Unreported Britain

The rise of the shadow state: the truth about outsourcing

Contractors like Serco, G4S and Clearel have become “too big to fail”, while it’s taxpayers’ money they’re consuming.


A security guard working during the London Olympics. G4S’s failure there is just one chapter in the outsourcing story.
People’s eyes tend to glaze over when you mention public service commissioning. It’s hardly the most sexy subject to write about. But it matters. It matters, for a start, because it’s a huge industry. A study by Oxford Economics estimates that it employs 1.2 million people, and creates or supports a further 2.3 million jobs. According to the research, the current outsourced market for public services has an annual turnover of £82bn, representing around 24 per cent spend on public services in the UK.

And it matters because outsourced public services have an impact on the entire economy, in terms of wage levels, benefit demands and spending power. It matters because these services are vital to our social fabric and have knock-on effects – effects that can help or hinder not only the people they serve, but their friends and relatives. What happens to a child in a children’s home or a prisoner in jail affects all of us.

And a report released today by Social Enterprise UK, the national membership body for social enterprise, has produced some stark conclusions about how the face of our public services has changed.

1. Rise of the giants

Here’s a list of things that one company, Serco, operates: prisons and young offenders institutions. The National Nuclear Laboratory. Transport services like the Docklands Light Railway and Barclays Cycle Hire. Security services for the National Borders Agency, and maintenance services for missile defence systems. Air traffic control services. Leisure services. Management for hospitals and pathology services. Waste collection for local authorities. Education services for local authorities. Government websites.

If the company were to go under, it would cause severe disruption to public services. The growth of such contractors that are “too big to fail” began under New Labour and has continued apace. Why did it happen? In the report, Matthew Taylor, former director of policy for the Labour Party, provides a clue: “One of the funny stories I heard about this is that the government wanted to move into agile commissioning. And immediately, all the large providers employed a Head of Agile. Of course, smaller providers can’t afford a Head of Agile.” The biggest companies are best placed to meet Government guidelines.

In the early years of outsourcing under New Labour, the commissioners at local and national level lacked experience and confidence, so they went with the biggest firms, whom they felt they could trust. Rather than tear up these contracts, in recent years they simply expanded them with “bolt-ons”, in many cases due to fear of litigation. It’s an understandable fear – the larger the corporation, the more litigious it’s likely to be, and the West Coast Mainline debacle shows how costly and politically hazardous it is to be embroiled in such a case.

This is the situation today: in March this year, the UK Border Agency issued contracts worth £1.7bn for asylum seeker services (including accommodation). All eight contracts went to three companies: G4S, Serco and Clearel. Nearly a quarter of the £3.3bn contracts for the Work Programme went to one company (Ingeus). And cuts within the public sector have reduced the volume and skill of commissioners, meaning that they will choose to “buy safe” more often than not. This lack of genuine competition, as we’ll see, removes the main incentive to provide quality of service.

2. Goliath is killing David

It’s also forcing smaller charities and social enterprises out of the market. Many are making redundancies and turning away from public service markets in order to survive, just when they are needed most. They cite procurement policy as one of the biggest barriers to their sustainability.

I’ve already written, at length, about one enterprise which went bust as a result of signing up to the Government’s Work Programme. It wasn’t the only one – earlier this year Groundwork South West also went into administration. The deals favour the prime contractors: by June 2012, 96 charity providers had dropped out, 27 unable to make it work.

“There’s an ebbing away of confidence,” Peter Holbrook, CEO of Social Enterprise UK, tells me. “We’ve seen companies go to the wall, or being sidelined, and of course it makes you nervous. These days you increasingly have to work with a private contractor. It means small charities are getting crumbs from the table” This is the problem with the payment-by-results (PBR) system. Payments for these hard-to-reach jobless cases may be some time coming, if they come at all. Not-for-profit organisations, having failed by definition to build in a layer of profit to their business model, don’t have the capital reserves to wait for results. Essentially, they find themselves out-manoeuvred by the bigger companies that sub-contract to them. And this matters because…

3. Profit and public service don’t always mix

I’ve previously written on this with regard to one company the public does know about due to the Olympic fiasco: G4S. But the report has a lengthy section about a sector of the industry which hasn’t received quite so much coverage: children’s services. It’s an area that was highlighted by the recent Rochdale scandal, but this element of the story was somewhat buried by the other details.

