Posts Tagged ‘Carillion’

Another Crisis in the Outsourcing Industry: Capita Now in Trouble

February 1, 2018

Yesterday, Mike reported on his blog that the outsourcing giant, Capita, was now in trouble. Its share price has apparently halved, knocking £1.1 billion of its stock market value. It has axed its scheme to issue £500 million in dividends to its shareholders. Instead, it intends to raise £700 million, partly by selling off parts of the company, which it needs to balance the books. There are also fears that it will make part of its 67,000 strong workforce redundant as well as concerns for the firm’s pension fund.

Mike in his article notes that the company was responsible for assessing the infamous fitness for work tests, for which the government has imposed hidden targets. One of these is that 80 per cent of reconsidered cases should be turned down. Mike therefore comments that if the crisis means that some of these assessors get a taste of what they inflicted on benefit claimants, this would be a case of poetic justice. He also wonders what the firm was doing when it devised the scheme to issue those massive dividends to its shareholders. Did they believe that the government’s magic money tree would continue to allow them to give heaps of money to their rich shareholders? He also asks other searching questions, such as whether it was deliberately underbidding to get government contracts, and then using the money to help finance those projects it had already won.

Mike concludes

So: First Carillion collapsed. Now both Interserve (remember them?) and Capita are in trouble.

Who’s next? And what will happen to public services while the Tories dither over this crisis?

See: https://voxpoliticalonline.com/2018/01/31/in-the-crap-ita-government-contractor-responsible-for-benefit-assessments-is-in-deep-financial-doo-doo/

Capita, or as Private Eye dubbed it, ‘Crapita’, has a long history of incompetence behind it. Way back in the 1990s it seemed that hardly a fortnight went by without Capita turning up in the pages of the satirical magazine. And the story was nearly always the same. The outsourcing company won a government or local authority contract to set up an IT system or run IT services. The project would then go over time and over budget, and would be massively flawed. And then a few weeks or months later, the company would be given a contract somewhere, and do exactly the same thing there.

You’re left wondering how Crapita kept winning those contracts, when it was so manifestly unfit to carry them out. Who did it have on its board? Or was there a deliberate policy by Major’s government to support outsourcing, no matter how inefficient and incompetent they were, because it was private enterprise and so preferred and supported for purely ideological reasons?

In any case, what seems to have placed the company in a very precarious financial situation is the usual tactics of big companies in this stage of capitalism: award massive dividends to the shareholders. This usually goes along with starving the rest of the company of investment, which seems to have been done to. And granting massive, and massively unsustainable pay awards to senior management. There’s no mention of that in Mike’s article, but I don’t doubt that this was done too. I’ve got the impression that it’s just about standard practice across a huge swathe of industry.

This is a financial strategy that has driven far more than one company to the wall. I also wonder if the executives weren’t also trying deliberately to create a debt, so that they could dodge corporation tax for five years. This is one of the tricks Stewart Lansley and Joanna Mack describe in their book on contemporary British poverty, Breadline Britain.

Over the years the outsourcing policy has been in operation, there’s been one crisis after another. The outsourcing companies have repeatedly shown themselves to be incompetent, not just in the case of capita, but also notoriously with G4S and the scandals over the violence and brutality it meted out towards asylum seekers in the detention centres it ran. And, of course, when a whole load of prisoners escaped on their way to court. Or jail.

Private industry has repeatedly shown that it is incompetent to do the work of the state sector. These firms have the disadvantage of having to make a profit for their shareholders, as well as the demands of their management for multi-million pound pay packets. The only way they can afford this is by cutting wages to their workers, and spending as little as possible on the service they are meant to be providing. The result of this has been a series of financial collapses. Carillion was the first. Now Capita and Interserve, another outsourcing company, is in similar trouble.

The only sensible recourse should be to cancel these companies’ contracts, and take everything back in-house. But this won’t be done. I think there’s a problem in that the state sector has been so decimated by the past four decades of Thatcherism, that it no longer has the capacity to run these services itself. There’s also the additional problem that too many politicians and media magnates have connections to these companies, or to firms in a similar position hoping for government contracts. Acknowledging that outsourcing was a failure would damage the interests of these politicos and press barons. There’s also the challenge of actually facing up to the fact that a central plank of Thatcherite dogma – that private enterprise is always more efficient than the state – is absolutely, undeniably wrong. Anybody who makes this point is denounced as a Communist in screaming headlines. You only have to look at the way the Tory press has vilified Jeremy Corbyn for daring to want to renationalise the NHS, the electricity net and the railways. His policies are very far from the total nationalisation demanded by Communists and Trotskyites, but you wouldn’t know it from the frothing abuse hurled in his direction by the Tories and Blairites.

