards stupendous, dizzying, corrupting. Yet none of this deters the government. Since 2008, the outsourcing of public services has doubled, to £20bn. It is due to rise to £100bn by 2015.

This policy becomes explicable only when you recognise where power really lies.

The role of the self-hating state is to deliver itself to big business. In doing so it creates a tollbooth economy: a system of corporate turnpikes, operated by companies with effective monopolies.

corporate lobbyistsIt’s hardly surprising that the lobbying bill – now stalled by the Lords – offered almost no checks on the power of corporate lobbyists, while hogtying the charities who criticise them. But it’s not just that ministers are not discouraged from hobnobbing with corporate executives: they are now obliged to do so . . .

That the words corporate power seldom feature in the corporate press is not altogether surprising. It’s more disturbing to see those parts of the media that are not owned by Rupert Murdoch or Lord Rothermere acting as if they are.

For example, for five days every week the BBC’s Today programme starts with a business report in which only insiders are interviewed. They are treated with a deference otherwise reserved for God on Thought for the Day. There’s even a slot called Friday Boss, in which the programme’s usual rules of engagement are set aside and its reporters grovel before the corporate idol. Imagine the outcry if Today had a segment called Friday Trade Unionist or Friday Corporate Critic . . .

Research conducted by the Cardiff school of journalism shows that business representatives now receive 11% of airtime on the BBC’s 6 o’clock news (this has risen from 7% in 2007), while trade unionists receive 0.6% (which has fallen from 1.4%). Balance? Impartiality? The BBC puts a match to its principles every day.

And where, beyond the Green Party, Plaid Cymru and a few ageing Labour backbenchers, is the political resistance? After the article I wrote last week, about the grave threat the transatlantic trade and investment partnership presents to parliamentary sovereignty and democratic choice, several correspondents asked me what response there has been from the Labour party. It’s easy to answer: nothing.

Cameron's real changeBlair and Brown purged the party of any residue of opposition to corporations and the people who run them . . . Since Blair’s pogroms, parliament operates much as Congress in the United States does: the lefthand glove puppet argues with the righthand glove puppet, but neither side will turn around to face the corporate capital that controls almost all our politics . . .

So I don’t blame people for giving up on politics. I haven’t given up yet, but I find it ever harder to explain why. When a state-corporate nexus of power has bypassed democracy and made a mockery of the voting process, when an unreformed political funding system ensures that parties can be bought and sold, when politicians of the three main parties stand and watch as public services are divvied up by a grubby cabal of privateers, what is left of this system that inspires us to participate?

Read the full text & references here:


The destruction of public science: an Indian scientist records one aspect of Margaret Thatcher’s legacy

The positive and negative aspects of Margaret Thatcher’s legacy are being aired. For the writer, the damaging effects of privatisation, mass unemployment, waste of North Sea oil revenue, financial deregulation and outsourcing far outweigh the rapprochement with Gorbachev – the only positive which comes readily to mind.
Dr Devinder Sharma writes today:

cambridge plant breeding instituteThe erstwhile Plant Breeding Institute at Cambridge (UK)

”Margaret Thatcher, 87, died yesterday. She is being hailed as the Iron Lady who transformed Britain. Every newspaper across the globe has paid rich tributes to her. Some have even carried her obituary on the front page, which is quite a rare honour.

”I only know that she had a steely resolve. Whatever she thought of doing, she did it. That’s what I have read over the years. And knowing the determination with which she destroyed public sector science, I can understand why and how she earned the title Iron Lady. Nevertheless, let me share this story of how Britain’s only woman Prime Minister, the unyielding Margaret Thatcher, eclipsed one of the world’s best known research centre in plant sciences, which was emerging as a global leader in plant molecular biology and genomics.

”I am talking of the famed Plant Breeding Institute (PBI) at Cambridge.