It used to be the case that charities would bid for council contracts to care for vulnerable children, and would cross-subsidise themselves from fundraising and other means to do so. It was never going to last: private equity firms gradually took over. The report says: “Sovereign and 3i are the big contenders, but it is hard to pinpoint which firm owns what; their waters seem to be in perpetual motion, as they buy one another and take one another over, and offload assets.”

These companies operate by buying up cheap housing stock around the country, to which vulnerable children can be shunted. Two London boroughs now have no children’s homes at all. There are 101 homes in Lancashire alone, even though Lancashire has a population of less than 1.5 million. London has 130 homes, for a population of 7.8 million.

Ann Coffey MP is quoted: “They may take a child into care for the first time, after a final event has happened. So a child may have gone one more time, missing from home, and he or she is removed. The authority then thinks, ‘Where the hell have we got a place?’ Not ‘What does this child need?’ It’s the most terrible market failure.”

And the report cites a horrific statistic, one that shows Rochdale, much as we’d like it to be, was unlikely to be an isolated case. Ofsted figures published in May 2012 revealed that children’s homes in England— caring for 4,840 children, including 1,800 girls — had reported 631 suspected cases of young residents being sold for sex in the past five years. These are just the reported cases: it’s likely to be far higher.

It’s not hard to see how the practice of moving children around can exacerbate the problem. Once a child is removed from its own local authority, it loses contact with its team of social workers, its grandparents, neighbours and others who might be able to spot the signs of abuse. One girl at the centre of the Rochdale case was moved from Essex and placed in a one-to-one home, where she was the only resident. She never woke up with the same staff member in the home who had been there when she went to sleep.

The sector has responded to these criticisms, claiming “the simple connection of cheapness isn’t accurate” with regard to the shifting of children. But it’s still hard to disagree with Coffey’s conclusion that the sector is “murky to say the least.” As Holbrook says: “There’s no problem with upscaling if you’re doing something like buying paperclips. But most public services rely on human relationships, so upscaling leads to a huge degradation in the quality of service.” And what about the staff in those homes?

4. Robbing Peter to pay Paul

Almost all the jobs being advertised by private care firms are at the UK minimum wage. This isn’t a living wage, as we all know. The staff are paid by the minute and aren’t paid travelling time. A care worker for a private company is interviewed. She was paid 14 pence per minute, and travelled from appointment to appointment on buses in Islington: “An average day that I was doing at the time, and this wasn’t very long because I couldn’t afford to keep it going, I’d start at 9, do 45 minutes with one person, another 45 minutes at 10, a half hour at 12, a break, a quarter hour at 4, another 15 minutes at 4.30, a half hour at 5 and another hour from 8 til 9. So that’s a 12-hour day for 4 hours’ money.”

Companies are making offers to contractors that aren’t mathematically possible if they’re providing jobs with a minimum wage, national insurance contributions, a pension scheme and training. Savings in one area invariably mean higher costs elsewhere: “No local authority should make that deal: even just on the pragmatic basis that it will be their own residents who are on the receiving end of that low wage, their own housing benefit department making up the carer’s rent shortfall, their own health and children’s services that come under strain when poverty is rife.” We’re seeing a degradation of service for short term profit gains.

As the anonymous care worker describes: “The public face of the company is all very welcoming. They’re always very hazy around money. It’s all, ‘Don’t you worry, there’ll be lots and lots of work for you’. We were all on zero-hours contracts, so basically they weren’t obliged to give us any work. There are hundreds of people out there working like this, I’d meet people all the time, for jobs that required two carers, and I never met anybody who was being paid any differently. I know the hours for tax credits have changed now, but most people were on housing benefit.”