There’s also another problem with calling an end to the outsourcing scam. PFI contracts and outsourcing allow some of the costs to be written off the official government accounts sheet. They’re still there, and we have to keep paying them, but they’re not included in the official figures. It’s why Mussolini used a similar scam when he was Duce of Fascist Italy. Any government that restores these projects to the way they were handled before risks putting millions back the official figures. And if that’s the Labour party, you can imagine the Tories making their usual hackneyed and untrue comments about ‘high-spending Labour’, and then re-iterating the spurious arguments for austerity.

I’ve no doubt that the government will do what it can to shore up the current mess the outsourcing companies are in. But the collapse of Carillion and now the severe financial troubles faced by Capita and Interserve show that outsourcing does not work. And given these companies’ highly checkered history, they should never have been given governments to begin with.

And it bears out exactly the description the author of Zombie Economics used for them in the very title of his book. Outsourcing, and the rest of the Thatcherite economic strategy of privatisation, wage restraint, low taxation and declining welfare are ‘zombie economics’ as they don’t work, but haven’t yet been put it into the grave.

It’s high time they were, and Thatcherite free trade capitalism was abandoned as the failure it so glaringly is.

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George Osborne Lies about Responsibility for the Collapse of Carillion

January 16, 2018

No, not Marillion, who had a hit in the 1980s with the classic, ‘Kayleigh’, and whose singer was called Fish, ’cause he drank like one, but Carillion, the outsourcing giant which has gone belly-up.

Mike’s put up a post about Carillion’s collapse, pointing out that the company was in dire financial trouble, and had issued at least three profit warnings. But miraculously it was still able to win government contracts.

George Osborne, our former comedy Chancellor to Dave Cameron’s comedy Prime Minister, decided to put his oar in today. Faced with the question of who was responsible for awarding these contracts to the ailing company, Osborne did what every Tory does: he lied and spun. Oh no, whined Osborne, now the editor of the Evening Standard, it’s not the Tories’ responsibility they got government contracts. It’s all the fault of civil servants.

Er, no, George. It’s not. It’s your fault, and the fault of every Thatcherite government since the days of John Major.

If you enter the civil service, you will be told that it is your duty to provide the government with impartial advice. This marks the British civil service out from its continental cousins, where the upper levels of the civil service belong to the ruling party, and so change with each election. There have been cases when the civil service has been less than impartial, such as when the rail network was privatised. This was the brainchild of a particular civil servant, who was a keen promoter of free market private enterprise. But this particular mandarin has been and gone.

Looking back, a scandal like Carillion was almost inevitable. When outsourcing began in the 1990s under John Major, firms like Capita, dubbed ‘Crapita’ by Private Eye, became notorious for the way they continually got government contracts, despite coming in late and over budget on just about all those they had been awarded. Or else the systems they installed just didn’t work. But it was Tory – and Blairite – ideology that private enterprise was always better than the state, even when, to most people, it most certainly wasn’t. And there was a revolving door between these firms and the Tory party. Under John Major, the various ministers responsible for privatising particular firms magically got jobs on the board of the same, now private companies, afterwards. Amazing! But civil servants weren’t to blame for that, although certain high level civil servants did benefit from the revolving door, particularly and most notoriously in the MOD. The system got so bad that John Major’s government got a justifiable reputation for ‘sleaze’. But a French politician was much more accurate in his description of it. He said that in Britain, we called it ‘sleaze’, but in La Patrie, they simply called it ‘corruption’. Indeed. Over the other side of La Manche, a civil servant or politician has to wait two years after they’ve retired from office before they can take up a job with a private firm. Which means that their address book, which is what the firm really wants, is out of date, and they’re of no value to them. Problem solved.

Carillion was allowed to go on because of a series of legislation put in place by the Tories to protect the outsourcing companies. Like as private companies, they are not subject to FOIA, and any attempts to probe their financial affairs is automatically denied by the government on the grounds of ‘corporate confidentiality’. You see, such requests would jeopardise their position by opening them up to scrutiny by their rivals. We’ve seen this used when justifying giving contracts to private firms in the NHS. NHS performance is published and scrutinised, but not those of the private firms angling for lucrative NHS contracts.

