On 20 November the government’s Public Accounts Committee questioned the Chief Executives of G4S (£700 million UK public sector contracts) and Capita (£1.1 billion), the Chairman of Serco (£1.8 billion), and Atos’s Regional CEO for UK and Ireland (£700 million), following a report by the National Audit Office. This level of investigation was forced on the government by the repeated exposures of corruption by Britain’s biggest outsourcing companies. These companies’ combined contracts with the public sector have grown 500% in the last decade. G4S and Serco are currently subject to a Serious Fraud Office investigation for billing the Ministry of Justice for electronic tagging of ex-prisoners whose sentences had expired, and some of whom had died (see FRFI 234).
Both companies hold contracts for various aspects of the asylum and immigration system, including housing for asylum seekers in much of the country, in conditions that a Home Affairs Committee report published in October describes as ‘substandard’ and ‘squalid’. Serco’s Chairman Alastair Lyons described how their contracts now also include ‘a third share in the Atomic Weapons Establishment’ and running ‘some army and air force bases. We do RAF Cranwell.’ Meanwhile Capita run Army recruitment, which has seen a 35% decline since they took over in March – something Capita’s chief executive Paul Pindar blamed on a lack of current conflicts. ‘We have the disadvantage that we actually have no wars on,’ he told the Public Accounts Committee. Capita also deliver contracts for IT, human resources, finance – in the words of Paul Pindar: ‘essentially anything that replicates the white-collar element of the back office of a public sector organisation. Those would be the areas we would be interested in operating in.’
Atos is best know for its delivery of the barbaric Work Capability Assessments which have been used to terrorise and slash benefits for thousands of disabled people, but the company’s tentacles extend much further, including contracts for the Department for Transport, the Vehicle and Operator Services Agency, the Highways Agency, the Department for Culture, Media and Sport, the Department for International Development, and the Foreign and Commonwealth Office.
During the hearing the Serco and G4S representatives claimed that the executives responsible for making the decisions in the electronic tagging case were simply unable to tell right from wrong – but they were forced to admit that incidentally these executives also received bonuses based on productivity! The hearing exposed a further means by which Serco had inflated its profits from the tagging contract, by providing hardware through Serco Geographix, a separate company, at a price 60% above the going rate, to Serco Ltd, which was the company with the MoJ contract. These charges were then presented as part of the necessary operating costs for the contract.
The Chair of the Committee, Labour MP Margaret Hodge, set clear parameters for the hearing that protected the companies, quoted in the uncorrected transcript: ‘this is not a session in which we are trying to pass a verdict on whether it is good or bad for Government to contract out public services’. Most of the hearing consisted of the outsourcing executives offering ‘helpful advice’ to government about how to improve its approach to outsourcing, including a suggestion from Pindar that civil servants need to be more prepared to take risks! Labour and the Tories are absolutely committed to the onward march of outsourcing, as Hodge made clear in her opening remarks: ‘What we are about is starting to ensure that there is proper accountability for the taxpayer’s pound, and starting to ask some value-for-money questions about private contractors delivering public services, particularly in an environment where you are going to play a growing role in the delivery of those services’.
Of course, the idea that real accountability will be imposed on these companies is a charade. The committee heard that often major contracts with central government have only a single junior civil servant monitoring them part time. Neither G4S nor Atos paid any UK corporation tax in 2012. There was a lot of talk at the hearing about transparency, yet the National Audit Office noted in its report that it had not received all the information it had requested from Serco. The National Audit Office currently has no legal powers to demand information that is protected by ‘commercial confidentially’, an excuse often invoked by government departments to avoid handing over information about outsourced services.
Similar criticisms have been made of Serco’s failure to disclose information for an audit relating to their falsification of performance figures for an out-of-hours service in Cornwall, in particular “who within Serco knew of the misreporting at the time, other than the employees directly responsible”. Serco must be reassured by the fact that NHS Cornwall and Isles of Scilly PCT, who commissioned their work and the audit into their falsifications, has now been abolished by the Health and Social Care Act 2012, so there is nobody left to be accountable to. Increasingly, mechanisms for accountability are themselves outsourced, further distancing the companies they manage from public accountability: the NHS Cornwall audit was outsourced to PriceWaterhouseCoopers and within the DWP, it is Capita who is responsible for managing all the other contractors.
The ruling class present the continued growth of outsourcing as inevitable; it is up to us to prove them wrong.
Tom Vincent
