Postscript

Perhaps Emma Harrison should have waited before selling A4e.  The Tory victory in the election sent the price of shares in outsourcing companies skywards.  G4S's rose by 7.35%, Serco's by 5.95% and Capita's by 6.72%.  Ah well, £20m will have to do.

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.

Carrying on

On the day of the reshuffle the DWP put out its independent report into the way the bedroom tax is working.  It's a process known as burying bad news.  But it was noticed, particularly by the Liberal Democrats, who decided that it was just too bad to defend any longer.  And it's that, unfortunately, which has been the news story, rather than the contents of the report itself.  Let's skip the politics and look at the facts.
You can read it all here - "Evaluation of Removal of Spare Room Subsidy".  There's a lot of it, so you might like to copy most of the media and just look at the Key Findings from page 15.  Crucial is the fact that only 4.5% of affected claimants have moved "within the social sector" in the first 6 months of the reduction, with another 1.4% moving to the private rented sector.  There's nowhere to move to.  Most people said that they had done more to find work or better-paid work (well, they would, wouldn't they?) but hardly anybody had taken in a lodger.  41% of tenants have paid the full shortfall, 39% have paid some, and 20% have paid none.  Where have people got the money to pay the extra?  57% say they have had to cut back on essentials (like food) and 26% had had to borrow money.
And on it goes.  The RSRS (as the report calls it) is a massive failure, as everyone except IDS and Freud predicted, and all it has achieved is to plunge poor people into greater penury.  The BBC got a quote from Iain Duncan Smith: "This department is delivering some of the biggest welfare reforms in over 60 years, designed to return fairness to the system and we are on track to make the £6bn savings we had previously set out.  At the same time we are helping to make sure our housing benefit reforms have a transformative effect on the lives of those who in the past were faced with a system which trapped people into cycles of workless and welfare dependency.  The scaremongering by those opposed to our welfare reforms - in particular our housing benefit reforms - has been proven to be without substance, and we are already seeing the effects of people moving into work."  The risible DWP Press Office chaps tweeted desperately in similar vein.  But the Lib Dems decided that they couldn't defend it.

There was some barely-noticed news on the outsourcing front.   The contract for electronic tagging of offenders, previously held by G4S and Serco (both of which were found to have defrauded the taxpayer of millions) has gone to - wait for it - Capita!  Some asked why Capita; why does it always have to be these three?  But it's an inevitable part of the outsourcing business.  If you create huge contracts only the big firms can bid, and it was these three which were prepared to bid for everything.  
One lot of contracts of interest to many is Community Work Placements.  But CWP doesn't seem to be going well.  The Boycott Workfare team is doing a great job of publicising companies and organisations which agree to take part by taking free labour.  One was recently claimed by the government as a success, providing a photo-op for Osborne.  It quickly decided to withdraw when it discovered the trouble it was attracting.  It looks like the CWP contractors are targeting councils and housing associations for placements, if Seetec is anything to go by.  They say, "Examples of such projects include estate maintenance and local renovation, groundswork, horticulture, recycling as well as administration, customer service and sales, warehousing, distribution and cleaning services. The list of potential projects is almost endless."  Sadly, it will be tempting for cash-strapped councils to go for this.  Presumably they can adapt the hi-viz jackets they use for Community Payback offenders on similar projects.