This also means there’s a large section of the workforce that isn’t preparing for old age and retirement: a problem that will also have to be dealt with further down the line. It’s no surprise staff turnover is high, and this feeds into the quality of care.

5. We reward failure. All the time.

Again, I could cite the catalogue of failures I wrote about prior to the G4S debacle. Or the £529,770 that was lost from staff fraud or abuse from the Flexible New Deal 2010-11. Or the chaos that followed the privatisation of our court translation services. Or A4E’s company director payments, which saw the-then CEO Emma Harrison pay herself £8.6m, in a year when fewer than 4 in every 100 unemployed people seen by the firm managed to secure jobs for longer than 13 weeks. Or the nine prisons put out to tender in November in 2011 in spite of high-profile failings in the private sector (as the report says, in the very same bidding round the Wolds was returned to the public sector following the expiration of G4S’s contract, having seen poor inmate behaviour and high levels of drug abuse). Or the closure of Southern Cross as a result of complex financial deals designed to maximise financial gain, which left taxpayers picking up the pieces. Or…

There’s nothing inherently wrong with a market. But cases like these show that we’re getting all the downsides of privatisation – the stripping away of money through profits, above all – and none of the upsides, because there isn’t genuine competition. This is market failure, pure and simple.

6. The profits don’t even stay in the UK, let alone improve services

Social enterprises reinvest the money they make in service improvements. Private companies don’t: for every level of sub-contracting, profits are taken out in the form of shareholder dividends. The total amount of money being taken out of the social economy as a result is hard to quantify.

But one thing’s clear: money which has been allocated by Government to communities and issues that need it is being stripped away. Here’s one example: “Private equity companies work to extract as much financial value as they can from the companies they take over, in a relatively short timeframe. One of the ways they do this is through sale-and-leaseback deals on residential care homes for children and adults. This leads to extreme volatility in a market where stability is a fundamental requirement.”

But perhaps the most galling thing is that nearly half the money raised by this practice doesn’t even stay in the UK. A 2010 report by the Office for National Statistics showed that more than 40 per cent of shares in UK companies are held by overseas investors: this had increased by almost 25 per cent in just two years.

7. We can’t hold these companies to account

There have been moves towards openness – through the FOI Act and the publication of every contract worth over £100,000. But this legislation has been trumped by commercial confidentiality laws. You can find out how much a company has bid for a contract, but not how much lower it was than that of the next lowest bidder, so the number has no context.

As the report says, in business, there are mechanisms for accountability. A company’s CEO is answerable to non-executive directors, who can ask questions on behalf of shareholders. MPs don’t have the same power. And as Holbrook tells me: “I was involved in a Dispatches programme on Virgin’s move into health care, and an ex-employee emailed me to say she’d wanted to speak out but couldn’t due to a confidentiality agreement. There’s far less opportunity for whistle blowing within large providers.” On top of this, the service giants regularly make use of Britain’s defamation laws – which like the bidding process, favour those with the most money behind them – whether confronted by traditional media or online scrutiny.

Equally murky is the “revolving doors” culture – both revolving in, with corporate staff appointed to government posts, and revolving out, with public servants taking on high-ranking private sector jobs once they leave office. Alan Cave, a central architect of the Work Programme as a civil servant, left to join Serco, one of its main beneficiaries, this year, while Phil Wheatley, former head of the National Offender Management Service, is now a G4S adviser.

8. This is the Shadow State

Only one in five people polled by Social Enterprise UK knew that the majority of children’s homes are now owned by private companies. The majority of people polled for the report had never heard of Atos or Serco, yet these firms and others like them, are receiving and are responsible for many billions of pounds of taxpayers’ money.

