Shining a spotlight on four government agencies: an educational psychologist, a cook, a farmer and an accountant
The relatively powerless are harassed: corporates survive censure unscathed
OFSTED had not inspected more than 1,600 schools that were judged “outstanding” by it for at least six years – and of those, almost 300 had not seen an Ofsted inspector for at least 10 years, according to a report by the National Audit Office – see chart on page 27 of the report.
The case of Waltham Holy Cross is ongoing. Last year the government decreed that Waltham Holy Cross would be handed over to Net, a chain of academy schools in May. As the NAO records, this has already happened to over 7,000 other state schools in England since 2010: public assets built and maintained by generations of taxpayers are being given away. Waltham Holy Cross parents made almost 100 freedom of information requests which revealed errors in the draft Ofsted report and that Net was being sounded out on “their appetite to take on this school” in January, over a month before the Ofsted verdict was published. News of teachers and parents there – and in other parts of the country taking action to prevent this ‘forced academisation’ may be read here.
In an article in the Times Educational Supplement (TES), head teacher Geoff Barton, the general secretary of the Association of School and College Leaders, said “Ofsted and the government are the source of much of the stress and anxiety on staff through an extremely high-pressure accountability system and concluded ‘the accounts above reveal an inspection system that appears in too many cases to be doing great damage. My sense is that it’s time to stop quietly accepting that the way Ofsted is, is the way Ofsted should be”.
This month. four years later, TES readers discussed overhauling Ofsted, a ‘toxic’ system. One letter, whose signatories included Dr Richard House, chartered psychologist, former senior lecturer in education studies, Dr Rowan Williams, former Archbishop of Canterbury and Sir Tim Brighouse, former schools commissioner for London, was provoked by a recommendation by Ofsted head Amanda Spielman to shut down what she labelled as “failing Steiner schools”. The signatories are founding a campaign to bring about the replacement of Ofsted with a new inspectorate that is ‘empowering, collaborative, and understanding and respectful of pedagogical difference’.
Unthinking adherence to FOOD STANDARDS AGENCY bureaucracy led to the unjust downgrading of a new small business, damagingly reported in local paper
As the public perception is that businesses with a one rating will give customers food poisoning, a cook-manager has criticised the food hygiene inspection system after her business was given a one rating out of five – though hygiene and food storage was rated highly.
At a (requested) pre-opening inspection by the council in March 2018, no reference had been made to the need for a staff manual and staff training procedures but this ‘one-person’ operation was ‘put on a warning’ for not having a staff training manual – though no staff was employed – and was told that a tick paper exercise (officially a ‘documented food safety management system’) is required for all aspects of work.
The work required to maintain cleanliness and produce wholesome food appeared to be discounted and a paper exercise – easily forged – was prioritised. The District Council inspectors were unhelpfully applying the rules of The Food Standards Agency, a non-ministerial government department, to the letter and not the spirit of those regulations.
Solution found and accepted: a whiteboard was put up in the workplace, a photo taken once a week and an online manual was printed.
On several farms which had passed inspections by the ASSURED FOODS STANDARD (Red Tractor) agency in July 2018 serious cases of animal abuses were reported in the media.
A farmer recently wrote an article in the Western Daily Press foreseeing the advent of similar tick-box regulations:
“What I have been pulled up on is the fact that I do not keep written mobility and condition records. These are not yet enforceable under the scheme – but I have reason to suspect they soon may be.
“The only thing that will be achieved by keeping written records will be the creation of more work for the assessor; more forms for him to sit down and read through and check; one more task to help fill his required nine-to-five working day.
“And let’s suppose I decided to cook up a completely bogus set of records. How would he even know?
“When the Red Tractor scheme was launched the president of the NFU (under whose wing it actually operates) was Ben Gill who told us all how vital it was going to be in supplying the nation with safe, wholesome food which consumers could buy with confidence while, equally, bringing more prosperous times for farmers.
“What I see now is an organisation riddled with pointless bureaucracy (I understand another tier of inspectors is in place to check on the assessors).
“I see, equally, an organisation which appears to operate dual standards: one for the soft-target, small producers like me and another for the industrial giants such as Moy Park, over whose portals the Red Tractor flag proudly flies but where recent footage captured undercover at Moy Park showed stinking, squalid poultry houses where chickens will be lucky to survive their miserably short allotted span”. He ended with two pertinent questions:
- if Assured Foods was aware of conditions at this plant why did it not intervene?
- And if it wasn’t aware, why not?
The FINANCIAL REPORTING COUNCIL, the UK’s accounting and auditing regulator, is regrettably funded by the audit profession and its board of directors is appointed by the Secretary of State for Business, Energy and Industrial Strategy.
Its monitoring of out-sourcing firms such as Capita and G4s in several sectors, including health, social, military and prison services has not led to effective disciplinary procedures – in fact they continue to receive lucrative government. The Financial Times reported yesterday that though its auditing of Carillion since 1999 is under investigation by the Financial Reporting Council, the value of new UK public sector contracts awarded to KPMG increased more than fourfold last year. In 2013 seven senior members of the FRC scheduled to investigate KPMG’s role in the collapse of lender HBOS, were current or former employees of KPMG itself.
Prem Sikka, professor of accounting at the University of Sheffield, has posted almost 400 FRC entries on the AABA website (now well hidden by search engines). A recent article adds news of another appointment: Revolving Doors: FRC appoint new member to the Audit and Assurance Council – former PwC and Royal Bank of Scotland exec .
