In just the first half of 2012, Capita: The
British Government’s Favourite Outsourcerer, won over £900m
of contracts to provide services previously delivered by the public
sector. This is three times the business
it won during the same period just one year earlier. However, the latter half of this year has
seen this ‘achievement’ dwarfed by the news that Capita has been selected as
the preferred bidder for a £1.7bn
contract to provide ‘educational support services’ for schools across
Staffordshire. With Capita poised to gobble up even more of Britain’s public
services, today’s article shed light on who Capita are, how much of Britain
they own, and why we should all be paying better attention to the rise of the
Outsourcerer.
Capita Who?
Capita provide a wide range of services for
private and public sector clients under the guise of allowing the client to a)
save money and b) focus on providing their ‘core’ offering. So let’s say you are a police force like the
Met. Why would you employ an in house IT team when Capita, IT specialists, can run
things for you? They’ll be cheaper and
you can focus on catching criminals, as is your core ‘offering’. But as we shall see, both these promises can
be found wanting.
Beginning with just two people within the
Chartered Institute of Public Finance and Accountancy in 1984, Capita became an
outsourcing giant which last year posted a turnover of £2.9bn, with pre tax
profits of £385.3m and 46,500 employees[1]. But how did they get here?
The Conservative governments of Thatcher and Major
were good times for Capita. They saw
their profits and turnover doubling year on year through the early 90’s. By 1996, in the dying days of the Major
government, Capita were posting a turnover of £112m, pre tax profit of £12.3m
and had grown to 3,500 staff. They
bought Recruitment & Assessment Service from the Government and in so doing
expanded their recruitment business.
They also won their biggest contract to date to manage the Teachers
Pensions Agency and administer the driving theory test for the Driving
Standards Agency.
However, at the arrival of New Labour, bright eyed
with ‘modernising’ zeal, Capita heard the whistle blowing for the gravy train
and rode it all the way to Valhalla.
Just one year into the first Blair government, Capita were boasting a
turnover of £238m, pre tax profits of 27.1m and a staff of over 5000. From here on in, the growth in exponential
and based in large part on acquisitions of formerly government organisations,
and contracts to deliver central and local government services.
|
Year
|
Turnover
|
Pre Tax Profit
|
Staff
|
|
2000
|
£453m
|
£51.2m
|
8,500
|
|
2003
|
£1.08bn
|
£121.2m
|
19,000
|
|
2005
|
£1.4bn
|
£169.6m
|
24,000
|
|
2008
|
£2.4bn
|
£277.2m
|
36,000
|
|
2010
|
£2.7bn
|
£364.2m
|
37,000
|
In summary, in the ten years of New Labour between
2000 and 2010, Capita turnover increased by a multiple of fifty nine. During this time they took over the following
services:
Pensions Service for the Metropolitan Police
HR for Westminster City Council
BBC Information Centre
Constructionline - the public sector online
register of approved construction contractors and consultants
The Congestion Management Scheme for Transport for
London
Service Partnership with Birmingham City Council
Strategic Partnership with Harrow Council
Installer Registration Scheme for the Health &
Safety Executive
Strategic Partnership with Sheffield Council
Extended and expanded ICT and contact centre
contracts with Birmingham City Council
The ‘Strategic’ or ‘Service’ Partnership deals are the biggest hitters,
where a council basically invites Capita to provide a whole host of services
for the Council over a number of years.
One might ask: if Capita and their Outsourcerer friends can provide a
lower cost solution to a non core service, allowing more public money to be
spent on the services that matter, what is the problem? The problem is, that the services are more
often than not MORE rather than less expensive (particularly when taking into
account the bigger picture) and as time moves on, the definition of what
constitutes a ‘non core offering’ seems to have lost all foundation in sense.
The Lie of More for Less
The so called cost effectiveness argument for outsourcing is driven under
the assumption that a private ‘specialist’ can deliver a more efficient service
than the public sector. Or, as some in
the trade might put it, deliver more for less.
The fact is that in most cases, while the bidding stage presents a short
term saving, the longer term picture is quite the opposite.
Firstly, the profit motive. The
corporation is out to make a profit from the service they provide, unlike the
public sector provider. Secondly, in
order to make any substantial reductions on providing the cost of the service,
the brunt is most often met in the terms and conditions of the workforce,
meaning low pay, lack of job security and ultimately, another bill for the
government to pick up down the line
Speaking of changes in Health and
Social Care services in an interview with the New Statesman, an anonymous
worker puts it perfectly:
“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.”