”For any plant scientist, the Plant Breeding Institute at Cambridge was a Mecca. As a student of plant breeding I too nourished the desire to make it one day to PBI. But by the time I reached the age to visit PBI as a researcher it had already been sold-off to Unilever. Later, in 1998, Unilever sold it to Monsanto. I remember the controversy over the priceless plant germplasm collections that PBI had, at the time it was sold to Unilever. After a lot of public pressure, the plant collections were shifted to another public sector research institute, John Innes Research Centre in Norwich.

”The sale of PBI to Unilever was a great loss to independent science, and of course a loss to humanity.

”It was in 1996 that I went to Cambridge as a Press Fellow. One fine day I called up Sir Ralph Riley, a very distinguished plant geneticist, who also happened to be the founder director of PBI. He came to see me at the Wolfson College, and very politely offered to give me a tour of Cambridge to show me around some of the better known places for plant genetic research. This was indeed a treat. ”After showing me the pub where Watson and Crick had dashed to after discovering the DNA structure, he drove me around to what used to be the PBI. Parked his car somewhere, got out and pointing to the research farm, he said:

“This is where plant breeding died.”

”I can never forget those words.

”I asked him whether PBI was incurring losses because that’s the only economic reason why a research institute would be sold-off. On the contrary, he said, when PBI was sold by Margaret Thatcher to MNC Unilever, it was bringing in a revenue of (British) Pound 10 million a year against an expenditure of Pound 4 million/year. I don’t know how you would take it, but how can any sane person justify selling-off a profit earning research centre? But then, that was the Iron Lady. She earned the title because of her dictatorial role in pushing privatisation. ”Subsequently, Sir Ralph Riley wrote:

“Unfortunately after I had ceased to have any involvement with the AFRC the government privatised that part of the PBI activity concerned with variety production even though it was generating a return to the Government of about £10 million per year from a total cost in the Institute of about 4 million pounds per year. Thus the work that we had done to bring fundamental and closely applied work together, to permit easy crossfeeding was destroyed. Nevertheless, it may be that it (the former PBI) provides a model that will subsequently be followed by others.” (See page 395-396 of this Royal Society publication:

To read the whole article go to Ground Reality.


VERY bad decisions by government – 29: privatising the work of the Audit Commission

eric pickles23jpgBefore referring to the decision of Communities Secretary, Eric Pickles to scrap the Audit Commission, protector of the ‘public purse’ which pays for local government, health, housing, police, fire and rescue and other public services, David Hencke questions the wisdom of doing this.

Will its work be done more effectively by private companies which are part of that corporate-political nexus (‘cosy relationships’) deplored by the Vested Interest in Politics people and the public in general?

Hencke says:

david hencke2“Basically Pickles wants to leave it to local councils, health trusts and the new NHS commissioning bodies to police themselves by appointing their own auditors, taking away a whistleblower hot line to the Audit Commission, and allowing big accountancy firms free rein to up their charges by picking off individual councils. It also allows even more cosy relationships to be built between the auditor and the local council and leaves whistleblowers nowhere to go”.

The Commission has already had to start outsourcing

In March last year it awarded the following contracts to:

  • Grant Thornton (UK) LLP, a total notional value of £41.3 million a year covering four contract areas in the North West, West Midlands, London (South) Surrey & Kent, and South West;
  • KPMG LLP a total notional value of £23.1 million a year covering three contract areas in Humberside & Yorkshire, East Midlands, and London (North);
  • Ernst & Young LLP a total notional value of £20 million a year covering two contract areas in Eastern and South East; and
  • DA Partnership Ltd a total notional value of £5 million a year covering one contract area in the North East & North Yorkshire.
The Commons Public Accounts Committee has come to some damning conclusions on what the government is about to do – see Hansard. Points include:
  • The government claims it will save £137m a year but the MPs say the figure is more likely to be £2.4m.
  • The audit regime will be fragmented and more complex.
  • The proposals for self-appointment of local auditors risk compromising the independence of audit.
  • There are risks of duplicating governance structures, losing economies of scale in audit fees, diminished quality of audit and increased tendering costs
It also stresses that there must be provision to enable auditor removal, whistleblowing and public interest reporting.

There is a full report by Hencke on the Exaro News website.