Down the drain

With all that's going on, who is taking any notice of outsourcing?  Even the galloping privatisation of the NHS receives no attention from the mainstream media.  It's down to the "left-wing" papers to bring the occasional bit of news to our attention, but unless you read Polly Toynbee's excellent article in the Guardian back in May you would have little idea that anything significant was happening.
We don't know the situation with A4e, but the chances are that its finances haven't improved much, if at all, since March 2013, the date of the last published accounts.  And they're not the only ones in trouble.  Both Serco and G4S have gone into the red, and the publicity is all negative.  Quite right too; think of those electronic tagging contracts which both companies used to rake in money they weren't entitled to.  They've had to pay it back, but there have been no prosecutions.  Why?  For two reasons, I think.  One, that a court case would have exposed the fact that it was government processes which allowed them to overcharge by millions.  And two, that they have become indispensable to government.
Let's go back a bit, to the heyday of the last government when outsourcing became all the rage.  Some companies, like A4e, chose to concentrate on particular areas of business, in their case where the commodity was people.  Others, like Capita, specialised in "back-office" functions, focussing on IT systems and processes.  Serco and G4S both started life as security firms, and cashed in on the bonanza that was outsourcing in that field.  But they soon branched out into anything that was going.  They learned that there are a number of rules to the game:

1. Bid for everything.  That means employing a large number of bid-writers who know exactly how to write the tender.
2. Bid low.  Offer to do the job for so little that not only can you not make a profit but you can't fulfil the contract either.  It doesn't matter.  Just get the contract.
3. Renegotiate.  Having embarked on the job, announce that you need more money to complete it.

So Serco in particular have scooped up contracts for everything from prisons to council call-centres, trains to welfare-to-work, electronic tagging to forensic science laboratories.  How can they possibly know enough about any of these specialist areas?  Simple.  They take over a service that's already being run by someone else and employ their staff (not all of them, of course, got to keep the costs down).
But now they are coming unstuck.  Serco announced a little while ago that it was pulling out of the healthcare market altogether.  This comes after it made a mess of the GP out-of-hours contract in Cornwall and had to hand it back; and now we learn, from the Independent, that it has been overcharging the NHS by millions for pathology services through a firm it set up in partnership with two London hospitals.
But healthcare is just one area.  There are plenty of companies ready to step into that market.  Meanwhile Serco, along with G4S, Capita and the others move on to the next contract.  Sometimes they don't even have to go through the tedious bidding process; contracts are just handed to them.  Often now the whole outsourcing procedure is tailored to the demands of these few companies, making the idea of competitive tendering a nonsense.
If some companies go under, others will step in.  The competition comes now not from UK firms but from overseas companies like Atos, who've discovered just how easy it is here if you know the rules.  And we, who pay for it all, can do nothing about it; we can't even know what's happening because of "commercial confidentiality".  All we know is that it's money down the drain.

Negativity

I was brought up to believe that the worst thing you could ever call anybody was a liar.  Even when they clearly were.  Even when it was Iain Duncan Smith.  But (I'm sorry, Mum) I have to say it.  Esther McVey lied today in the Mail and the Express.  Since the quote is the same in both I have to assume that it's her lie, not the papers'.  "‘I meet with thousands of young people a year and they all say the negative picture painted by opposition politicians about young people and their bleak future has a very negative effect on them."
You can imagine it.  She's got a captive audience of unemployed kids in a jobcentre or somewhere, and every single one of them says, "Well, it's Labour telling us how bad things are, and there's no future."  
You may say it was just exaggeration.  But what about the substance of this mendacious piece?  Try the Mail's lengthy version.  Count the number of assertions which are simply not true.  The Express resorts to quoting the Mail, but at least it gives Rachel Reeves the chance to describe the comments as "pathetic".
We could dismiss all this as tripe, and rather desperate tripe at that, were it not for a piece on the Huffington Post site which makes it look like part of a concerted effort directed by Lynton Crosby, the Tories' campaign guru.  We heard this week that self-employment is at its highest level since records began, and that of the 1.1 million people who have started a job since January 2008, two thirds are self-employed.  (The figures are on the BBC news site.)  Over the last year it's over half of new "jobs".  But all is wonderful according to scary Tory MP Matthew (call me Matt) Hancock.  "There are more jobs available than ever before in this country, the vast majority of the jobs are full-time contracts of employment, and there has also been a very strong growth in self-employment. " [my italics]  This is simply not true.  The article gives plenty of space to voices refuting Hancock's claims.
But it seems that the tactic is simple.  Get out there and lie.  Blame Labour.  Deny the figures.  Just lie.