The boom in outsourcing

£88 billion has been spent on outsourcing in the UK since 2010.  That's nearly double what was spent in the last four years of the previous government, and the public sector is outsourcing at twice the rate of the private sector.  The big winners have been Capita and the usual suspects, but little of this boom seems to have touched A4e.
The project has enable the government to claim spurious private-sector job creation, as workers are switched from one to the other, with fewer jobs remaining at the end of it.  It also enables Cameron to claim that he is fulfilling his pledge to "release the grip of state control", though this begs the question of exactly who is in control.  Time and again we see how poor the procurement process is; how promises made on tender documents are pure fiction, but there is no come-back for the taxpayer.  There's an excellent analysis of the Work Programme figures in the New Statesman.  The providers are spending nothing like the amount per client that they promised, yet still they get their incentive bonus.
There is evidence that some services outsourced by local authorities are being brought back in house, and we've seen that happen in the past.  But there comes a point where there's no "in house" left; no council or government structure to administer the service.  It was a creeping privatisation under Labour.  It's galloping under this government, with little notice being taken by commentators of where we're going.
For a little light relief, we're told that a cabinet reshuffle is on the cards for next Monday.  It's suggested in the Telegraph that there are rumours of a straight job swap between Iain Duncan Smith and the Defence Secretary Philip Hammond.  The mind boggles.
 

Not accountable to anybody

A curious story popped up in my Google alerts the other day, from the Rotherham Business News website.  It reported on the new "Help to Work" programme, then went on to the fact that Rotherham Council had discussed a review into the Work Programme as it operated locally, with Serco and A4e.  The report was particularly concerned about sanctions.  Both companies were invited to take part in the review, in person or in writing, but declined, "with A4e taking the view – based on advice from their Department for Work and Pensions account manager - that it would be inappropriate to respond to the panel's questions."  I'm not entirely sure what a DWP account manager is.  But clearly A4e don't see themselves as accountable to anyone.
The DWP has shied away from investigating another provider, Seetec.  Private Eye broke the story some time ago.  Two whistle-blowers had reported fraud around Seetec's Work Choice contract.  The DWP has now "investigated" and exonerated the company.  But it didn't interview the whistle-blowers, and claimed that it had all the evidence needed in their emails - which contained no detail, just a short summary.  The Eye says that Margaret Hodge is on the case.
It's staggering that the value of outsourcing contracts has risen by 168% in the first quarter of 2014.  It's gone to £2.1bn.  In local government it's up by 60%.  And more than half the contracts are first-time outsourcing deals.  The government wants more.  Private Eye also reported in the latest issue on a meeting held by Francis Maude, the Cabinet Office minister, with bosses from G4S, Serco, Capita and Atos, to discuss "how to develop the government's commercial reforms".  Apparently they discussed "greater openness and trust between government and its suppliers".  But of course, you can't have openness when commercial firms are involved, unless you change the law.  And businesses are lobbying hard to avoid that.
There was an excellent, if chilling, article by Polly Toynbee in the Guardian last week.  Read it and weep.  Even if the Tories are rejected at the next election it will be too late to undo their sell-off of our public services.

ATOS out, but secrets and spin remain

We knew that ATOS were pulling out of their WCA contract, but the terms have now been agreed.  Of course, we don't know what those terms are; commercial confidentiality and all that.  But Mike Penning, the minister, is obscuring matters even further by first insisting that "Atos will not receive a single penny of compensation from the taxpayer for the early termination of their contract.  Quite the contrary, Atos has made a substantial financial settlement to the department," and then, "“They haven’t pulled out actually, we’ve removed them from the contract.  This is not them walking away.”  But "sources close to the company" pointed out that, "People don't usually pay a fine if they've been sacked."  In other words, Penning wants to talk tough and insist that it was the DWP which sacked ATOS, whereas we know that the company wanted out and was negotiating terms.  
The Independent says that the DWP is talking to Capita and Maximus with a view to them taking over the contract, but it's felt that the government is going to have to pay a huge amount of money to get anyone to take it, since it only lasts until August next year.  And Channel 4 News' Factcheck blog has pointed out that the assessments, although carried out by the company, were devised by the DWP.  Will they be changed?  
Atos says that anyone who has an appointment with them for an assessment must keep it, but they won't be making any new appointments.