The proof of the pudding is after all in the
eating, so one might expect after the wave of outsourcing that occurred under
new Labour, that we would have seen a drop in public spending on noncore
services (infrastructure, IT, support services etc) and an increase in that
spent directly on the service, e.g. welfare support for the vulnerable. In
fact during the tenure of New Labour the costs of providing the public services
they outsourced rose astronomically, and with it, government borrowing. As the Institute for Fiscal Studies highlighted
in 2010, whilst public spending on investment (transport, the NHS and education
– on these services contracts) rose sharply, the increase in benefits provided
to the elderly, sick and unemployed was
achieved without as significant an increase in spending as during the previous Conservative government. In short, the 4.4% per annum average rise in
public spending under New Labour (compared to 0.7% under the Conservatives)
went not on handouts to the needy or ‘bribes for the electorate’, but in fact
funded the rise of the Outsourcerers.
However, despite the public disdain the Tories showed in opposition for
these contracts, once in office the Coalition achieved the unimaginable: they
outsourced as a faster rate than New Labour.
And here we come to the second issue of outsourcing – the creation of a
shadow state.
A Hollowed Out State
As the rise of Capita and her fellow Outsourcerers Serco, G4S and others
continues apace after the Coalition Government took over in 2010, the nature of
the services they were providing moved from peripheral to what one can only
describe as Core. In recent years the
government has farmed out contracts to the private sector to run hospitals, to transport prisoners, to run prisons, to build and run police stations, to
build and manage schools, and now even to teach lessons.
To anticipate the results of all this outsourcing, one can look to the
emerging legacy from the New Labour period.
First to the NHS, where a vast majority of the hospitals whose
construction was outsourced through Private Finance Initiatives, which often
included conditions which meant the outsourcing of services to the Private
Partner are now facing a financial apocalypse.
A recent study found that in London alone, twelve of the eighteen
healthcare Trusts were financially viable. Worse than that, seven Trusts had to be
issued with a £1.5bn bailout from government
to cover the unsustainable costs of the PFI contracts.
There is also the matter of
transparency in the spending of public money.
The Public Accounts Committee, which is responsible for ensuring value
for money to the British Tax Payer, is but one body raising the issue. One recent report stated clearly that companies providing public
services for profit refuse point blank to answer questions on the subject of
value for money by hiding behind the cloak of commercial confidentiality.
Finally, the giant Outsourcerers get to wield so much power that they,
like the super banks before them, become too big to fail. Capita itself recently received no more
than a ‘censure’ from the Financial Services Authority after its
Financial Management arm lost its investors £144m by betting their investments
on high risk endeavours whilst promising the investments as risk free. Whilst Capita’s culpability was unchallenged,
only £32m was requested in damages for the investors. This, together with recent slapped wrists for
G4S after the Olympic understaffing issue, and A4E for its work programme
scandal, leave a bitter taste in the mouth.
In essence, these companies are responsible for such a swathe of service
provision, that it seems they no longer face any existential threat by fine or
sanction, as the resultant impacts on the public services would be
unacceptable.
Enough is Enough
The simple truth of the matter is that unless we start to pay more
attention to the superficially turgid topic of public service commissioning –
or the privatising of public services – there may very well not be a state
left.
This might seem something that doesn’t necessarily trouble you, but there
is reason we went down the route of democratic statehood in the first place; In
order to protect the individual, to guarantee a standard of service provision
and treatment of the staff delivering those services, all delivered under a
mandate provided by the electorate every four years.
Today, the outsourcing market for public services stands at over £80bn, with the Coalition Government
announcing a further £70bn of services soon to be
opened out for tender. This, together
with the visceral attacks on the provisions of the welfare state, is somewhat
reminiscent of the Poor Law Amendment Act of 1834,
which heralded the Workhouse.
Indeed, what is happening today in the UK, rather than being a
modernisation, as it is billed, is infact a regressive step back in time. The ideas of private companies delivering
education, health, transport, post, energy and other services is not new. It is old.
It is how things used to be done.
It failed miserably. The idea
that private services operate fairly and that philanthropy, charity and
voluntarism can deliver a fair society belongs in the past along with its
workhouses and its pauper lists.
The Welfare State rose out of the failure of this approach, to ensure
that through our contributions in tax and national insurance, every citizen was
guaranteed access to healthcare, education and all the other supporting
elements of the social contract. If this
was breached, the electorate could hold those offices of state to account. Not so in 2012. So, it seems, we are called to repeat history
and take back the services which we all need, out of the hands of private
interests, and into the hands of those with a stake in the public interest.
Get Involved
Join Residents of Barnet to protest Capita’s ever growing slice of the
Council Budget – here
Keep up to speed on the latest sell offs at Corporate Watch – here
Organisations to watch:
[1]
All figures and information in this section sourced from: http://www.capita.co.uk/about-us/pages/our-history.aspx