This is an argument that can and should be depoliticised. There’s nothing left wing in saying a local community should benefit from a local contract. And there’s nothing in traditional conservative thought to encourage private companies, say, buying up assets, loading them with debt, and passing that debt back to the service users. Yet it’s quietly, inexorably, grown over the last few decades. Tomorrow, I’ll describe what can be done to fight it.

The second part of Alan White’s work on the shadow state will be publishedon his blog tomorrow.

UPDATE 3 January 2013 13:45 This article originally stated that clinical failures had lead to London hospitals being forced to lend money to Serco. This was incorrect and has been removed.


The rise of the shadow state: the truth about outsourcing


To ask for jobs is to ask for slavery. You don’t need jobs, you need access to resources.

If you’re in the process of petitioning your government, your local MP, senator, representative, whatever for jobs, then kindly go home, look in the mirror and give yourself a hefty slap in the face. This is the 21st century. To ask for jobs is to ask for slavery. You don’t need jobs, you need access to resources.Did

 you know that if we got rid of futile concepts such as land ownership and patents, we could automate this planet so that 75% of working people could retire tomorrow?

Did you know that within one decade we could increase that retirement percentage to 95%?

Did you know that we as a species already have the technology to start doing this? Cars can drive themselves, machines can perform complicated operations, and any job related to money, law, or the marketing mix is utterly redundant.

Are we fucking nuts? We’re living on a slave planet in which things are about to crash into global poverty and destruction, when we could be living in paradise where the only work you can get is working for the immediate betterment of ALL humankind! Imagine that – whenever you’re working and you have a good idea, it’s instantly transmitted around the world and the ENTIRE SPECIES says, “Nice work dude, that makes everything easier”. Only 5% of the global population will work at all, but even then it’ll only be a couple of hours per month and the waiting list will be ten marathons long. Everyone else will just be enjoying life, pushing the boundaries of art, science and philosophy, and bringing up their children to be astonishing leaders of tomorrow instead of FMCG-hungry money whores turned psychopath by human culture and peer pressure.

And please don’t come out with all that politician-style ignorant rhetoric about idealism and utopia bla bla bla. Just because YOU haven’t heard of it, or realised that some people are already doing this, or that there’s a plan based upon 75+ years research, and it includes some of the best scientists, engineers and technicians from all over the planet then don’t drag the rest of the species down with your indoctrinated closed-mindeness and utter ignorance. Lose the ego and do your research – there’s this thing…called the internet…

It IS possible, there IS a plan, it’s already happening. The concept is the resource-based economy, the international organisation is The Venus Project, and the reason your political, religious, and financial leaders aren’t talking about it is because either they’re scared to see their own pathetic little empires dissolved into obscurity, or because they’re as thick as shit.

This is Occupy Earth.

Basic income and feudalist thinking – 21st century hardware running 17th century thinking.

Basic income, tech and the 1%

Odd that the percentage who would “abuse” basic income is about 1%. Perhaps the insult to humanity, ie that people would become lazy, stems from classic Freudian projection on the part of the uber wealthy?
I know most of us would choose to contribute to our society if the shackles of wage slavery were released.

Wage work as we know it is dead.
The systems for financial distribution, and social adaptation don’t work.
Our political system is incapable of adapting to needed evolving models.
The myth that there is no money, therefore austerity etc are based on this attempt to keep doing what didn’t work in the first place.

If there are people, then there is work to be done.

Tech is taking over many menial tasks.
It is testament to the basic fatal flaws in our existing systems that this inevitable reality is abused to increase the wealth divide.
If nothing else, progress being used to further increase debt and poverty, must be seen glaringly as the inherent corruption in our present social , financial and political system

you call the support line.
there’s a round of machines to get through, and you might get through to a call center in a country where the labour is cheaper.

thats great (sort of) technology has replaced many of the more mundane and soul destroying “jobs” in some ways. kind of.

its happening everywhere. as corporations realise that the biggest cost is wages and are finding ways to use new systems to replace them.

thats progress. like it or not i believe its the way forward. why not?  if we can get a machine to do an adequate job, brilliant.