A troubled week

Mike Penning, the Disabilities Minister, seems to be in the wrong job.  In a debate in Parliament on the mess around work capability assessments, Penning apologised.  Doesn't he know that he's not supposed to do that?  True, he was confronted with the story of Sheila Holt, the woman who was pursued by Seetec and Atos even though she was in a coma.  The sorry tale was originally told by the Mirror on 12 February.  Penning, perhaps, had no option but to apologise; but he's rather letting the side down by doing so.  His boss, Iain Duncan Smith, and his colleague Esther McVey would, I'm sure, simply have brushed the story aside.  He has probably been told that he must not see this as a precedent.  Ministers at the DWP have a motto; never apologise, never explain.
So there hasn't been a peep out of them about another horror story, this time from David Cameron's constituency.  It was covered in the Oxford Mail and headlined: "Man starved after benefits were cut".  Mark Wood, aged 44, had multiple problems which made him very vulnerable; but Atos declared him fit for work.  All his benefits were stopped except his disability allowance.  He couldn't pay his bills and apparently starved to death.  As well as being appalled, we should note a contradiction which emerges from the story.  Wood's GP "said he had not been contacted by either Atos or DWP about Mr Wood’s medical history, and revealed that if they had asked for his professional opinion he would have said Mr Wood was unfit for work."  But the obligatory arrogant comment from the DWP spokesperson says: “A decision on whether someone is well enough to work is taken following a thorough assessment and after consideration of all the supporting medical evidence from the claimant’s GP or medical specialist.”  Someone is making it up, and I don't think it's the GP.  (For the first time this mysterious spokesperson is named; it's Ann Rimell, who is Senior Press Officer at the DWP.)
As if it wasn't enough that one contract was in a shambles, a report came out from the National Audit Office showing that a newer one, the PIP assessments done by Atos and Capita, was heading the same way.  A piece in the Guardian reports that a backlog of 92,000 cases has built up, three times the expected number, and only 16% of cases have received a decision.  Neither company is anywhere near meeting its contractual requirements.  But the DWP spokesman said, in effect, "No problem".
As well as leaving it to others to deal with the Atos affair, IDS has also been ignoring the growing unrest about sanctions.  West Dunbartonshire CAB produced a scathing report which makes all the points many have been making for quite a while.  But the DWP's response was to confirm to Inside Housing that under Universal Credit housing benefit could be subject to sanctions.  This is because people who get working tax credits or HB but not JSA or ESA can only be punished by hitting that benefit.  Then on Friday the Herald newspaper in Scotland published a report of a piece of analysis done by an academic which brings up to date some of the stats on sanctions.  We knew that from October 2012 to September 2013 the success rate for appeals against sanctions was 58%.  But Dr Webster says that this has risen dramatically in the most recent quarter, to 87%.  However, only 2.44% of those who were penalised actually appealed in the last 3 months.  IDS would claim, of course, that this means that the vast majority of sanctions are justified; but Dr Webster maintains that the low appeal rate is down to the difficulty so many claimants have with the appeal process.  And he makes an interesting point: "To date, Work Programme contractors have been responsible for twice as many sanctions on the people referred to them as they have produced 'job outcomes' ."
Duncan Smith had a project which he's been forced to drop by his own colleagues.  He wanted to redefine poverty.  At the moment poverty is defined as having an income less than 60% of the country's average income.  So it's relative, but it's based firmly on the idea that poverty is about not having enough money.  IDS wanted to include other factors, like "worklessness" and addiction.  This was a terrible idea, for several reasons, admirably expressed by Bernadette Meaden on the Ekklesia website and by Andreas Whittam Smith of the Independent.  
Duncan Smith's recent appearance before the Work & Pensions Select Committee astonished many people, because his attitude was so disgraceful.  One of the Labour members of that committee, Teresa Pearce, has described her feelings about it on the International Business Times website.  She calls him "downright rude and quite abusive".
And finally - I've lost the link to this, but it's memorable.  In the debate on the bedroom tax Labour brought up the evidence to show that IDS's estimate of the numbers wrongly penalised was a wild stab in the dark and completely inaccurate.  Now Smith doesn't like to be contradicted.  But I detect something else in what happened next; panic at the very idea of maths.  Having accused Chris Bryant of mathematical incompetence he said that one in twenty of something-or-other .... "One in twenty - that's a fifth ..."  Er, no.  (If your maths is as bad as his, one in twenty is 5%.  A fifth is 20%.)

