Posts Tagged ‘Public Private Partnerships’

Last Fortnight’s Private Eye on Dave Cameron’s ‘Right to Buy’ Policy

April 14, 2015

Cameron formally announced today his ‘right to buy’ scheme, which would see the remainder of Britain’s stock of social housing sold off. Tom Pride and Mike over at Vox Political have already posted pieces on this today. I’ve reblogged Mr Pride’s, in which he tells it like it is. It’s just a return of Thatcher’s ‘right to buy’ scheme from the 1980s.

He goes further, and describes Cameron as ‘a pound-shop Maggie Thatcher’. Which is pretty much exactly what he is. Though it does leave you feeling that we’ve been short-changed. Surely with his blue-blood and Eton education he could be something a bit more up-market. A Fortnum & Mason’s Maggie Thatcher, perhaps, or may be a Harrod’s Maggie Thatcher? Or perhaps something a little more popular, but still offering quality: a Sainsbury food hall Maggie Thatcher?

Mr Pride also points out that the beneficiaries of the original right-to-buy fiasco weren’t the ordinary tenants, but the private landlords who purchased them and then hoiked the rents up accordingly. People like Charles Gow, the son of the minister, who privatised them. Young master Gow is a multi-millionaire with forty of them.

Johnny Void also wrote a piece I’ve reblogged earlier last year, when IDS announced it as his big idea, pointing out, along with Mike, that it would lead to a complete absence of council houses, and that the affordable housing that’s supposed to replace it isn’t anything of the sort. It won’t solve the housing crisis. It will only make it worse.

Which was Private Eye’s view in their last issue a fortnight ago. In ‘Housing News’ they wrote

The wheels are falling off Tory housing policy as the desperate search for votes intensifies.

Chancellor George Osborne’s final budget saw yet another ineffective give-away to first-time buyers in the form of “Help to Buy ISAs” – up to £3,000 in taxpayer cash to top up savings for a deposit. Like umpteen other schemes designed to help those who can’t afford a mortgage, this one may just inflate prices further while failing to address shortage of supply.

Not to be outdone, the Iain Duncan Smith faction promptly leaked the latest version of its own pet idea: to extend the Right to Buy to Britain’s 2.5m housing association tenants. This sounds like music to Tory ears until one realises that, unlike the social homes owned by the councils, housing association assets are private property.

For decades, governments trying to keep the national debt down have restrained council borrowing by tying up council housing assets in ring-fenced housing revenue accounts (HRA) and making it almost impossible for councils to build. Housing associations, on the other hand, are independent charities so their £65 bn in borrowing is safely “off balance sheet”.

As the chancellor must be only too aware, compelling housing associations to sell to tenants and use the RTB discounts enjoyed by council tenants (up to £102, 700 in London and £77,000 elsewhere) would cost serious amounts of taxpayer money and bankrupt a few housing associations. Then again, as this is the eighth election in row where the Conservative party has said it will extend RTB to housing association tenants, will the vote-catcher fare any better than usual?

That isn’t the end of the TRB saga. Under localism, some councils have found a way round Treasury borrowing caps via public-private partnerships, using the new “general power of competence” to create their own “local housing companies” and build homes – for sale and for social rent – and keep them outside the HRA. Not only does this evade the borrowing caps, but it also means the new homes are not, er, subject to the Right to Buy. Housing minister Brandon Lewis is not happy, and has threatened councils with serious reprisals. So much for localism.

Now public-private partnerships, like the Private Finance Initiative, are by and large a colossal waste of money and a massive drain on the state, all in order to provide contracts to the Tories’ donors in private industry. But if local councils are using such schemes to build more social housing, then perhaps we could do with more of them in this specific instance.

As for Osbo and his Help-to-Buy ISAs, one of the commenters over at Tom Pride’s or Johnny Void’s blogs stated that the last thing the Tories wanted was for the price of housing to go down, as this would have a knock-on effect on the rest of the economy through the way mortgages are used to stimulate finances elsewhere. Hence in the short-term, I really don’t think Osbo would be at all worried about housing prices going up, so long as the bubble burst when someone other than the Tories were in power.

As for the ‘Right-to-Buy’ policy having now been wheeled out by the Tories in eight elections in a row, that shows that they have absolutely no intention of honouring it. Not if it’s been touted in the past, but obviously not been put it into practice, if they’re still claiming they’re going to do it this time.

