Conscious Capitalism

The voracious appetite for publicity that is characteristic of A4e and Emma Harrison sometimes appears ridiculous. But it does have an effect. They convince not only themselves but others who accept it all without question. Take, for instance, an article on the Huffington Post. The author, American Margaret Heffernan, came to the UK. "Our trip focused on companies that are good for people, the planet and profits. This is also variously called Conscious Capitalism or social entrepreneurship". And guess what she found? Her nine examples include Jamie Oliver's 15, Divine chocolate and, yes, A4e, which is, she says, "working with insane dedication to prove that everyone is employable if you take enough time and give enough attention. The unbelievable energy of A4E employees also testifies to how much difference a sense of purpose can make. You don't have to pay a fortune to get great performance from your people." Heffernan cites these companies as examples of greed being "supplanted by purpose". Which proves that the propaganda works.

But it's lost on the people in Edinburgh who are having a struggle with A4e. A group called Edinburgh Claimants supports people who have serious problems with officialdom. They have won the right to provide a representative to accompany claimants in interviews at the Jobcentre, with Atos, the local council, and even at two of the welfare-to-work providers in the area, Ingeus and JHP. But A4e won't co-operate. They refuse to have representatives there and sanction people if they try to insist. You can read the full story on http://www.edinburghagainstpoverty.org.uk/. Why? What do they want to hide? The Edinburgh group think that it's a matter of human rights, and I'm inclined to agree. I'm following this story with interest. Perhaps A4e are only practising "conscious capitalism".

Round-up, 22 April 2011

There is a group in Edinburgh called the Edinburgh Coalition Against Poverty which reports victories in what it calls its war against A4e. This is obviously not an impartial account, and I haven't seen any other reporting of it, so I can't vouch for its accuracy. How many people does the group represent, for example? But it's an interesting development.

I was amused by the title of an article in an Australian journal - "Therese Rein the $1.4bn queen of British welfare". Sounds like there's been a coup! Rein is the wife of a former Australian Prime Minister. The article reports that, as owner of Ingeus, she stands to make a great deal of money. The firm won all seven contracts that it bid for, giving it 23% of the market, while A4e only has 13%. Concerns are reported: "Two failed bidders shown details of the winning bids said they believed Ingeus had discounted its prices by up to 50 per cent in some areas. Perhaps the company was banking on the economies of scale that would come from being the largest provider, or maybe even hoping that the government would later be forced to raise the promised payments."

The big story of the last few days has been the announcement, as part of the election campaign, of figures purporting to show that more than 80,000 people are claiming incapacity benefits for being addicts, alcoholics or obese. No mention was made of addicts who are not on IB but on the smaller JSA. And, of course, the reporting played into the hands of the Tories who want to appeal to the Mail and Express readership. Instead of sensible discussion we had the usual chat from experts.

Meanwhile, Emma Harrison has been in discussions at the Swedish Embassy and Mark Lovell has been to a meeting with the Local Government Association about crisis loans, debt and public service reform.

More family champions

Emma Harrison has announced that two other councils have joined Blackpool in piloting her Working Families Everywhere scheme. They are Hull and Westminster. Neither council seems to have told their electorates, since there's nothing on their websites. Perhaps they are reluctant to announce, at the same time as making hundreds of council workers redundant, that they are employing "family champions".

Mandatory Work Activity

I don't know whether A4e bid for any of the Mandatory Work Activity (MWA) contracts, but they're not among the preferred bidders. Of the eleven areas, JHP has 3, Rehab, Seetec and Ingeus 2 each, and BEST and ESG one each.

It's going to be a controversial contract. It's meant to "encourage participants to gain a better understanding of the discipline and focus that is required for work and allow them to make a contribution to their community at the same time" (Indus Delta) and it's for those who haven't been co-operative with the system up to now.

Nice Work for Some

Private Eye has been scrutinising some of the outsourcing companies again. It notes that Working Links, which got three Work Programme contracts, has been caught over-claiming job outcomes in Merseyside. The company claimed for 85 recent job starts which people had secured before any intervention by Working Links.

But the Eye is even more interested in the finances of A4e. Three of its directors are paid through schemes which are common enough for the highly paid but not available to the rest of us. "In the last two years international director Roy Newey has been paid £662,000 through a company called Roy Newey Ltd," says the article, and two non-executive directors had similar arrangements. It goes on: "Newey paid himself NIC-free dividends totalling £326,000".

A4e paid Emma Harrison and her husband's conference management company Andromeda Park Ltd £462,000 last year, another of the couple's companies, Thornbridge Ltd, £627,000 for the lease of a building, and £81,000 rent on a property owned by the couple's pension scheme. And that was before profits after tax for A4e of £6.2m." A4e is definitely improving some people's lives!