An interesting week

Well, where to start?  "Welfare" has certainly been in the news this week.

On the outsourcing front, we knew that there were moves to oust ATOS from their WCA contracts and move the work to other providers.  Today we learn that the company has announced that it wants out.  They gave the information to the Financial Times, perhaps significantly, giving as the reason the abuse of their staff.  They say that they've been trying to agree an early exit for some months (the contracts are due to end in August 2015) but won't walk away until there are other providers in place.  The BBC news website reports that the government is furious at this announcement because it will probably mean that other companies will put in lower bids to take on the work than they otherwise would.  Which other companies would pick up this poisoned chalice?  Capita already has half the PIP contracts, along with ATOS, so they might be keen.  Then there are the other usual suspects, including A4e.  This is not, after all, payment by results (not officially, anyway) so it's a guaranteed income.  But would it be worth the hassle?

The row between the government and church leaders escalated this week.  27 Anglican bishops and 15 nonconformist church leaders wrote a letter, published in the Mirror, which attacks in no uncertain terms the government's creation of a "national crisis" of hardship and hunger.  This forced the whole subject onto the agenda, with much discussion on TV and radio about Cameron's claim to a "moral mission".  The debate was further fuelled by the publication of the latest sanctions figures.  Record numbers have been plunged into destitution in the year to September 2013; 897,690, including 22,840 ESA claimants.  This compares with 500,000 in the year to April 2010.  Iain Duncan Smith's response, parroted by his colleagues, was, "sanctions are used as a last resort".  We remain unclear as to whether he actually believes that.  My congratulations go to the Bishop of Manchester who, in the face of a very hostile interview on BBC radio, was extremely coherent and accurate about the hardship inflicted on individuals for no good reason.

However, a leak to the Guardian this week showed that, just when you thought they couldn't sink any lower, they do.  The idea has been considered by the DWP of charging people who have been stripped of their benefits to take the case to appeal.  At the moment 58% of appeals are successful.  This is clearly too many for the DWP, so slapping on a charge which no one could afford to pay would cut this figure admirably.

While the expected drivel poured from the right-wing commentators and their readers, I do suspect that a lot of people who had previously taken no interest in the subject have now woken up to what is going on.  It probably won't change anything in the long run, but getting all this out in the open can only be a good thing.

The outsourcing argument

The National Audit Office has come up with some facts about the profits of the outsourcing companies, and the risks of contracting out our public services.  There's a brief summary in the Independent and a longer analysis in the same paper.  The focus is on the profit margins of G4S, Serco and Capita, but the second piece also says that Atos and G4S pay no corporation tax.  The NAO is making a number of important points, which Margaret Hodge MP summarises: " These reports together raise some big concerns: the quasi-monopolies that have sprung up in some parts of the public sector; the lack of transparency over profits, performance and tax paid; the inhibiting of whistleblowers; the length of contracts that taxpayers are being tied into, and the number of contracts that are not subject to proper competition. The recent fraud allegations surrounding the Ministry of Justice's electronic tagging contracts with G4S and Serco are also a reminder of how important it is that government properly scrutinises and monitors its contracts with private providers.”

In an interesting piece by the BBC's Robert Peston the journalist points out that much of the information in the report was given voluntarily by the companies because they don't have to disclose any of it, despite representing 15% of public spending.  He looks closely at the profit margins, and says that the balance of risk is changing.

