"It's who you know" - networking and A4e

The unemployed are increasingly being lectured about the benefits of networking.  For most people this is irrelevant.  Our networks don't include anyone who could give us a job.  But for outsourcing companies like A4e networks are vital to the business.

This is a simplified version of the A4e network.  Top left, David Blunkett, Secretary of State for Work and Pensions when the w2w contracts were privatised; after ceasing to be a minister he became a paid "advisor" to A4e (and still is).  But with Labour out of power it was useful to get a Tory on board; Jonty Oliff Cooper used to be an aide to David Cameron's strategy director Steve Hilton and was taken on by A4e as their director of policy and strategy.  He is not now listed as part of A4e's senior team.  Moving clockwise, we get to David Cameron.  He was sufficiently persuaded of Emma Harrison's capacities that he made her his "family champion".  And then there's Chancellor George Osborne who brings us to George Bridges of Quiller Consultants.  Bridges is a personal friend of Osborne and helped him run the Tories' election campaign in 2010.  So the network helped in the appointment of Bridges and his firm to help A4e revamp its image after the meltdown.  Private Eye points out that the firm, Quiller Consultants, is owned by Lord Chadlington, the Tory peer who is also Cameron's constituency chairman.
The new chairman of A4e is Sir Robin Young, a retired career civil servant whose last government job was as a Permanent Secretary.  The link between him and Robert Devereux,  Permanent Secretary at the DWP, was referred to by Margaret Hodge last week when she described them both as, "A whole lot of good chaps - I understand that the Chairman is an ex-Permanent Secretary, whom, no doubt, you have conversations with."
It's a network that has made millions for Emma Harrison.  What a pity that we can't all do it.

That PAC meeting

You can read the transcript of the Public Accounts Committee meeting on Tuesday here.  Not the bit that was held in secret.  But we did learn that there was another witness besides Eddie Hutchinson whose evidence was heard in private.  She was a whistle-blower who was complaining about what had happened.  For those who don't want to plough through the entire piece I have made notes below.  The characters involved are, on the committee, Margaret Hodge, Fiona Mctaggart, Austin Mitchell, Matthew Hancock and Richard Bacon and, as witnesses, Robert Devereux, Permanent Secretary, Department for Work and Pensions, and Alan Cave, Delivery Director, Department for Work and Pensions, along with Amyas Morse, head of the National Audit Office.

MH not happy with RD.  She sent him the A4e internal report and some emails.  He said there wasn't enough specific information in them to do a proper investigation.  She says he should have come back to her for that info.  He says that Grayling announced his enquiry.  She persists, he is infuriating.  What about the internal report?  He accepted A4e's word that of the 9 cases only 3 were actually fraud, and they related to one person.  But they are going to investigate all the cases.  He says they can't investigate where a company has gone out of business.  R Bacon points out that you can.  MH asks about the audit Grayling asked for.  RD says that it won't be published.  "This is a whole lot of good chaps-I understand that the Chairman is an ex-Permanent Secretary, whom, no doubt, you have conversations with. It is a big company with an expensive PR machine, which we have seen in operation over the past few weeks. They are bound to be good citizens, so we don’t need to have open and transparent oversight of them." - MH.  RD gives the official answer about possible litigation.  Lot of discussion with committee members about this.  RD says all the evidence is that A4e is not fraudulent.  Hillier keen to link value for money to the service her constituents are getting.  RD says the WP is not about the service - if they don't provide the service they won't get paid.  FM wants the evidence that A4e " has in place a system for staff to report improper behaviour or performance management systems that avoid perverse incentives".  

AM: "You have just sat through a long closed session, which produced some fairly damning indictments of both the structures and the practices in A4e and Working Links and which gave several indications of possible fraud. Some evidence has been submitted to us as well-to the Chair-by the people who gave evidence in that closed session. Will those allegations be investigated?"  He is keen to talk about what they do to avoid fraud - mentions Private Eye, about which RD is sarcastic.  He describes controls now in place to ensure claims are correct.  MH: "So is A4e fit and proper to undertake the Work Programme ?"  RD says yes.  

