Ingeus sold and WP extended

There's an interesting report in the Financial Times today about developments in the Work Programme.  Ingeus Deloitte, the company which originated in Australia, has been sold to an American company, Providence Service Corporation.  The Work Programme business, says the FT, is worth £150m a year to Ingeus, "which is understood to have won such a large share of the market by bidding more cheaply than rivals".  Despite the failure of the WP to help the vast majority of those referred to it, there are obviously profits to be made.  And Provident can simply take over Ingeus's activities by bidding for the offender rehabilitation contracts (and anything else on offer).
The other interesting point in the article is that the Work Programme contracts are due to end next year, but they are expected to be extended to 2016 "to avoid the general election".  (Labour has already said that they wouldn't renew the contracts if they get into power.)  By this stage the "attachment" payments should have ended; would we be told if they haven't?  The contracts didn't seem to be generating much profit for the providers, but Provident obviously thinks that the potential is there.  Richard Johnson, formerly of Serco, says that can only come from cutting costs, but it's hard to know how companies like A4e can cut costs any further.
It makes me wonder, again, whether A4e is in line for a buy-out.  Would Emma Harrison be prepared to sell her 85% stake in the company?

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.