Last week the Cabinet Office chief procurement officer, Bill Crothers, said that the government spent too little time making firms "deliver what they said they would do" for the price, and needed qualified, experienced people to do that.  Although he didn't say so, the Work Programme is an example of that failure.  The DWP has relied on the incentive of profit and explicitly promised the contractors that it wouldn't ask questions about what they were doing.

A4e doesn't figure in these discussions by name, because it's not one of the big four.  But that doesn't mean that A4e is out of the game.  The big cake on the table at the moment is the Transforming Rehabilitation contracts (they'll have to come up with a better name than that) and A4e wants a slice.  There's an interview here with Jen Byrne, their "Development Director for Justice".  Will the bidders offer suicidal discounts, as they did with the Work Programme?  Probably not.  But at least now attention is being paid to some of the shortcomings of flogging off public services.

Another fine mess

We all know by now that another shambles has occurred in Iain Duncan Smith's welfare "reforms".  People on Disability Living Allowance are to be assessed for its replacement, the PIP.  But instead of it going live all over the country, as it was meant to do, it will only happen for now in parts of the country.  Nothing wrong with that, say ministers, we intended to do that all along, and anyway, better to go slowly and get it right.
Now, there are two contractors involved in this, Capita and Atos.  In one report I saw that the places which are going ahead with the PIPs assessments are those in which Capita has the contracts.  And we know that Atos was struggling to get everything in place because many of the proposed sub-contractors who were listed on its bid documents have pulled out.  Does this mean that the scheme can't go ahead where Atos is the contractor because they're not ready?  I don't know, but it seems likely.  The DWP won't want to blame Atos because, as with all outsourcing contracts, the question would be asked, "Why did you give them the business?"
IDS seems to be keeping his head down this weekend.

Still watching

I was taken to task recently for not writing about A4e on a blog devoted to A4e.  As I said at the time, there is no news about A4e.  But, when you think about it, that in itself is noteworthy.
I started the original website (which A4e got closed down) and then this blog because A4e had a very high profile, and I believed, drawing on my own experience, that the reality didn't match the hype.  And the reality needed to be out there.  Others obviously agreed.  But the tide of publicity rolled on, as did the number of contracts scooped up by the company.  Allegations of fraud had little impact, except to raise the profile even higher.  Emma Harrison revelled in all the publicity, basking in the glow of her own celebrity, collecting her CBE and being appointed adviser to government.  Her fall from grace came suddenly and unexpectedly, and the new bosses had to pick up the pieces.  That meant seeking as little publicity as possible, a strategy that was common sense as well as, surely, the advice of the PR person brought in to help, George Bridges of Quiller.
It worked for a while.  But then Harrison was lured back into the limelight by Channel 4 News, and gave that car crash of an interview.  Less spectacular, but of no help at all, was the behaviour of Jonty Olliff-Cooper, with his offensive tweets.  But the publicity dies down, and no one apparently cares any more.
But it's a different world out there for A4e.  The competition is much fiercer in those sectors they used to find most profitable.  The contracts aren't just handed to them any more.  Companies have come in from overseas, and the really big guns here - Serco, G4S, Capita - have spread their tentacles into what was once A4e's core business.  The smaller-scale stuff from local councils has dried up.  The last financial results available, as of March 2012, showed A4e in trouble.
So we carry on watching A4e, wondering if the company will even survive.

Should we just give up?

It's depressing.  We should be used to it by now, and understand that money is everything, people nothing.  but we still fondly imagine that people in government will wake up one day and say, "No.  This is wrong."  Dream on.  New disability benefit test contracts have just been awarded - to Atos and Capita.  According to the Guardian, the lion's share goes to Atos.  The paper is portraying it as a blow to G4S which was in the running, and hinting that the timing suggests that the Olympic security fiasco could have ruled them out.  I doubt it.  That's not how the procurement process works, as we know.  G4S's share price went down, but it's back up now.  A fascinating article by historian Michael Wood on the BBC website points out, among other things, that G4S is four times the size of the British Army.  The embarrassment of the Olympics is just a minor glitch.  Meanwhile A4e, a much smaller player, rides its own recent embarrassments comfortably.  It preens on its website that it has been telling the Polish government how it can transform its "public-private co-operation", focussing on payment by results.