This means that Mr Pride was probably being overgenerous in his description of Cameron as a ‘pound-shop Maggie Thatcher’. The stuff in pound shops is cheap, but it’s still good quality. This, however, is a decidedly shop-worn policy, that is definitely past it’s sell by date. This is the Arthur Daley, Trotters Independent Traders version of Maggie Thatcher. If the policy was an animal, it’d be the dead parrot in the Monty Python sketch, gone to join the ‘choir invisibule’.

Advertisements

Private Eye on A4E Lobbying at 2013 Lib Dem Conference

February 19, 2015

I also found this story in Private Eye’s issue for the 18th to 31st October 2013.

McNally Pally: How Lobbying Works

Documents released to Private Eye under freedom of information show how scandal-hit welfare-to-work contractor A4E used last year’s Lib Dem party conference in Brighton to get around obstructive civil servants and arrange an official meeting to lobby justice minister Lord McNally directly over probably contracts.

Along with other “workfare” providers, last year A4e wrote to all Ministry of Justice (MoJ) ministers asking for a meeting as the department made plans to privatise the probation service and dole out some very big contracts.

Given that at the time A4e was facing allegations of fraud (these led to nine former employees being charged last month) senior MoJ civil servant Jenny Giblett was not keen.

“From our perspective there would be no specific need for a meeting,” she wrote. In particular, she highlighted “presentation and media handling” issues since “A4e suffered some reputational damage in connection with the earlier allegations of fraud.” She stressed that meetings with ministers “are declared, and are the subject of repeated parliamentary questions and freedom of information requests”.

Justice secretary Chris Grayling and two of his ministers declined to meet A4e. But an anguished civil servant revealed: “Lord McNally has let me know this morning that he agreed whilst he was at Lib Dem Conference to meet with XXX for A4e.”

The firm’s Lobbyist had already used the conference, where ministers are free of their civil servants, to extract a promise of a full meeting with the minister in his office. Though Lord McNally was advised of the ministry’s position and the possible pitfalls, he made “very clear that he is going to meet with XXX of A4e, as he promised …”

One civil servant’s email reads: “He is going to need some very robust advice if we think he shouldn’t proceed with a meeting. Lord McNally has been chased directly by A4e twice already.” Another said: “If we’re going to convince him not to do it (which it seems to me we should!), I’m going to need to give him some more robust arguments. Do you think you could outline in an email the reasons you think such a meeting would be ill-advised.”

In the event the official Whitehall meeting went ahead. By nabbing Lord McNally at the party conference, A4E was able to overcome its “fraud” issues and gain official access to the MoJ ahead of other companies.

The record of the Whitehall meeting last November says A4e’s lobbyists expressed “concern that the level of risk organisations are being asked to take, at least initially, should not be too burdensome” for probation contracts, and tried to talk down “the risk of huge penalties for initial failure to meet targets” on such contracts, which Lord McNally said he “understood”.

This shows how the workfare companies continue to get contracts: through very aggressive lobbying, aided and abetted by politicians, who have absolutely no qualms about talking to a firm mired in a corruption scandal. And it all tells you all you need to know about the ‘business-friendly’ Lib Dems that McNally ‘understood’ A4e’s demands to have as little risk put on their shoulders as possible. It’s an attitude that has seen the taxpayer continually picking up the tab for late and shoddy work in other parts of the public-private partnership system.

From 2012: Private Eye on Private Fund Management for Cameron’s Big Society

April 12, 2014

This is also from Private Eye for the 20th April – 3rd May 2012, and covers David Cameron’s attempts to set up an investment fund for his Big Society projects.

Big Society

Capital Idea?

Funds might be hard to come by, but there was no shortage of self-congratulation at the launch of Big Society Capital, the big idea for getting private money into good causes.

Speaking at the Stock Exchange launch, David Cameron boasted that his predecessors had talked about social investment but “this government is actually delivering it, within two years – Big Society Capital with £600m of funds to invest”.

The idea is that the money, £400m from unclaimed bank accounts and £200m invested by the big banks, will attract further private investment too. This will be handed to fund managers (imposing a further layer of costs) who will then invest in “social enterprises” that do good works while making sufficient profit to reward their investors.

The “profits” of these enterprises, so the theory goes, will come from their results. Thus when a social enterprise finds work for disadvantaged youngsters, say, or keeps ex-prisoners on the straight and narrow, it will eventually get its reward from taxpayers. With worrying echoes of the private finance initiative, the costs to government are therefore kicked into the future and nthing shows up on the books today. If the enterprise providing what would otherwise be a public service gets into trouble, of course, it simply goes to the wall.

