Tuesday, December 31, 2013

Too Big To Fail (now where have we heard that before?)

I started this post on 14th December but wanted to wait until there was some further news to add to the reports linked to below.

CCT was introduced under the Thatcher government, the idea being that MoD contracts would be outsourced bringing private competition into government contracts. Mrs Thatcher (as was at the time) wasn't their biggest supporter, in terms of contracts, that was down to John Major and then Tony Blair, in fact under Blair the value of contracts rolled out, for everything from rubbish collection to legal services, dwarfed anything that John Major had done and when the Coalition took office in 2010 things really started to get serious in terms of contracts awarded. Last year over £40bn worth of contracts were outsourced but this doesn't necessarily make it a good thing.

Serco should be the answer to every 'little Government' wishers prayers. They are a company who have a track record of taking contracts (and therefore costs) out of the public purse and putting it into the public sector. It is however a company that is coming under increasing pressure to support its claims of efficiency and value for money. The argument that by taking expense out of the governments direct control you drive down costs by operating each contract under a separate umbrella also means that nobody has overall control and that all you are doing is transferring both risk and reward from one exclusive provider to one exclusive provider. In the public domain any increase in costs would be picked up by the taxpayer, the often referred to 'blank cheque' approach but transferring these contracts to the private sector doesn't always mean the taxpayer gets value for money and there is a real danger that we end up, to borrow from the words of a certain Oscar Wilde as 'knowing the price of everything but the value of nothing', private companies are responsible to their shareholders, those shareholders want dividends as a return on investment and that means making a profit either by cutting down on costs, which in turn impacts on services, or by lying about the underlying data and thereby inflating the value of contracts.

The relationship between data and contracts isn't just the prerogative of CCT (or best value as it is now known) there were cries of disbelief in the town halls of Westminster and Tower Hamlets councils after the 2011 Census when it was discovered that there had been reductions in the respective boroughs populations which in turn meant that central government subsidies would be reduced. One of the few occasions in recent times when both Conservative and Labour controlled councils were hoping that the immigrant population really had increased in line with Daily Mail expectations.

But back to the point I hear you cry.

Serco are a huge organisation, around 90% of its staff are ex-civil servants, this isn't a bad thing because with that background come contacts and expertise in a wide variety of sectors. Serco are now responsible for running Ofsted, Northern Rail, Mersey Rail, the 'Boris Bike' scheme, immigration centres, the Docklands Light Railway, Scotland's Northern Isles Ferries, the NHS services in Cornwall and Suffolk, the intelligence gathering part of the UK Border Agency, the nuclear weapons establishment at Aldermaston, the operating of tugs in naval dockyards and most bizarrely it looks after Greenwich Mean Time. Not only that but Serco runs the US federal government payroll system, Iraq's air traffic control and most intriguingly the driving test centres in Ontario. Serco is huge and had it not been for the recent report by PWC they would have been responsible for 40% of the MOD budget by 2015.

Not only are Serco cutting short health contracts but they (along with G4S) are also running into problems with their management of offender tagging contracts where it seems that things are not quite what they seem to be. The revelation that some of the prisoners, who were supposedly tagged as part of the contract guarantees, were  "were found to be dead, back in prison or overseas," raised more than just eyebrows, it resulted in the Government putting a stop to any contracts being awarded to Serco until they were given a clean bill of financial health. The report by PWC that suggests these financial irregularities go back eight years simply asks more questions.

Labour have now stepped in and have said that they will look at any contracts should they win the 2015 election. Ironically this is exactly what the Conservative party announced they would do to Government contracts after the 2010 election, nothing has really changed then as the Conservatives were, when in opposition, concerned about the taxpayer picking up the tab for overvalued contracts.

Thanks to The Week (issue 950) for bringing the bones of this story to my attention


Span Ows said...

Hi Paul, thanks for the comments. This Serco business is worrying, far too much going their way, almost harking back to the old East India Company days and the power those type of pseudo government companies had.

Paul said...

Hi Span. It is worrying, especially as one of the comments I have read said that the Government would have to step in and meet the costs of Serco not being able to fulfil their contracts on top of the award of the contracts in the first place.

A Northern Bloke said...

Why did it all happen in the first place?

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