Without basic financial transparency from public service contractors we can say goodbye to democratic accountability
When Twitter tells me to ask my MP to sign an early day motion, I am always filled with scepticism. I doubt the impact of the EDM. It’s quite good on small things that one MP cares about passionately and the rest don’t (measures to protect a kipper smokery from EU legislation), but if it seriously attempts to subvert or quicken a mainstream policy, parliament will find a way to put it in its place. Plus there is a video to watch of a kitten with a cigarette.
And with those caveats in mind, you should still ask your MP to sign the EDM binding private companies with NHS contracts to the Freedom of Information Act. It won’t stem the haemorrhage of public money into private hands, and for sure it will do nothing to salve this bitter experience of seeing the nation’s defining institution under attack with no defenders, just the odd clutch of Labour MPs amassing like a Maginot line. Transparency of government contracts is a careful-what-you-wish-for demand – if you ask to read them, there’s always the risk that you might have to read them.
Nevertheless, we’re awash with precedent here, services the government has been commissioning from the private sector for some time. The things you cannot discover, due to “commercial confidentiality“, will make your eyes pop out. Take the topical example of probation services. Justice secretary Chris Grayling announced today that private and voluntary agencies would be taking these on wholesale on a payment-by-results basis. I predict reduced services, voluntary organisations edged out by private firms who have realised how lucrative it is, faked “results”, massive profits, and lots of crimes committed by prisoners on parole, which the Daily Mail will report merely as indicative of their savage, irredeemable natures. Call me pessimistic; I give it five years.
The first of these contracts went to Serco last July: it was worth £37m, and was won in conjunction with the London Probation Trust. The Ministry of Justice announced that the bid was saving it £25m, or 37%, on its previous costs. However, it was impossible to discover how much lower the Serco bid was than the next one – rumour said it was as much as 60% lower. Harry Fletcher, from the National Association of Probation Officers, said at the time: “Everybody thinks that Serco are doing this as a loss leader in order to get their hands on more lucrative contracts later on.” This is a pattern observable in a lot of government commissioning – in the Work Programme, the winning groups underbid incumbents by impossible amounts, but I know this for a fact in only one case – Ingeus, beating the Wise Group, undercut them by 65%. That information came out of a parliamentary inquiry. If you put in an FOI request, it would be trumped by commercial confidentiality.
Well, so what? The private sector is meant to underbid the public and third sectors. The whole point is that it’s more efficient. Not altogether so: if a system is stacked in favour of firms that can afford to take a loss, it squeezes out smaller enterprises and suffocates market diversity. It’s no accident that the prison service is dominated by four companies – G4S, Serco, Sodexo and Capita. It’s not a coincidence that the UK Border Agency is controlled by three (G4S, Serco and Clearel) – nor, for that matter, that there are four big supermarkets and five dominant waste management outfits. Business conducted like this is expansionist and inexorably cannibalistic. If that’s the way our public services are to be conducted, we need to be able to prove it, and draw a consequential line between the bidding process and the erosion of a mixed market. We can’t be left to guess.
In the welfare market there is this pitiful situation where all the contracts are published on the government’s Contracts Finder web page – huge numbers, sitting there unabashed like the flags of a modern, accountable democracy – and yet you can’t find out how much profit each company is making. If you’re lucky, it might crop up as part of some other investigation – A4e was asked what it thought was a “reasonable rate of return” in a Commons public accounts committee hearing on the efficacy of its last raft of contracts. It replied, “about 10%”. Very few insiders believe that Work Programme providers take less than 15% in profit. Besides which, A4e holds contracts worth £428m in this field alone. “About 10%” isn’t good enough, when one percentage point either way is worth £4m.
But again, you cannot make the argument that any given company makes too much profit when you don’t know what their relative profits are. We end up in a situation where the most solid point in the argument is to complain that the CEOs of these companies get paid too much, while the rest of their staff are on minimum wage. It’s not irrelevant – it marks them out as self-interested people, using a pro-social programme for their own, ultimately antisocial ends. But it’s not enough, if we want to make a case that the profit motive is damaging to markets that are mainly about relationships.
There is so much wrong with the privatisation of the NHS that the contractual nitty-gritty may seem like a side issue. But in fact it’s the only possible starting point. When you relinquish the right to know what happens to public money, in the finest possible detail,, you lose your stake in it. You become no more than the victim of bandits. Do ask your MP to sign this EDM. The kitten can wait.