SIBs and ABS

One of the problems which the Work Programme faced from the outset was that there was to be no, or very little, payment to the providers up front; they would have to stump up the money to finance it until the job outcomes started coming in - if they ever did. It's hugely risky, it excluded all but the biggest companies, and it drove even them into partnerships with other firms. But there's another model on the table, one which A4e's Mark Lovell is keen on. It's called Social Impact Bonds. There's an explanation and diagram here. Investors come in and put the money up to finance the providers' "interventions"; they work on the "target population", and the government repays the investors from the money saved by the success of the "interventions". Sounds reasonable. Certainly the private companies will get paid, and the risk is borne by people who can afford the gamble.

But the effect of this model is even worse than the current system. It further distances the state from those individuals who are seen as problems; they are not part of society, just nuisances who require intervention in their lives, and that intervention is a market in which financiers can invest.

Something else which interests Lovell is the Alternative Business Structure (ABS) for legal firms. It will come into operation this year, and allows any "fit and proper" person or company to own a legal services firm. It's been called "Tesco law" because supermarkets will be able provide legal services. There are lots of safeguards but it opens the sytem up to competition. And of course A4e is interested! They got into the Community Legal Advice business by partnering with an established legal firm, but if they can set up their own ABS a whole new market opens up. Lovell says that his focus is on what it could do for people on benefits and low incomes.

A social purpose company

The approved description of A4e (approved, at least, by A4e) is "social purpose company". According to Mark Lovell on 3 February last year, "Over the last few years Emma came up with a nice phrase that we use to define what we do – a Social Purpose Company. As a business we have a really focused view of the social impact we aim to deliver; Improving People’s Lives. We have a strong set of commercial skills and principles that we continue to mature and develop. We have a strong set of values and a clear culture about the services we deliver, how we deliver them and how we want the business to evolve."

But if you google on the phrase, you find that it doesn't seem to be Emma's invention. For instance, on a website on Belgian law, we have "Belgian legislation has also created a hybrid entity, the social purpose company, which can be considered as an alternative to non-profit associations. Unlike these associations, a social purpose company may perform a commercial activity, but this activity should be carried out in a non-profit context." This is more or less what we would call a social enterprise; it doesn't describe A4e. Then there's an internet selling company called OneNest which sells artisan goods. It's founder says, "Exactly ten years ago, I created my first social purpose company, oneNest." And, "Global Partners & Associates is a social purpose company working to promote democratic politics, effective governance and human rights."

So the phrase can mean whatever you want it to mean. What A4e apparently wants it to mean is that they're not like all those other private companies, like Serco, Capita, G4S et al, which take whatever contracts they can get in order to make a profit. No, A4e sees itself as blending "commercial and social principles" and coming up with something new. They've got a long way to go to persuade many of the people they've had dealings with that this is the case.

And as a PS, I wonder why there are almost no comments under any of Lovell's blog posts.

It's who you know

I have thought carefully about how to comment on this article in the Express by A4e's Emma Harrison - and decided that there's nothing I can say. Just enjoy the irony.

Toynbee article. And why it matters

There's an excellent article by Polly Toynbee in the Guardian, looking at the "benefits bonanza" of the Work Programme contracts. She points out that the big winner, Ingeus Deloitte, is run by a former director at the DWP, and that the company underbid the other providers to a worrying extent. She expresses surprise that previous performance is not taken into account, talking about the failure of A4e and Reed in the Pathways programme. We have pointed this out before, and it continues to startle people that a company can bodge one contract after another but still get the business. Toynbee asks why the providers would want these contracts now, and says that there are two reasons: "in previous contracts when they ran out of money they ganged together, demanded more – and got it. The government had no option. Not one company has ever been terminated for missing its targets. So price is flexible. The other reason is that these contracts are small beer, loss-leaders for large companies with their eye on massively lucrative future contracts in the great Cameron outsourcing bonanza."

But why does it matter if a private company provides a public service? Who cares. as long as it's provided efficiently and cheaply? Successive governments have taken this view, and David Cameron has been explicit about it. There is a market place, and the private sector can compete with the public sector to deliver the goods. Those of us who question this philosophy are regarded as socialists (a dirty word) or stupid. But I'll try to explain why it matters.

If my local council decides to contract out the maintenance of its housing stock, that would seem to be simply a matter of getting the best deal for council tax payers. But there are problems. Council tax payers won't be allowed to know how much it's costing, because the contract is "commercially sensitive". One firm may under-bid to secure the business, buying up its competitors, and then go bust, leaving my council to pick up the pieces. A contract may turn out not to serve the interests of residents, but can't be re-negotiated. One could regard these as matters of practicality rather than morality.