The big hope for Big Society Capital is pulling in private money alongside its £600m. But where will this come from if only relatively low returns are on offer?

Nick Hurd, so-called minister for the civil society, says “high net worth” individuals are already eyeing the new “market” and “that’s before you even look at the £95bn that charities and foundation trusts are sitting on, managing in very conservative ways through their very conservative, traditional financial instruments”. In other words, charities now struggling with huge cuts in income (said to be more than £1bn a year) should stop being fuddy-duddy and plough some of their funds int6o riskier social enterprises.

This is all the brainchild of Gordon Brown’s former confidant, non-dom private equity guru Sir Ronald Cohen, who chairs Big Society Capital and who, Cameron drooled, “help turn UK venture capital into a sustainable, successful and vibrant industry”.

The idea is to repeat the trick for the Big Society. Or as Sir Non Dom put it: “The power of entrepreneurship and capital markets … which we’ve unleashed for the benefit of economic profit needs now to be unleashed for dealing with social issues”.

The problem is that the private equity fund management model has unleashed vast profits for fund managers but done precious little for anybody else. And likening private equity to venture capital, which generally funds start-ups, has always been more of lobbying-ploy to sweeten the pill than anything real. Less than 5 percent of private equity investment goes into early stage businesses; most ends up in highly geared asset-stripping buy-outs – hardly a model for a new world of social activism.

Indeed, the chief executive of Big Society Capital is one Nick Donohoe, formerly of investment bank JP Morgan, where he sat on the management committee as it bought and sold dodgy securities. This entailed a massive bailout and landed the bank with a $153m fine for selling dodgy “collateralized debt obligations” to pension funds while a related hedge fund was “shorting “thm.

On Big Society Capital’s website Cohen explains where he’s coming from: “The gap between the very successful ahnd the unsuccessful has got bigger and bigger and we nee something other than government or charity to deal with that.” Is this the same man who ten years ago persuaded Gordon Brown to reduce capital gains tax to 1- percent, leaving private equity bosses paying lower tax rates than their cleaners? It certainly is!

I’ve blogged before about how much of the Nazi gleichschaltung (co-ordination) of industry took place through the Nazis incorporating large, state-run businesses, like the Heinrich Himmler steel works, named after and run by the head of the SS, as private companies. The Nazis also co-opted business leaders into the civil service and state industrial sector, in a similar way to the promotion and appointment of contemporary businessmen to official positions under the Tories. This is part of the same policies.

There is, in theory, absolutely nothing wrong with encouraging business to invest in socially responsible and improving causes. This, however, is certainly not the way it should be done. The Eye points out that the type of funds Big Society Capital aims to draw on and uses as a model are highly profitable for the fund manages, but offer poor returns for the investors. The Eye actually points out that these funds are used as part of ‘asset-stripping buy-outs’, in which previously successful companies are bought out and then effectively destroyed for the private of the purchaser, who then often moves on to prey on another company. As an instrument of the socially and economically destructive side of capitalism, it’s clearly completely unsuited for financing and rewarding socially constructive enterprises and schemes.

And as you’d expect from a public-private partnership scheme, it’s run by a crook, whose company was fined for exploiting its customers in America. As for Cohen under Gordon Brown leaving private equity managers paying proportionately lower taxes than their cleaners, that’s truly grossly immoral. It’s also something that’s become the norm under the low tax policies persuaded by successive administrations since Thatcher.

The investment capital fund idea on which Big Society Capital is based is completely inadequate to fund charitable or socially constructive enterprises and projects. These need government investment. This, however, is completely against Tory and Neoliberal dogma that state intervention and state expenditure is always bad. Hence such spending will not be made. It wasn’t after all made when setting up Big Society Capital – as the article says, £400m of this came from unclaimed bank accounts. The result will be that charities and social enterprises and projects will continue to be starved of funds through the simple inability of state and private capital partnerships to provide them. It may, however, help Cameron to make a spurious claim that his government has done something to address the problem, while in fact they have done very little.

From 2011: Tories Launch Workfare Policies at Conference Sponsored by Workfare Contractors

April 9, 2014

Private Eye in the issue for the 22nd July -4th August 2011 also reported on the way David Cameron launched his policies further placing government services in the hands of private companies, including those running the various workfare schemes, at a conference organised by one of the organisation working for the same companies.

Will It Workfare?

When David Cameron launched his “Open Public Services” white paper last week, he did so at a conference arranged by a think-tank funded by the very firms who will benefit from the privatisations his document proposes.