The rich get richer .....

Economists are puzzled.  The figures show that the numbers in work are rising, the numbers claiming benefits going down.  And while, of course, the figures are false for various reasons, the trend is still there.  But the economists' models aren't working.  More people in work should mean that wages are rising; but they're not.  If anything, they're falling.  And more people in work should mean that the tax take is higher; but it's not.  Explanations are cobbled together, some of them more plausible than others.  But I think there's a straightforward story.
At the top of society (if that word has any meaning now) is what's often called "the one per cent" and what I will now call the elite.  They comprise three main groups; the top of the financial industry (banks and the like); the top of big businesses; and the top of government.  They are all inter-connected, know each other well and have a common purpose in making themselves richer and more powerful.  In 2008 the elite crashed the financial system.  Bankers were blamed, but politicians had failed to regulate banking effectively (the Conservatives, in opposition at the time, had wanted even less regulation).  Now, some people claim there was a conspiracy among the elite to do this.  I don't know if that's true, but the result was the same.  Someone had to pay to put the system back together again, and it wasn't going to be the elite.  They suffered not at all.  Many of us were astonished that nobody could be held accountable; there was no criminal responsibility.
The crash was a marvellous opportunity for the elite.  To pay for the failure of the bankers we were to undergo "austerity".  It took a while for us to realise what that meant.  Those at the top of the tree could have a tax cut.  The elite were sitting pretty, as were those in the next layer down, those on £100k a year or more.  These are the people whose pay continued to climb and whose accountants devised ever more complex schemes to get them out of paying back any of their income in tax.  Salaries for top earners, along with bonuses, grew to absurd and obscene levels.  "Austerity" only began to be felt further down, in what we might as well call the middle classes.  Their pay stopped rising but their outgoings didn't.  Many who worked in the public sector found themselves out of work altogether, or having to get by on much less than they were used to.
The elite seized the chance to flog off what was left of the public sector.  Services should be making profits for them.  That could only be done by employing fewer people on lower pay, but that was part of the process of channelling money upwards into the pockets of the elite.  In what little remained of the public sector, pay was frozen.  This gave private employers more reason to freeze pay as well.  For people near the bottom of the heap - the old "working class" - the minimum wage became what it was never intended to be, the normative wage.  And that didn't rise either, except by an insignificant amount.  Employers found new ways to lower their wage bills.  Permanent jobs became casual work via agencies, with workers never knowing what, if any, hours they would get.  Then the "zero hours" notion spread, with even greater insecurity of income.
The cost of living, though, rose inexorably, and more and more working people couldn't survive without top-up benefits.  The biggest cost was housing; but there was no thought of capping rents, or even restoring some sensible regulation.  Instead, the total benefits a household could receive were capped.  For those right at the bottom of the pile, those dependant on benefits, life was made harder and harder.  They were the scapegoats, apparently the cause of all our problems.  Taking money away from them had little effect on the economy, but worked politically.  So inequality has reached unprecedented levels.
Economists believe that there is a natural limit to inequality, because at some point there will be a revolution - unless there is a particularly repressive government.  But the chances of revolution are very low.  Radical change was brought about in the past because people could organise themselves into an effective force.  Yesterday was the 195th anniversary of the Peterloo Massacre.  A crowd of up to 80,000 people had gathered in Manchester to demand change, but government forces killed 15 people and injured many more.  It wasn't the end of revolt, but the beginning.  Chartism very nearly succeeded, let down only by poor leadership.  The trade union movement grew stronger until, through the 20th century, it brought about a shift in power and decent wages and conditions for working people.  The movement was squashed in the 80s and is much weaker than it was.  There is no organisation through which people can fight back, and right-wing governments are adept at pitting the not-very-rich against the poor.
What happens now?  I have no idea.  But economists had better devise some new models if they are to understand what awaits us.