There are areas, however, where questions of morality are inescapable. There has always been a market in healthcare and education, the result of people being able to buy their way out of public provision. When it seems that the public provision may disappear altogether, in favour of the market, there are protests - too late. Three areas remain where many citizens expect, and assume, that the market should not operate, even as it takes over; areas where the commodity is people: offender management, advice services and welfare. Private prisons have been in existence for years; a few days ago it was announced that Birmingham jail was to be contracted out to G4S, the first time that a publicly-run prison has been sold off. Another jail is to be run on a payment-by-results contract; the private firm will get paid for the number of people it can keep from re-offending. Advice services used to be run by not-for-profit organisations like the CAB; deliberately so, because it was thought that such services should be clearly distinct from government. Now they are sold to the highest bidder. And, of course, there is a thriving market in welfare-to-work services. In these three areas, people in need of help are sold for private profit. They cease to be citizens, part of society with rights and responsibilities in a public space, and become objects in the market place.

I know this is a dialogue of the deaf. Growing numbers of people have been persuaded that the services used by other people (rarely by themselves) can be a matter of private profit, and there are no practical or moral objections to a few people getting rich from the public purse. To them, I would recommend the book Consumed by Benjamin R. Barber.

A4e and money

A press release by the Press Association this morning hasn't been picked up by the media. A4e has another contract. That fact is rather tucked away in the story that, "A new independent service is being launched to offer free advice on financial issues over the phone, the internet and face-to-face through a nationwide network of centres." This "Money Advice Service" is free to use for everyone, and is a rehashing of a service that's been there for a while. Now it's adding a national face-to-face service, provided in England and Northern Ireland by A4e. (In Scotland and Wales, Citizens Advice have the contract.) A4e have been involved in this for a while so perhaps the papers don't think it's news. They're too busy pushing the start of the drive to get people off incapacity benefits. The Money Advice Service's own website makes no mention of A4e. And there's nowhere a statement of how much this contract is worth to A4e.

Emma Harrison has been in America looking at social and welfare reform, while Mark Lovell reports "some good new business in welfare skills and local govt."

£1.4 million a year for Emma Harrison

This is a must-read article for anyone interested in A4e. In the Guardian, Toby Helm and Daniel Boffey have been going over A4e's accounts and report that Harrison and her husband have a joint income of £1.4m from government contracts.

The writers give the incomes of Serco bosses and point out that a recent report for the government called for a fair pay code for company executives. Then they turn to A4e. "A4e's latest accounts show that Harrison, who lives with her husband in Thornbridge Hall, a 12th-century stately home in the heart of the Peak District, has an 85.5% shareholding in the Sheffield-based company. She receives a salary of £365,000 a year. On top of this, last year she and her husband received an additional £462,000 from A4e for the company's use of her home for conferences and administrative work. .Her husband received an additional £626,856 for the lease of another property to A4e." The company's "turnover hit £190,990,000 and its profit increased 80% to £6.2m in the last financial year". The accounts take an upbeat view of the "opportunities" to be had from the "pressure on public spending".

Union leaders are quoted. Understandably, they're not happy. But, "A spokesman for A4e said the £462,000 paid to Harrison and her husband for the use of Thornbridge Hall last year was part of a leasing arrangement covering several years. The spokesman added: 'Over the past 20 years Emma Harrison has grown A4e from a small, Sheffield-based training business to one of the largest social purpose companies in the UK, helping unemployed people back into work. This has been a long journey, at times involving significant personal financial risk.'"

This is a timely article. It's just a pity that it won't change anything.

Reactions

Reactions to the contracts awards are interesting. G4S, with 3 contracts (and the contract for running Birmingham prison, announced yesterday) saw its share price go up, while Serco, with only 2, saw a fall. A4e doesn't have shareholders - but if it had, the shares would surely have risen. The Guardian reports that, "Small voluntary groups complained ministers had undermined the 'big society' by handing the £5bn-plus contracts to big providers." The Association of Learning Providers, a trade body for the industry, wants the government to go the whole hog and privatise Jobcentre Plus. Put that alongside another Guardian piece, "Jobcentres tricking people out of benefits to cut costs, says whistleblower" which is quite horrifying, and you see that it's a real possibility.

A4e has been named by a Dutch outfit as one of Britain's top employers. "The research shows that A4e has outstanding HR policies and excellent working conditions." That could come as a surprise to some.

Work Programme contracts out

The list of contractors is out and can be seen at http://goo.gl/GA32u

There are either two or three providers in each of the 11 areas.

The biggest winner is Ingeus Deloitte, with 7.

Next comes A4e with 5 (East Midlands, London East, North West, South East and South Yorkshire).

Seetec, Avanta, G4S and Working Links each have 3.

Maximus, Rehab Group, Newcastle College and Serco each have 2.

CDG, Reed, Prospects, JHP, Pertemps, Fourstar, ESG and BEST have 1 each.

Only one of those primes, Rehab Group, is a voluntary sector organisation. One, Newcastle College, counts as public sector.

Perhaps Ingeus's partnership with the massive financial company Deloitte helped its success. But A4e have done very well. Serco, on the other hand, has done badly. But that's assuming that these contracts are going to be money spinners.

There's also a list of subcontractors out. Only 36 are listed, 25 of them voluntary sector. That suggests that there are going to be a lot of redundancies in those organisations which are currently sub-contracting under FND.