This has been brought in by the Tories, including Dave Cameron and George Osborne.

And while we’re at it, let’s make the point that much government advice doesn’t come from the civil service. It came from private consultants, like Anderson Consulting, who were responsible for turning the Benefits Agency as was into the shambles it now is. Under Tony Blair this grew to enormous proportions, so that Blair was taking advice from SPADs -Special Advisors – from private industry, rather than the civil service.

So it’s fair to ask which set of private consultants argued that Carillion ought to be given a contract? Perhaps no-one did, but I think it’s a fair question, given just how much sponsorship the Tories received from private industry. Was Carillion one of their corporate donors?

So who’s responsible for the government awards given to Carillion? You are, George. You, Cameron, and your whole disgusting party. Now stop lying. You were rubbish as chancellor, and you’ve got no business editing a paper either.

Virgin Trains Bans the Daily Mail – Right-Wing Heads Explode!

January 15, 2018

Last week Virgin Trains announced that at least on one of the lines they operated, they would no longer carry the Daily Mail due to customer complaints. Immediately the Mail and its legions of followers started frothing at the mouth and complaining of censorship. But they don’t really have any basis for complaint, as the ban by Virgin is part of the very capitalism and privatisation that their heroine, Maggie Thatcher, promoted.

As a private firm, Virgin is under no obligation to anyone except to turn a profit for its shareholders and bloated paychecks for its board members. Thatcher deluded herself into believing that privatisation would lead to better services, due to the action of market forces and competition. But this didn’t happen. We’re paying more now in subsidies, for a worse service, than we did under British rail. But this hasn’t bother the Tories, whose ideological commitment is for private industry to run everything, even when this would produce a manifestly worse service, as it would if and when they decide to go all out and privatise the Health Service completely.

But as a private firm, ‘Beardie’ Branson can do whatever he likes with it. It’s his property. And so, by the nature of property rights, the Tories can’t argue against what he’s done. It is censorship, yes, but it hasn’t been done by the state. It’s been done by a private individual, whose right to do what he likes with his property has always been regarded by the Tories and the Republicans in America as absolutely inviolable. Branson is free to decide whatever magazines his trains will, or will not carry, in the same way that newsagents can decide which papers to stock. Way back in the 1980s I tried to order the English version of Pravda, which was then coming out, from my local newsagents in my part of Bristol. No such luck. I was told that Bristol had been divided up between the two national distributors. One operated to supply the newsagents in one half, while the other operated in my area. And the distributor that supplied the newsagents in my area wouldn’t carry it. So I had absolutely no choice whatsoever. Private enterprise had decided that where I was, I couldn’t obtain Pravda. Just as Branson has now decided that the Heil will be unavailable on his trains.

Yes, the decision makes a mockery of Thatcher’s constant mantra that privatisation and private industry would bring more ‘choice’. It hasn’t. But this has been the result of privatisation generally. People have been left with a plethora of companies, all actually providing a worse service than when the utilities were nationalised, and for many people choice is actually an illusion. It doesn’t matter who you go to, you’re still paying very large amounts for services that arguably aren’t worth it. If you want an example, think of the privatised dentists. Thanks to Thatcher’s decimation of the dental service back in the 1980s, there are now few dentists taking NHS patients. The dentists that have gone private charge fees that, for many, make going to them unaffordable. Yes, you can change dentists, looking around for a cheaper service, but unless you find an NHS dentist, you’re still going to be charge very high fees. So from that perspective, you don’t have a choice. And the same applies to the railways and other public services taken over by private contractors.

Secondly, Branson was responding to ‘market forces’. This was the other buzzword of the Thatcherites. The operation of the market was held to be good, just and a guarantee of commercial efficiency and success. Capitalism won over socialism, because socialism took no account of market forces. There’s some truth in that when it’s applied to completely socialised economies such as those of the Communist bloc. But as we’ve seen, various capitalist firms have since failed, and then had to be bailed out by the taxpayer. If you just have market forces as your guide, then these firms, which now include Carillion, should be allowed to go under because of their failure to respond to what the market wants. But instead the right demands that we bail them out, because it’s private enterprise and so can’t be allowed to fail. It’s why the corporatist capitalism ushered in by Reagan and Thatcher has been called ‘socialism for the rich’, as the state is always required to support them, while denying welfare services and healthcare to those genuinely in need.

