The 12 April 2010 issue of the Financial Times reports that, ‘The drive for efficiency savings that lies at the heart of the general election campaign has helped lift share prices in Britain’s biggest outsourcing companies to multi-year highs. Investors have become increasingly confident that the expanding £80 billion sector is likely to be one of the few beneficiaries of the looming public spending squeeze, as the next government turns to private providers to cut costs.’ The author instances Capita and Serco as outperforming the FTSE100 index by 24.6% and 43.4% respectively. Both companies have been meeting with politicians ‘to influence policies ahead of the manifesto launches, due this week.’ ‘There is almost no area of public services where we wouldn’t be able to help provide efficient and quality services’, says Chris Hyman, chief executive of Serco. One analyst observes that, ‘Post election, they’re all going to do very well.’ So, whoever wins the election, Capita and Serco will win.
On cue, as it were, the Labour Party issued its Manifesto, also on 12 April. As we gaze beyond the sunny uplands of ‘A future fair for all’ we are told that there will be ‘Tough choices for £15 billion efficiency savings’, £11 billion of further operational efficiencies and other cost-cutting savings will be delivered by 2012-13. For education ‘£950 million saved through collaboration and efficiency in back-office functions and procurement’ – Capita and Serco are described by the Financial Times as ‘back-office specialists’. There will be new powers ‘to bring in new school leadership teams, through mergers and takeovers, with up to 1,000 secondary schools part of an accredited schools group by 2015…a new generation of not-for-profit chains of schools with a proven track record. These will include excellent school leaders from the maintained sector, universities, colleges, faith schools, academy chains and independent schools.’ So, we will have new federations of schools run by an amalgamation of bodies including the private sector. This is the route towards privatisation of education.
For the NHS, all hospitals will become Foundation Trusts and the more successful of them will be able to take over ‘those that are underperforming’ and ‘to increase their private services – where these are consistent with NHS values.’ In keeping with Labour Party values a future Labour government is intent on ‘Creating a shareholding society’, widening share ownership. The Conservative Party manifesto, issued the following day, offered a similar bright dawn of community empowerment to take over schools and such like. All of this is presented as somehow empowering parents, patients, communities and any and everybody except those who will actually be empowered and enriched: those standing in the shadows – the gentlemen of the City.
Capita
Capita describes itself as Britain’s leading outsourcing company. In 2009 it pre-tax profits rose 17% to £325.1 million. Among the management and administration services it provides are those for the NHS, the Government’s Building Schools for the Future programme, TV licensing, the Health and Safety Executive, Criminal Record Bureau contracts, local government services (Capita administers the Council Tax for 34% of the population), defence training, Learner Support Funds, school and local authority absence management, BBC audience surveys, and it has a contract with the National Statistical Office to conduct the 2011 Census.
Capita’s main shareholders include Deutsche Bank, Legal and General, Invesco, Baillie Gifford & Co., and Capital Research and Management Company. These are big City investment funds and banks. Capita’s directors are interwoven with those of Yahoo, Wickes plc, Schroders, Grand Metropolitan, Capital Radio, Debenhams plc, Focus DIY, The Big Food Group, the Great Ormand Street Hospital’s Corporate Partnership Board and Alchemy Investment (an investment fund). In 2009 director’s salaries were up to £770,000 and their further incomes recorded paid by the firm gave up to an additional £833,000.
Serco
Fight Racism! Fight Imperialism! readers will have encountered Serco as managers of Yarl’s Wood Immigration Removal Centre since 2007. Serco supplies tagging devices for offenders and asylum seekers and runs four prisons and another Immigration Removal Centre. Serco transports prisoners and detains them at law courts. It manages the Docklands Light Railway, Merseyrail and Northern Rail. It runs the local education authorities for Bradford, Walsall and Stoke-on-Trent, and provides information systems for schools and colleges. Serco is one of Ofsted’s three Regional Inspection Service Providers (and no doubt can be relied upon to be completely impartial – without an interest – in deciding whether a school is failing or not and the appropriate course of action to be recommended). Also in Serco’s portfolio is the London Borough of Southwark’s IT infrastructure, assorted leisure centres and the pathology service for Guy’s and St Thomas NHS Foundation Trust. Serco boasts of a role in managing three hospitals. This remarkable diversity of corporate abilities is demonstrated by its management and maintenance of the Ballistic Missile Early Warning System RAF Fylingdales, RAF Brize Norton, RAF Northolt, RAF Ascension Island, that it is one of three partners managing the UK Atomic Weapons Establishment and it manages to fit in running airports in Iraq. Serco also manages Royal Naval facilities.
When we examine Serco’s main shareholders we can see that perhaps it was not always demonstrable ability that won such a range of contracts. Shareholders include the Lloyds Banking Group, Legal and General, Baillie Gifford Co and HBOS (now part of Lloyds). The directors also serve with, among others, Domestic and General, the Royal Bank of Canada, The Carlyle Group, Aer Lingus, GenCorp Inc., Delloite and Touche, Tomkins plc, Forth Ports plc, Bovis and the Olympic Park Legacy Committee. Directors’ salaries in 2009 went up to £1.5 million with additional payments up to £3.5 million. Chris Hyman modestly explains his success, ‘What I am successful for is listening to God.’ Some might be disturbed to discover that the divine is so well versed in the ways of Mammon.
Whichever political party wins the general election the Financial Times, Capita, Serco and their directors know that the City will win.
Trevor Rayne