The Exaro site previews a report to be published by the University of Greenwich Business School on outsourcing which, it says, will "reignite controversy" and "provoke a furious reaction".  Sadly, it won't.  The report states the obvious; that there will always be a conflict of interest between "commercial and shareholder interests" and the public objectives.  It also has evidence that any saving of money by using private companies is short-lived.  The authors of the article go to something called the National Outsourcing Association for a reaction.  They say that people only notice outsourcing on those rare occasions when it goes wrong; it saves money and employs a lot of people.  And that, I'm afraid, will be the extent of the debate on this issue.

We are not going to change anything in the near future.  But that doesn't mean we should stop resisting.

Unemployment and privatisation

The unemployment figures which came out yesterday weren't over-hyped, even by the government.  For an excellent analysis of what they mean, read Mark Easton on the BBC news site.  Long-term unemployment is rising inexorably, which shows that the Work Programme isn't doing what it was supposed to do.  But no one is really asking why.

The G4S fiasco has opened up a debate about the whole privatisation project.  We're still not entirely clear what went wrong, but it was a disaster waiting to happen.  It must be galling for A4e that the company is routinely linked with G4S as an example of the dangers of outsourcing.  But will the lessons be learned?  There's a very thoughtful piece in the New Statesman by Rick Muir, and another in the Guardian by Seamus Milne.  Here are my observations, for what they're worth.

One of my earliest concerns when I started examining A4e was how quickly one company could drive out the competition.  The bigger the contract, the more likely this is to happen.  And when everything is privatised, where do you go when things go wrong?  When the public sector no longer exists, you can't take a service back in-house.  Olympic security now depends on the army and the police.  But my pension is now run by Capita.  What happens if they screw up?  Serco runs an out-of-hours GP service in Cornwall which has become so poor that they've been ordered to improve it.  What happens if they can't?  Three companies - Serco, G4S and Capita - now run vast  numbers of services in this country.  You and I have no control over them.  It is no longer a case of deciding that private profit is a better motivator than public service.  The politicians decided that long ago.  It's no coincidence that many of the politicians have connections with these companies.  Perhaps it takes a huge mess like that which G4S has put us in to focus minds.

Your thoughts, please.

Moving on?

The fuss dies down, the media spotlight moves away from A4e, and nothing has changed.  It's time to remind myself, and my readers, why this matters.

Successive governments decided that the delivery of public services would be more efficient if it was motivated by private profit.  A few outsourcing businesses such as Capita and Serco grew fat, making big profits for their bosses and shareholders.  The last Labour government applied the same logic to welfare-to-work efforts.  In 2006 the role of Jobcentre Plus was downgraded and people were sacked.  One company, A4e, did so well from the privatisation that other players couldn't understand how they'd done it.  However, those New Deal contracts were so badly designed that results were half of what had been promised; projected outcomes of 50% came in at 25%.  Still, the contractors made a profit, and A4e widened its business, scooping up contracts in a wide range of public services, all of them dealing with the most disadvantaged people.  On the back of its success in Britain, it secured contracts abroad.  

Flexible New Deal delivered even poorer outcomes than its predecessor, but profits were still good.  And through all this, A4e behaved in a very different way from its rivals.  Who could name the boss of any other outsourcing company?  But Emma Harrison was the very public face of A4e, hungry for publicity and advising governments.  There was bad publicity, certainly.  Yet none of it lasted.  TV producers wanted to go after the company, but had decided that the only way to do such reports was with whistle-blowers and / or secret filming, so it was left to radio producers to keep up the pressure.  Harrison seemed fire-proof, however, and the incoming coalition government decided that she was the person to rescue the country from its burden of workless families.