As for Branson’s ban on the Heil, he was responding to market forces. People had complained about the Heil, and as the service provider, he responded to what his customers wanted. The Mail, which has vociferously and consistently fallen over itself praising Thatcher to the rafters, cannot complain. Thatcher stood for market forces, and market forces have dictated that Virgin’s customers don’t want the Daily Mail. So it’s just too bad for them that Virgin trains will no longer be carrying it. There’s also an element of hypocrisy here. If Virgin had said that they wouldn’t carry what remains of the left-wing press in Britain – the Mirror, the Groaniad or the I, the right-wing press, including the Heil, would be delighted. This shows that the great British public despise the left and its journalism, they would announce proudly. But now that the great British public, or at least that section of it that travels by train, have decided that they don’t want the Mail and its hate and bigotry travelling with them, the Tory press has been screaming ‘censorship’.

Yes, Virgin’s ban on the Daily Mail is censorship, but it’s been done because of the nature of capitalism, Thatcherite ‘choice’ and ‘market forces’. Except that in this case, they haven’t acted to empower the right, but attack it.

Private Eye on the Blacklisting of Trade Unionists in the Construction Industry

March 12, 2016

I found this article in the 23rd August – 5th September 2013 issue of Private Eye.

Blacklisting
Blame Game

No honour among thieves in the construction industry. Sir Robert McAlpine Ltd (SRM) has decided that if it is to go down for illegally blacklisting trade unionists and other “troublesome” workers, it will take its competitors with it.

SRM is being sued in the high court by more than 100 workers who claim their lives and careers were blighted by being placed on a blacklist operated on behalf of the construction trade by the Consulting Association (
Eyes passim). Last month the company decided to dish the dirt and name nine other major contractors, responsible for 34 companies, as co-defendants to the action. It alleges that two of the giants – Balfour Beatty and Skanska – adopted a particularly hardline approach when it came to refusing to employ people who found themselves on the Consulting Association list, often for simply raising safety issues.

SRM says that if it were to be found guilty of a conspiracy to put together a blacklist aimed at preventing people from earning a living-an allegation it denies – the others were, too. As well as Balfour Beatty and Skanska, it has added Amec, Bam, Carillion, Costains, Laing O’Rourke, Kier and Vinci Skanska to the legal action. With individual claims running from £10,000 up to around £300,000, it could see the workers win millions in damages between them, with others to follow if the case is successful.

SRM claims the named companies were all paid-up members of the Consulting Association, which was closed after it was raided by the Information Commissioner’s Office in 2009. The ICO) uncovered details of around 3,000 workers, many of whom, it is claimed, were effectively banned from using their skills.

The original action brought by the workers, all part of the Blacklist Support Group (BSG), targeted SRM because it was believed to have the worst record of blacklisting. SRM even paid legal and other costs for Ian Kerr, who ran the Consulting Association and was fined £5,000 for holding the illegal database.

SRM says that some of the other signed-up members of the Consulting Association, who paid hundreds of thousands of pounds for membership fees and “usage” charges, were “more inclined than the others” to refuse to give work to individuals on its books. “It appears that the Balfour Beatty companies were particularly ‘hard-nosed’ and took a particularly hard line in this regard compared to other members,” SRM alleges.

It says the evidence unearthed by the ICO suggests Balfour Beatty refused workers on it various sites around 187 times. It also handed information on workers to the Consulting Association on more than 300 occasions.

Of the Laing group, SRM alleges that the 85 times its companies provided information to the Consulting Association and the 87 times it refused work “are high compared to other members”. And it accuses Skanska of refusing to permit workers on its sites on approximately 103 of the 127 times it had made enquiries to the Consulting Association.

SRM denies the workers’ claims of conspiracy and breaches of the Data Protection Act, and is contesting the action. However, it says that should it fail, the other companies should pay a contribution to any damages and costs awarded to the workers in proportions to be decided by the court. Watch this space.

This has been going on for a very long time. One of my cousins was turned down for a job years ago, because his father was a Communist. This was also a major issue back in the 1990s, when Panorama or one of the other documentary programmes ran an edition on the Economic League. This was set up as another trade organisation to compile blacklists of trade unionists and other bolshie workers back in the 1920s, when it was founded as the Economic League against Industrial Subversion. Then it was succeeded by another blacklisting organisation, Hakluyt. Both organisations have appeared in Lobster at various times. They had links to the Tory party, and, I believe, British intelligence.