A4e pulls out of another prison contract

One of our commenters broke the news yesterday, but now we have confirmation and the details in the Guardian.  A4e has pulled out early from a £17m contract to provide prison education (OLASS) in 12 London prisons.  The contract had almost two more years to run, so we can assume that pulling out has cost the company dear.  But it claims that it couldn't run the contract at a profit.  Without any more details from the company, there is speculation that the reason is that overcrowding and under-staffing in prisons is resulting in prisoners being unable to attend classes, and this impacts on the private companies which are paid according to the number of classes they run.  To add to A4e's embarrassment, the contract was initially delayed by the extended audit of its activities which followed fraud allegations.  And, as the Guardian points out and as we reported at the time, it's not the first time A4e has done this.  In 2008 it pulled out of 8 OLASS contracts in Kent prisons because it was making huge losses.  It had then severely underestimated the costs of providing a pension scheme for the professional teachers it took over from the previous providers.  Presumably it factored all that in to the London bid.
Maybe it's an indication that A4e now can't withstand the losses it might once have absorbed.  It adds to the sense that this is a company in trouble.

The latest fantasy from Iain Duncan Smith

Wearily we have to notice the speech IDS was due to make today, which was trailed so exhaustively that there's no need to read it.  Yesterday's Telegraph naturally had the most sympathetic coverage.  Apparently the government is "matching economic recovery with social recovery", but "the economy will never fully recover unless families on benefits return to work".  That's the big problem for Smith.  His big plans have failed to get well over 2 million people back into work (or into work for the first time) and he takes it personally.  How dare they remain unemployed?  He has stated that "the way our benefits system is constructed" is responsible for the number of immigrants, coming to take the jobs British people refuse to take.  The Guardian gives more detail on the figures IDS will cite and they quote him: 
"When we took office, there were nearly five million people on out-of-work benefits. It was clear to me that in large part this situation was the product of a dysfunctional welfare system that often trapped those it was supposed to help in cycles of worklessness and dependency.  My one aim as work and pensions secretary has been to change this culture – and everything we have done, every programme we have introduced, has been about supporting everyone who is able to into work.  The scale of the change has been enormous – but we are delivering, and it is changing our country for the better."
If that makes you want to scream and throw things, I'm sorry.  That's the make-believe world that IDS lives in.  All those lives he's ruined; the trail of misery and destitution he's left; the lies about sanctions - they are nothing to him.  He was asked by a BBC reporter recently if he worried about cases of people suffering.  He said they made him "sad" and he wanted to understand them.  It was actually revealing.  These cases, these people, are not real to him.  They are shadows he can dismiss.
Policy Exchange, the Tory "think tank", has come up with some ways of slashing the income of the poorest even further.  One idea is to reduce the benefit cap, currently £26,000 pa, still further outside the south-east corner of the country.  IDS said, "We're not working on that," which doesn't rule it out for the future.  It's an acknowledgement that the biggest driver of high household benefits is rent; but it ignores the fact that there are people needing benefits in some high-cost areas outside London.  PE also wants to limit child benefits to 4 children.  That might get a sympathetic hearing; but it would significantly increase child poverty.
This is the message which the Tories will take into the election.  The out-of-work are wilfully unemployed and they are the cause of all society's ills.  But by making them suffer ever greater deprivation the Tories will persuade them to get a job.
I read an interesting piece recently (I've lost the link) which said that the only conclusion to be drawn from the puzzling employment statistics was that lots of people were working without paying tax.  They must be in very casual work or notional self-employment, or the deliberate black economy.  Yes.

Selling off A4e?

News today that A4e has sold its business in India to a local company, Skills Academy.  A4e was providing skills training and "placements" mainly in rural areas.  I don't know when A4e's own website was last updated, but they say that have been working in India for over 3 years and talk in the future tense about the contract they will be delivering, having signed it in January 2012.
What's the significance of this?  There was a time, not so long ago, when A4e boasted of operating in eleven countries.  Now, the only overseas business is in Australia.  Are they shrinking sensibly, having spread the business too thinly?  Or is this a sign of continuing financial problems?