The government was unable to rid itself of the delusion that profit was the best incentive.  The Work Programme has been designed to reward only "success".  It was never considered that a better way was to beef up Jobcentre Plus.  There was outrage when the amount of money which Harrison personally had made from contracts last year was publicised, especially when it was linked to a distinct lack of success.  Of course, the other outsourcing companies had made similar profits, but none of them had the same public profile as Harrison and A4e.  All that money could have gone to creating jobs or shaping a better service to the unemployed.

I regularly get comments from readers which I can't publish.  They tell stories of experiences with A4e which I can't verify.  But they add to the picture of a company which needs continuing scrutiny.  

Incentives

"It's not about maximising profits," said A4e's Mark Lovell, in that strange little piece on the BBC news. That's not a statement that any of the big players - Serco, Capita and G4S, as shown on "Britain's Secret Fat Cats" - would dream of making. It would be ludicrous. They are companies with shareholders, and maximising profits is their entire raison d'etre. They might express the intention to improve people's lives in the context of bidding for contracts; they could hardly do otherwise. But that is incidental. It's a business. And the government obviously acknowledges that. Grayling talked recently about providers being able to make "shedloads" of money. And now Freud has spelled out the scale of those payments. Providers will get between £4,000 and £14,000 for each client who secures work. The higher amounts are for outcomes for people who have been out of work for longest and are regarded as "hardest to help" - and who stay in work for two years. Freud is explicit that it's these incentives which will make the Work Programme successful. The profit motive rules.

So is A4e any different from its competitors?

One obvious point of difference is in the amount of publicity the firms seek. In the case of Serco et al that's nil. They don't need it, and don't get it. That's why their dominance has crept up on people. But for A4e, or at least for its boss, publicity is an essential strategy. There are a few signs, however, that this hunger for the limelight may be counter-productive. The words, "Anybody but A4e" have been uttered by people in local councils.

Britain's Secret Fat Cats

I managed to watch this Channel 4 Dispatches programme on 4OD - or rather, the first two thirds of it. It seems that if you pause a programme on 4OD you can't restart it, but have to go back to the beginning. I saw enough to applaud this exposure of the reality of outsourcing.

It focussed on the three biggest companies, Serco, Capita and G4S. We were reminded that David Cameron called in these and other companies to renegotiate some contracts, but the big 3 are totally unconcerned about taking a small hit now, because there's so much business in the pipeline. They are all buoyant about the vast amounts they will make in the near future. Capita's Paul Pindar reckoned they had 30 contract opportunities, worth £4.7bn, and Serco has a £16.5bn order book. The reporter tried to get at the details of these contracts but was told by the government that they were commercially confidential - giving the lie to Cameron's promise of "transparency" in government contracts. Bear in mind in what follows that A4e are in a rather different category to these 3; it isn't a publicly listed company with shareholders, so we can't get at figures for executive pay. Last year Chris Hyman of Serco got £5m, Nick Buckles of G4S got £4m and, in 2008, Paul Pindar of Capita got £10m. And half or more of their business comes from the privatisation of the public sector. We were treated to a fascinating explanation of the self-serving system which results in obscene levels of executive pay. The tax-payer who provides the dosh for the pay of the execs of the outsourcing companies has no say in how much they should get.

The programme then turned to the Work Programme. It looked at Liverpool, where a small local outfit had used the Future Jobs Fund to secure work and / or training fpr more than 400 people. Despite Cameron's talk of the Big Society, power devolving to local people, this organisation and all those like it will not be in the running for contracts under the WP; but in the North West both Serco and G4S are on the shortlist. It was clear, we were told, that even if small, local organisations start out as players in the Big Society, they will soon be swallowed up by the big fish.

