Posts Tagged ‘Social Impace Bonds’

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.