RD goes through all the checking process in detail.  Matthew Hancock asks him the questions which allow him to show how watertight the WP is.  Hodge raises issue of bonuses.  RD says it's not an incentive to fraud because they can't now commit fraud.  Hodge describes the case of a woman who already had a job lined up but was persuaded to sign the forms for A4e in return for £50 for herself.  She thinks this is wrong because A4e did nothing for the money.  RD says the £50 was A4e's and it's within the rules.  Some argument about this.  How can you measure what help was given?  They get on to complaints and argue about that.  

Hillier wants a single hotline for complaints and whistleblowers.  RD says he wants people to go to the provider first then the JC.  FM says: "The reason that I first wrote to the Comptroller and Auditor General about how A4e were behaving was that there was no process where the concerns of my constituents, who were referred to A4e, could properly be dealt with. I just got brush-off letters and there was no process where I could advocate on their behalf. Now that was not always about fraud, but there is a lack of a process."  RD bats that aside.  

Cave admits that they didn't ask for the 2009 report and should have done.  Conversation shows that there were two earlier witnesses, not just Hutchinson.  He later admits that he doesn't know who the other 4 shareholders of A4e are.  FM presses the point about controls needing to be not just financial.  She returns to this.  "What struck me from my contact with people is that a large proportion of those customers are very often not reluctant, but are very keen on getting into work, very keen that the public’s money is properly spent and feel that what they see is not spending the public’s money properly."  (Hancock again feeds RD nice questions.)    RM: "We keep hearing from people that they do not know how they can complain and that they have bullying managers who prevent complaints. I accept that you have not been able to investigate all these cases, but one of the things that I have learned as an MP is that while you get green ink complainers, when you get the same complaint from all ends of the constituency, there is something that you should be alert to, and one of the things that I am very struck by is the number of people who have worked for these companies and say that bullying management means that there isn’t a way in which they feel that they can safely make complaints when they are asked to do things. We have had evidence from people who have been asked to do things that include making up evidence and telling lies. We have not been able to test that evidence in a court of law. Nevertheless, it is quite perturbing that people feel that that is what they have been asked to do and that there is no way they can whistleblow about it."  She refers to a previous witness: "She was talking about a different programme, but it was in this period, and therefore she did not know how to complain. While you are right that the programme that she was asked to lie about was not the Work Programme , if she had known of a safe way of passing it up, that would have equally applied to people who worked on other programmes at that time in that company."  

Mitchell:  " I think Mr Devereux has said that one of these companies could go bankrupt. That is about equivalent to the Governor of the Bank of England saying moral hazard could discipline the banks because they might go bankrupt, too. They are already too big to fail. It is so unlikely. Here is a new category of capitalism that was set up to milk the state. It is not facing the competition of the market; it’s got a safe contract, which just goes on, so the threat of bankruptcy is really hypothetical."

Argument about what "systemic" means.  Then Hodge: " Finally, a public sector contract to build houses, hospitals or schools is pretty straightforward. I am thinking of payment by results-the school is there-and you can keep a little bit of money back to make sure that if anything has gone wrong, you can get it back. Would you accept that a contract that provides human services is qualitatively different? It will work only if you build trust. I think that that is the key thing-there has to be trust in the system. It is partly about the outcome but also about-this is the Fiona point, really-how well the customers are treated. That has to be part of the mix in these sorts of contracts. So it is about the how as well as the how much-I hope that you accept that. If I put it to you that I think that trust has broken down here, in particular in relation to A4e, how can you rebuild it?" Just stonewalling from RD, helped by Hancock.

 

Several points stand out for me.  There is Devereux's determination that anything before the Work Programme doesn't really matter; and the WP is fraud-proof.  Hodge and Mctaggart in particular want to focus on the service customers get, but Devereux thinks that's irrelevant because the companies only get paid if they deliver a service which gets results.  

It's frustrating to read, but not as frustrating as it must have been for the committee members.

 

Meanwhile, Chris Grayling is assuring us that the Work Programme is doing splendidly.  In the Express he says that 100,000 people have found work through it.    