The Financial Times has maintained its interest in the finances of the Work Programme. On 8 March they reported that some of the larger providers were privately dubious about whether the payment by results system was going to stack up. They can't afford not to be in it, but they are banking on the fact that the government can't let it fall over and will bail them out if necessary. Yesterday they quoted Chris Grayling's response. No provider will have more than "a limited number of contracts", in order to spread the load if anyone goes bust. And, he said, the providers can make "shedloads" of money if they get the hardest to help into work.

All in all, quite depressing.

PS. Emma Harrison was speaking at a meeting of the Policy Exchange, a Tory think tank, today about Working Families Everywhere.

Cameronland

It must be party time at A4e at the moment. David Cameron has set out his plans to abolish the public sector and privatise all public services. Local councils will exist simply to channel our money into private companies under contracts to provide just about everything. Those companies will be expected to use the voluntary sector, which will make things cheaper - assuming that there are still volunteers willing to assist in this enterprise. In Cameronland (a very different place from where most of us live), "This is a transformation: instead of having to justify why it makes sense to introduce competition in some public services – as we are now doing with schools and in the NHS – the state will have to justify why it should ever operate a monopoly."

A4e has been building up a presence in the education and health sectors and many more, and so will be well placed to snap up contracts, but Capita and Serco are ahead of them, and there are plenty of other companies in the queue for this lucrative work. I don't remember ever being asked whether I wanted this to happen. I don't remember voting for it. I don't want any more of my money going into private profits.

For those who think it's okay, remember what happened in 2007. Severe flooding hit many areas, and large numbers of council workers turned out, voluntarily, to give practical help on their council's behalf. What private company will we turn to the next time something similar happens?

Public v. Private

An interesting discussion has broken out after a recent post. A proponent of private enterprise is defending it against what s/he sees as the waste and inefficiency of the public sector. This is a huge area of debate, and I am neither an economist nor a politician; but it's worth setting out my beliefs on the subject, and later (possibly) relating the history of welfare-to-work as an illustration. There are, of course, many books on the subject which will reinforce whichever stance you take.

It is ironic that much of "nationalised" industry in the 20th century was forced on governments by the failure of private industries; coal-mining, railways and steel all came into public ownership that way. The NHS was the result of the failure of the private sector to provide universal cover. At the level of local government, council housing was necessary because the private sector couldn't house people adequately. In case we thought that nationalisation had had its day, we now own many of the banks because private enterprise failed.

Socialists take the view that most industries and undertakings should be publicly owned. That ideology gave way to the view that a mixed economy works best. But the pull to the right has been inexorable (the banks notwithstanding), and the prevailing orthodoxy is that markets provide the best mechanism for all industries and services. Profit is the best motivator. Public servants will always be underworked, overpaid and uncreative. The only actual evidence ever produced for this assertion is the catastrophic failure of the economies of communist countries, which has no relevance to modern, mixed economies.

Political parties took to promising to "reduce the size of the state". In practice, this means sacking civil servants and contracting out the services they delivered. At local government level, councils were, for example, forced to sell off housing and prevented from building more. They were forced to "deregulate" local transport, often resulting in a worse service. When the need for new services arose, it could often make sense to employ private companies to deliver them; "back-office" functions, heavily dependant on IT, could reasonably be contracted out. But often privatisation has been the result of government or local councils being unable to justify employing more people themselves. For instance, when government came up with the idea of direct payments for social care local councils had a choice; they could set up their own departments to deal with this, as most did; or they could find themselves bound by staff-cutting policies and fall back on private companies.

The only "market" in the delivery of public services is the competition between private companies to provide exactly what is required at the lowest possible price. It means that front-line civil servants, usually on very low wages but with job security, are replaced by even lower-paid people on short-term contracts. No entrepreneurship or creativity is involved, and hitting targets takes precedence over shaping an effective service. Large companies elbow out smaller ones, and a handful - Capita, Serco, A4e - come to dominate. Public monopolies rapidly give way to private monopolies.

That's where I stand. If you disagree, please give evidence.