Cameron unveiled his plan at a Canary Wharf event hosted by “Reform”, a right-wing charity funded by business “partners”. Cameron and his ministers regularly appear at Reform events; and the PM proposed “releasing the grip of state control and putting power in people’s hands”.

The list of Reform’s backers suggests who those people will be. They include leading hospital privatiser General Healthcare, prisons and schools firm G4S, cleaning and catering outfit Sodexo and all-purpose giants Serco and Capita. Telereal Trillium, which already gets £284m a year for running government properties, also funds Reform, as does PA Consulting, which makes millions as an adviser on several privatisations.

But will the outsourcing plan actually work? Given how existing arrangements are panning out, it seems unlikely.

Days before the white paper, the Department for Work and Pensions quietly published some research on the previous government’s “welfare-to-work” outsourcing scheme, which pensions secretary Iain Duncan Smith will soon expand with a new “work programme”. The model involves layers of bureaucracy that would be derided in the public sector: first “prime providers” creaming off the fees, then subcontractors doing the leg work. And it’s not going well.

The DWP report reveals that, so parlous is the economics, “60 per cent of subcontractors have sought financial assistance from their prime provider”. As for the notion of the private sector bearing the risk, the researchers record: “The 23 percent of subcontractors receiving guaranteed referrals from prime contractors are much more likely to feel financially secure.” When the insecurity of any of the 77 percent translate into failure, the taxpayer will pick up the pieces.

Perhaps more revealing than the research is the fact that it was conducted by PricewaterhouseCoopers. With the inside track, PwC last month withdrew its bid to act as a prime provider and subcontractor on IDS’ new work programme.

PS: The work scheme is at least providing jobs for former Labour ministers.

Jim Knight, given a life peerage after losing his South Dorset seat in the 2010 general election, is a former employment minister who last month became a non-executive director of Alderwood Education.

This company was launched specifically to cash in on the Duncan Smith initiative; its executives saying that “welfare to work is a huge growth opportunity”. Well,, it has been for Lord Knight, who until recently was an opposition employment spokesman in the upper chamber and now joins a gaggle of other ex-Labour ministers in the work programme field. The include David Blunkett (A4E), Jacqui Smith (Sarina Russo) and Angela Smith (Vertex).

This provides further proof of the fact that the public-private partnerships favoured by the Right since Thatcher don’t work, are massively inefficient and need to be regularly bailed out by the taxpayer. This is also demonstrated by the way the PFI contracts awarded to the private firms building and running hospitals regularly go way over time and budget. But such contracts aren’t really about providing services efficiently. They’re about giving public money to private firms, which fund the political parties and provide lucrative directorships for politicians.

From 2011: Government Appoints A4E to Design Contracts for Private Welfare Schemes

April 8, 2014

This is another story from Private Eye, this time from 2011. According to the Eye for 30th September – 13th October 2011, the government was awarding A4E the contract for designing the rules under which A4E, amongst other contractors, would bid to provide public welfare and social services.

Welfare Reform

Contract Claws

The Cabinet Office has appointed A4E, one of the government’s biggest contractors, to design the kind of contracts for which it will itself bid.

A4E will design the “payments by results” rules for the welfare contracts funded by “social impact bonds”, the government’s new big idea for public services. By putting its main welfare contractor in charge of designing welfare contracts, the department is effectively repeating one of the central failure of the private finance initiative.

The contract is worth up to £300,000 and covers pilot schemes in four regions to help families with multiple problems. Private investors fund welfare and social work schemes and the government then pays the investors back over years based on the public money “saved” by unemployed people finding work or ex-offenders staying out of jail.

The Cabinet Office is seeking “more innovative financiers, with a bigger appetite for risk”, so it will take very tight contracts to prevent these aggressive investors getting big returns over long periods for ill-defined “savings”, as the PFI example shows. Asking A4E to guarantee the “robustness of the savings estimates” seems perverse as the firm has repeatedly failed to give good results on its existing welfare-to-work contracts (Eyes passim), and it has every interest in government contracts being as soft as possible.

A4E may be excluded from bidding for the contracts it is drawing up in Birmingham, Leicestershire, Hammersmith and Westminster (all Conservative councils); but exclusion is not automatic; A4E is being asked to guard against “cream skimming/cherry picking” and ensure “value for money” – but critics say that A4E is itself guilty of the former and does not offer the latter.