Round-up of an interesting week

It began on Monday when the Guardian leaked details of the evidence due to be given to the Public Accounts Committee the following day.  They got it slightly wrong.  There were not two whistle-blowers, just the one.

On Tuesday the PAC met.  The Tory members of the committee insisted that the whistle-blower's evidence be held in private.  Somebody went straight to the Telegraph afterwards and gave an account of what had transpired.  This was published on 23 May.  The next day the Telegraph put the whole document containing the evidence given by Eddie Hutchinson on line.

The media used words like "damning" and "shocking" to describe what Mr Hutchinson said, and focussed on A4e.  Essentially, the culture at the company was such that fraud was inevitable and not dealt with properly.  

The government's reaction was confused but angry.  Chris Grayling appeared immediately to accept A4e's line that the allegations were "unfounded and untrue" and that Hutchinson was not a credible witness.  We were left to assume that he was an embittered sacked employee - the usual characterisation of whistle-blowers.  But Grayling's response always skated over the internal A4e report, produced before Hutchinson ever joined the company, which told a similar story.  In any case, it all happened under the old contracts and couldn't happen now.  He even demanded that former Labour ministers release secret papers showing what they knew about fraud at A4e.  But, "We have audited our current contracts with A4e and found no evidence of fraud."  Interestingly, he threw in that it was Ernst and Young which did the audit.  As one of our correspondents pointed out, Ernst and Young part owns Working Links.  Might as well keep it in the family.
I was reminded of an investigation for which I was responsible a few years ago.  The person drafting the report wanted to put, "There was no evidence ...."  I changed it to, "We found no evidence ..."  Quite different.
So where are we now?  The government wants to say that it never happened but if it did it was Labour's fault.  And Hutchinson isn't tellling the truth.  Whatever the PAC says has been rubbished in advance.  The other primes can be relieved that all the attention is on A4e.  The current contracts are fraud-proof, so that's all right.  But now we hear that Meg Hillier MP (left) is calling for "greater openness and transparency" over all such contracts.  The SundayTelegraph today reports the MP, who sits on the PAC, as saying: "A4e is one of a number of companies receiving its only income from the public sector, but we can't follow the public tax pound. It's public money paying for a public service commissioned by the Government. Why would you want to hide anything?"  She added that a good organisation would have nothing to hide.  Public companies are accountable to their investors, so taxpayers should have a right "to know how publicly-funded firms made a profit and should have a say over how companies operate, including how much executives are paid."  We agree.

None of that can change the fact that the Work Programme is floundering.  The best that the government can do is expand its work-for-free programme (see the Observer).   When in a hole stop digging, they say.  But the DWP keeps on digging.

Grayling on Newsnight

Okay, I take it back.  The BBC did tackle the A4e fraud question on Newsnight last night.  If you missed it (as I did) you can catch up on iplayer here 25 minutes in.  Paul Mason summarised Eddie Hutchinson's evidence, picking out all the juicy bits.  He then showed the 2009 internal A4e report which, he said, they had handed to the DWP only to be told that they weren't interested because they were concentrating on current programmes.  Mason said that Hutchinson had been surprised to learn of this report.  (He joined the company the following year.)
Emily Maitliss then interviewed Chris Grayling.  She wasn't sufficiently clued up about the contracts, but the main points got across.  Grayling insisted that the allegations were not about the Work Programme, and that the detailed investigation done by the DWP's audit team and Ernst & Young had found no evidence of systemic fraud.
Maitliss tried the obvious questions.  Is A4e a fit and proper company?  If this was a fraudulent benefits claimant he would be "down on them like a ton of bricks".  Grayling stonewalled, but said that there were "significant doubts" about the evidence and "significant doubts" about Eddie Hutchinson.
So the strategy is clear.  Suggest that Hutchinson is a liar.

Grayling virtually calls Hutchinson a liar

There is no doubt whatever over which side Chris Grayling is on.  On Channel 4 News tonight he said that there are "serious question marks about how substantial and how correct the evidence ... is; serious potential misunderstandings."  The evidence, of course, is that which Eddie Hutchinson gave to the Public Accounts Committee about what he'd found at A4e.  But Grayling insists, "We haven't found fraud at A4e," after the investigation by Ernst & Young.  And now he's attacking the PAC, accusing them of not disclosing this evidence until the meeting, when it should have gone to those conducting the audit for the DWP.  Says Channel 4 News, "Mr Duncan Smith's letter continued: 'I can only reach the conclusion that the committee has held back details from the DWP in order to generate media coverage.'"  