Professor Sikka has said he is worried that the government is rewarding these firms with valuable contracts when they have been undermining the public purse through their involvement in several tax avoidance scandals (FT: 29.7.19).
The ‘soft targets’ are harassed: corporates survive censure unscathed
George Monbiot recently pointed out that the Commons report on the Carillion fiasco is one of the most damning assessments of corporate behaviour parliament has ever published. It trounces the company’s executives and board and laments the weakness of the regulators.
But, as Prem Sikka said in his April article, it scarcely touches the structural causes that make gluttony a perennial feature of corporate life.
Both agree that the problem begins with an issue the report does not once mention: the extreme nature of limited liability. Sikka points out that this system, under which executives are only financially accountable for the value of their investment, has also benefited frauds and led to the self-enrichment of executives at the expense of workers, consumers, creditors, pensioners and citizens.
Monbiot adds that the current model of limited liability allowed the directors and executives of Carillion to rack up a pension deficit of £2.6 billion, leaving the 27,000 members of its schemes to be rescued by the state fund (which is financed by a levy on your pension – if you have one). The owners of the company were permitted to walk away from the £2 billion owed to its suppliers and subcontractors. (Left: the former Carillion chief executive Keith Cochrane in Westminster after appearing before the Commons work and pensions select committee)
Monbiot continues: “There is no way that fossil fuel companies could pay for the climate breakdown they cause. There is no way that car companies could meet the health costs of air pollution. Their business models rely on dumping their costs on other people. Were they not protected by the extreme form of limited liability that prevails today, they would be obliged to switch to clean technologies”.
So what is to be done?
Prem Sikka (right) proposes that the bearers of unlimited risks and liabilities should be given rights to control the day-to-day governance and direction of companies.
He advocates including employees and citizen/consumers on company boards – because both ultimately have to bear the financial, health, social and psychological costs associated with environmental damage, pollution, poor products, industrial accidents, loss of jobs, pensions and savings. Through seats on company boards, they could secure a fairer distribution of income, challenge discrimination, curb asset-stripping and influence investment, training and innovation.
Across the 28 European Union countries (plus Norway), most have a statutory requirement for employee representation on company boards – unlike the UK, Belgium, Bulgaria, Cyprus, Estonia, Italy, Latvia, Malta and Romania.
George Monbiot proposes a radical reassessment of limited liability.
He points out that a recent paper by the US law professor Michael Simkovic proposes that companies should pay a fee for this indemnity, calibrated to the level of risk they impose on society. He adds, significantly, that as numerous leaks show, companies tend to be far more aware of the risks they inflict than either governments or the rest of society. Various estimates put the cost that businesses dump on society at somewhere between 4% and 20% of GDP
His own ‘tentative’ and ingenious proposal is that any manager earning more than a certain amount – say £200,000 – would have half their total remuneration placed in an escrow account, which is controlled not by the company but by an external agency. The deferred half of their income would not become payable until the agency judged that the company had met the targets it set on pension provision, workers’ pay, the treatment of suppliers and contractors and wider social and environmental performance. This judgement should draw on mandatory social and environmental reporting, assessed by independent auditors.
If they miss their targets, the executives would lose part or all of the deferred sum. In other words, they would pay for any disasters they impose on others. To ensure it isn’t captured by corporate interests, the agency would be funded by the income it confiscates.
Monbiot then says “I know that, at best, they address only part of the problem” and asks, “Are these the right solutions?
- support them,
- oppose them
- or suggest better ideas.
He ends: “Should corporations in their current form exist at all? Is capitalism compatible with life on earth?”
Professor Prem Sikka points out that shareholders are traders and speculators rather than owners:
“They barely hold shares for more than three months and do not have a long-term interest in the business. They have been utterly ineffective at curbing corrupt practices at banks, as evidenced by the tide of scandals.”
An appalling account of ‘serial offences’ in the banking sector follows.
Professor Sikka continues:
“If the government is serious about changing the predatory culture of banks then it needs to change the whole system of corporate governance. The market pressures for higher returns should be checked by turning all banks into mutuals and co-operatives. Employees, customers and borrowers have a long-term interest in the business of banks and should be empowered to elect and remunerate directors. Directors need to be made personally liable for the cost of criminal practices. At the moment banks are fined, but executives walk away with a stash of profit-related pay, with virtually no penalties. All major banking contracts should be publicly available so that we can all see the shady dealings.
“The banking regulators have frequently come from the finance industry and are too close to banks. They act only after the stench of scandal has become too strong, and frequently they have been part of what a US senate report described as a “cover-up”. This inertia should be checked through annual hearings by the Treasury committee.
“All policy meetings of the banking regulators should be held in the open, and information in the regulator’s possession – including background papers – should be made publicly available.”
Could his beneficial proposals incorporate those of James Robertson?
(1) transfer to nationalised central banks the responsibility for creating, not just banknotes as now, but also the major part of the supply of public money consisting of bank-account money held and transmitted in electronic form . . . make an agency of the government responsible for directly creating and maintaining the public money supply in the public interest.
(2) prohibit anyone else from creating money out of thin air as profit-making, interest-bearing loans to their customers – leading to a more competitive market for facilitating loans between lenders and borrowers than today. That will bring commercial banks into line with ordinary businesses which don’t get given their main materials for free.
Professor Prem Sikka: http://www.aabaglobal.org<http://www.aabaglobal.org/
James Robertson: http://www.jamesrobertson.com