Such conflicts of interest and soft corruption are, of course, no strangers to welfare reform and the public-private contracts governments since Maggie Thatcher’s have pursued. The Skwawkbox today blogged on the close links between George Osborne and the company, which bought up many of the Royal Mail shares at a discount. Way back in the 1990s, one of big accountancy firms being employed by Major’s government to adjudicate the bids of companies competing for a government contract, then decided to bid themselves as they decided they were the best candidate. A4E in this instance is merely part of a long line of such cases. It was all part of the ‘sleaze’ of the Major years, of which a French politician said ‘You call it ‘sleaze’. In France we simply call it corruption.’ The point of such contracts in any case isn’t to guarantee quality of service, or provide transparency and accountability, but simply to award lucrative government money to big companies that will then reward the politicians concerned with directorships.

‘Commission Managment’: The Nazi Term for Public-Private Partnership and the Use of Special Advisors from Industry

August 3, 2013

I’ve already discussed the use of personnel from big business and industry in government, and the establishment of government organs as private corporations in the Third Reich in my post on Spamfish’s post on Wolin’s idea that America is now an ‘Illiberal Democracy’. Another example of this was the appointment of the industrialist Carl Krauch as general plenipotentiary for chemicals and director of the Reich Office for Economic Consolidation , a subordinate body to the Reich Ministry of Economics. The Reich Ministry of Economics was itself in practice the ‘executive organ of the Commissioner for the Four Year Plan’. Under Goring’s management the Organisation for the Four Year Plan appointment a number of business leaders, like Krauch, as general plenipotentiaries.

Krauch had been on the board of I.G. Farben from 1926. From 1933 onwards he was an adviser to the Aviation Ministry, and to Brabag, which was responsible for producing artificial fuel. Krauch initially headed the research division of the Office for Raw Materials and Stock in the Organisation of the Four Year Plan. IN this role he had the full support of I.G. Farben’s board, and could use the company’s planning staff. He also took some of the staff from I.G. Farben to work with him in the Office of the Four year Plan. He was made general plenipotentiary for chemicals in 1938. The Reich Ministry for Aviation and Economics urged him to resign from I.G. Farben and become a state official, and was willing to appoint him state secretary. Krauch turned the offer down after consulting Bosch. he retained his seat on the I.G. Farben’s board, and in 1940 was appointed head as chairman of the company’s supervisory board. Krauch’s position in the Reich ministry was honorary, and he was not officially employed by them, nor was he included in the organisation’s budget. He was regarded with suspicion by other firms because of his continued links with I.G. Farben, and by the state economic bureaucracy, which was used to the strict separation of public and private organisations. The use of expert technicians like Krauch was expanded and became increasingly typical. While Goring and the General Council of the Four Year Plan were responsible for the ministry’s decisions, these were strongly influenced by the suggestions of their plenipotentiaries and by members of staff from the private armaments industry. These were ultimately responsible to the Armaments Ministry, but the ministry’s central administration rarely rejected their suggestions. Krauch described this adoption of managers from private industry in government as the assumption of state duties by the independent sector of the economy. It was described by other political theorists as a new form of ‘Commission Management’. In addition to using advisors and personnel from the Nazi party bureaucracy, the management apparatus of official from private industry was also used at the expense of a uniform state administration. The parallels here between the Nazi use of managers and technicians from private industry, and their use, along with Special Advisors, by contemporary British administrations since Margaret Thatcher as part of an ideology of Public-Private Partnerships are very strong indeed.

The Friends of the Reichsfuhrrer SS

Private industry also sponsored the SS. The Friends of the Reichsfuhrer SS was a group of heads of industry and bankers in Berlin. They donated money and even equipped whole SS units. AS a reward, the group became honorary members of the SS and influential personal contact with its leader, Himmler. One of the advantages this gave the group’s members was access to cheap labour from the concentration camps. To use this slave labour, the SS demanded a price of 6 marks per man per day.

Clearly there is no real comparison between Cameron’s policies and the Friends of the Reichsfuhrer SS, except in the most general sense of private industry donating money to the Conservatives, and other political parties, such as New labour, in return for governmental favours. There might be some if, the DWP adopts the recommendation of independent policy advisors to expand the use of residential centres for the disabled and long-term unemployed, to be employed on workfare, run by private contractors. Nevertheless, it demonstrates the ultimate extent to which the Nazis attracted and exploited contacts with private industry.

Sources

Martin Broszat, The Hitler State (London: Longman 1981)

Friends of the Reichsfuhrer SS, in James Taylor and Warren Shaw, A Dictionary of the Third Reich (London: Grafton 1987) p. 132.