Margaret Hodge says that she's very upset about the leak to the Telegraph and will launch an enquiry.  The initial Telegraph story suggested that the paper had simply spoken to someone who was there at the meeting.  The subsequent publication of the document containing his evidence must have a similar source; it's annotated, as if it's one of those copies handed out to committee members.  


With Grayling's colours pinned firmly to the mast, Hutchinson is now being portrayed as a liar.  Perhaps A4e will try to paint him as an embitterd ex-employee who failed in his job.  How can the rest of us know who's right?  There's one point which might clarify matters.  Hutchinson didn't join A4e until 2010.  It was a year before that when A4e compiled its own internal report which showed serious fraud and potential fraud.  So was that seriously incorrect as well?

If you get all your news from the BBC you wouldn't know anything about this.  As usual, they are pretending it hasn't happened.

The secret evidence disclosed

Thanks to the Telegraph, we now know some of what Matthew Hancock MP and his Tory colleagues wanted to keep private at the Public Accounts Committee meeting yesterday.  The whistle blower is Eddie Hutchinson, an accountant who was appointed head of internal audit at A4e in 2010.  The paper has put the whole of his evidence online here.
Hutchinson had previously worked for Working Links, where he uncovered a level of fraud which he described as "farcical" and which was ignored by management.  As later with A4e, he said that the bonus system was to blame.  Hutchinson was made redundant by Working Links and then went to work for A4e.  He found a similar situation there.  By February 2011 he was dealing with the Slough case, which, he said, should have been referred to the police earlier.  "He claimed he also became aware of a fraud on the New Deal for Disabled People contract from A4e’s Glasgow office. In this case, he said, an employee resigned, saying she had falsified evidence and misappropriated cash. At the time, he made a note it was a 'regular occurrence' that no action was taken against people admitting to fraud."  There were numerous other cases in different contracts.  He was supposed to be helping A4e to develop watertight risk controls, but noticed no "significant enhancements".  His advice was not heeded.  "After seven months at A4e, Mr Hutchinson said in evidence that he was convinced he had seen 'unethical behaviour, mismanagement, inadequate corporate governance, and risk management, and excessive payments in the form of salaries and bonuses'. He has told MPs: 'In my professional view, it was systemic.'"  A4e denies this, of course.  It's all in the past.
Surely this sort of evidence can't be brushed under the carpet.


The Exaro website has published the 2009 internal A4e report.  It can be downloaded from the site here (you will have to register with the site).   We'll be examining that soon.

Gagged

This is Matthew Hancock, the Conservative MP and member of the Public Accounts Committee, who insisted that the whistle-blowers' evidence on fraud in A4e and Working Links was not made public.  (On the same day Hancock appeared on BBC's The Daily Politics.  He was not asked about this, but did manage to quote the party line on how wonderful the Work Programme is.)  The whistle-blowers worked with or for the two private companies.  According to the Guardian, "One of the whistleblowers said: 'It has taken a lot for us to come and speak in public about what we see as fraud. We have been silenced.'"  Two of the witnesses' evidence was previewed in the Guardian on Monday.  One of them was "a senior figure in A4e's risk and audit department in 2011" and "claims there was evidence of fraudulent activity in many of the firm's offices."  The paper reports, "During the public session held later, Labour MP Austin Mitchell called for an investigation into the claims made in private. He said: 'We have just sat through a long closed session which produced some fairly damning indictments of the structures and the practices in A4e and in Working Links and gave several indications of possible fraud.'"
The Independent also reports the story:  "Another [whistle-blower] said they believed that pressure had been applied to the Tory MPs by the Government to ensure that more damaging evidence about the fraud on the programmes was not placed in the public domain."
So is this evidence going to be made public?  Or do Hancock and his mates have a vested interest in making sure that it's kept secret?