so theres a whole army of people that are now not needed for those mundane tasks.

humans capable of learning, thinking and creating. building better systems. getting involved in social projects. starting caring humane ideas to improve the plasnet, their communities.

you get the picture. the sky’s the limit. literally.

why is that not happening, at least i can’t see it. not in any real sense.

i think its the inherent greed in the way we do capitalism. the competition vs cooperation between the corporations.

the present, 17th century industrial revolution based separatist thinking that our systems are still living in. lack of faith and trust. need for more, like an addiction.

i think thats where it stops dead. instead of those corporations saying “wow we’ve got all this spare labour now. how can we build up the human side. invest in the future. create with all the assets we have…” you get the picture?

the way it is now, thats a dead end. all those people, all that experience, all that loyalty and human desire for continuity wasted. those workers thrown on what looks like the scrapheap.

(maybe leave the uk govts way of pushing those people into slavery for now. no surprise, really. thats their way of seeing things…)

can we start to get together. get all of us talking, thinking, working on the next step. evolution. cooperation.

i don’t think we have any other choice. the system needs to evolve. we are the ones who can do that.  we have to.




Debt free money:


The wayseer manifesto:


Our education system now:


“If you want to change people’s behaviour there is the carrot and the stick. Liberals never want to use the stick, while Conservatives use all available means at their disposal, unhampered by the cowardly, pathetic and effeminate liberal obsession to be indiscriminately compassionate.”

this is a response by a group whose purpose is to strip ” slut single mothers” of their benefits. their policy is based on, amongst other things, that the feminist movement has caused women to become promiscuous and compete with men for sexual “scores” causing a rise in irresponsibly conceived children, and therefore a loss of old fashioned family values. at no time was the care of these children discussed, btw.
along with keeping myself and a another campaigner busy yesterday afternoon, arguing with the tirade of hate driven justifications for this obscene viewpoint, the above statement was one of the final shots.
taking the “script” apart, i would argue thus.
who said you had any right to change people’s behaviour in the first place? – apart form rendering the rest null, this is a basic truth for me.
generalisation –” liberals never want to use the stick”. its doesn’t work on any level, unless you want people to live in fear of punishment (could be a big clue there…)

conservatives use all available means at their disposal” whilst trying to portray the C word as some kind of, what, powerful maker of things to happen, the underlying scorched earth mentality just means that the end justifies the means. dunno where to start with that one – at the least bullish focus on results, inability to pause and reflect on the effects of such, terminator like inhuman pushing to get wherever it is, and simply no responsibility for any damage to others in pursuit of the goal. not to mention obsession and totalitarian methods.
“unhampered by the cowardly pathetic and effeminate liberal obsession to be indsicrimminately compassionate”
unhampered – not tied to any true responsiblity for actions hidden as “on purpose and focused” perhaps?
cowardly – i personally think acts of kindness are courageous. cowards bully and use force instead of sharing strength.
pathetic – in what way? pathos is the true sadness, and allowing oneself to be vulnerable
effeminate – dismissing both the (assumed male) sexuality, and using the feminine to become an insult. actually using and observation of a state of being as an insult “effeminate, orange, tall, short, new old” – just descriptive words.
liberal obsession – staright projection – transferring their own obsession outwards and perceiving it in others, being unable to in any way reflect on their own behaviour but hating it just the same.
“to be indiscriminately compassionate” – i don’t think compassion in its true sense can discrimminate – its something we are, not something we do. acts may be described as this, but the sense that invokes them is felt within. and it is something that again is used as a weapon of hate, criticism when it is a true virtue, i suspect flowing form a compassionate view of ones self.

my only conclusion is that anyone who would say such things is a severely damaged rage filled person, lashing out at those perceived as more vulnerable who will be seen as threats.
would you want this person living near you? i bloody wouldn’t!

but people the like of this are running our world today. and amking decisions that affect us all.

welcome to the 4th reich!

full text of a fight with a fascist