The other day I was expressing sceptism about the launch of yet another strategy by Government to make a better go of outsourcing. I commented on the almsot total lack of proper objective evaluation of the success or othewise of outsourcing, which has gone much further in England than in any other country. I was asked what I thought such evaluation would look like. As the LinkedIn post has vanished, here is my answer:
That is an extremely good question.
A proper objective evaluation would have to be carried out by someone both expert and independent of both commercial and union interests and of Government. It would establish whether there are credible measures of performance, if not, suggest them, look at the data for both sectors, and establish the true costs of each sector. It would look at possible side effects, and at how costs are reduced – whether by reducing wages so far as to propel workers into poverty, for example. It should also consider the type outsourcing – they are many very different types of course, some allowing direct inter-sector competition but many not – and at how well competition has been managed and how it could be managed better. And how well contracts are being managed. And it would look at overall benefits, for exmaple, whether it has stimulated improvement in the public sector.
It would cost a little to do well – by rough reckoning maybe one five hundredth of one per cent of the value of outsourced contracts, per year. But at present, it isn’t done at all. I dont know of one, apart form my own study on prisons. That's not because I'm cleverer than others - it's because I bothered. MoJ has stopped doing it for prisons. When I asked DH what studies they had done for healthcare and social care, they said none. The King’s Fund library has almost nothing. Think of the upheaval that readying the NHS for competition caused under Cameron - and nothing to show for it!
No one has a clue. And yet this huge experiment in out sourcing by far (proportionately) the biggest in the world, rolls on, year after year, in a state of perfect ignorance, unless and until we learn something from the many procurement disasters. For which no Minister and no official ever suffers any consequences whatsoever.
There are two reasons why this has become much more urgent. First, we seem to be witnessing more and more disasters in Government procurement – probation contracts, Birmingham prison, FM contracts, Turkish PPE and Chinese COVID tests, witness the flood of single supplier tenders in recent months and of course, almost anything done by MoD. Second, the coming fiscal and social crisis, triggered by COVID, but coming on top of years of cuts, especially in local government, makes it vital that procurement isn’t for the same old same old, cheaper but degraded, but for a new way of meeting need. So, we are asking an institutionally incompetent Government to be suddenly much cleverer – but without bothering to evaluate what is has done so far.
Sound good to you?
Interesting piece by David Gauke, one of the liberal Tories sacked by Johnson, who says he initially supported the Government on COVID, noting the exceptional and novel challenges it poses, but that he ceased to do so as the sheer number of disasters and misfires mounted up. He makes the point: "A Government that shows humility and honesty will retain the benefit of the doubt, but that runs counter to a ‘never apologise, never explain’ ethos. "
So true. 'Sorry' is one of the most powerful tools at the disposal of any leader (if genuine and if not over-used - and if leading to real improvement), but the more insecure and autocratic the leader, the more it feels to them like weakness to admit they have done anything wrong or failed in any way. I think of the way Martin Narey, my boss, used to go on the media immediately and admit that something that had just gone terribly wrong in prisons WAS indeed terribly wrong and could not be defended. He thus disarmed criticism before it was fairly launched. Johnson, and especially Trump, represent the polar opposite: never apologies. And boy! does that not work!
The other day, someone contacted me about my book – yes, it still happens, every third blue moon – and I thought to have a look again at the latest performance ratings for prisons, for 2018-19, published nearly a year ago. Remember, back when COVID was just a misprint for ‘Corvid’?
When I was the Director responsible for Government research and statistics dealing with correctional services, the statisticians were people of complete integrity. They might make mistakes, sometimes, but you couldn’t get them to play politics, indeed publications were sometimes held up for months because Ministers wanted them to say things that the scientists said were misleading.
Nowadays, for the MoJ, spin is all. The bulletin for the 2018-19 ratings is so very proud at the progress being made. “13% of prisons were rated as having exceptional performance, the highest rate since 2014-2015”. And “more prisons were rated as having acceptable or exceptional performance than in 2017-18 or in 2016-17” and “there were fewer prisons where performance was rated as of concern or of serious concern”.
Slight problem: the same bulletin says such comparisons are rubbish. It says in the small print that because a new rating system was introduced in 2018-19, “comparisons cannot be made to performance rating s from 2017-18” (since they were derived from a different system) or with ratings before 2017-18 since those were based on a yet another different, earlier, system. Clear enough! One of the banes of Government stats is that these breaks in series occur all the time, yet what people often most want is to see a trend. Happens all the time with accounts, too.
Yet the authors of the bulletin immediately break their own rules!
I think I’ll ask the UK Statistical Authority to offer MoJ some help in understanding their own bulletins.
What is even more dubious is the choice of 2014-15 as the benchmarking year. Why that particular year? Why not an earlier year? Because any earlier year would remind us that the prison (and for that matter, probation) services were in a good state in 2010 – when the Tories came in. Why not benchmark on 2010-11, when not one single prison was rated as having performance causing serious concern. Not. A. Single. One. Compared to nearly 1 in 7 prisons last year. (Since MoJ ignores its own rules on past comparisons, why shouldn’t I?). Even more damning, in 2010-11 nearly every prison in the country, an astonishing 98%, were rated as either ‘exceptional ‘or meeting the majority of targets. In 2017-18, before the figures were conveniently ‘improved’ in 2018-19 by introducing yet another a new system, half of all prisons were failing.
MoJ play the same game with staffing numbers, comparing todays’ numbers with the year numbers were lowest and announcing the result as a triumphant x% increase. But the true baseline in 2010, before the Tory cuts started. Which would show that in our prisons, today, we have 16% fewer front line staff on our landings than we had in 2010. Which, in the opinion of everyone except Tory Ministers, and their stooges in the MoJ, is the reason the prison service has been brought so low, that foreign courts bar transfer of prisoners to the UK on humanitarian grounds. In the same way a slight fall in stats such as assaults or self-harm are trumpeted, ignoring the fact that they are nevertheless still over twice as high as when the Tories came in.
The MoJ hope we are too stupid, too lazy, to realise the extent of the damage Tory policies have done not just to prisons and probation, but to every single element of our justice system since they came to power in 2010. Well: I’m not. Nor, I hope, are you.
Woken at 5 a.m. by a blackbird just outside our bedroom, singing its head off. Our most beautiful songster, I think. Rather that than the show-off nightingale. After 20 minutes or so, pigeons started a throaty ostinato, then distant crows cawing, then at about 5.45 the electric twittering of our sparrow hedge. And I felt such deep longing to be in harmony with the natural world, that I felt like crying.
We shall miss these days, when COVID is over. That sounds strange, but it’s true. Yes, suffering surrounds us like a sea, stretching limitlessly in every direction, stretching to every country and far, far into the future, as the tide of damage, economic, mental, spiritual, political, diplomatic, rolls on and on. And yes, it is terrible.
But sometimes, it feels like we are also being shown something, something we always longed for, but thought could never be, shown it actually can exist. That for a moment, it does exist. That if we just restrain ourselves, the natural world we have been so relentlessly despoiling will come roaring back, and it will be immensely healing. That the air can be fit to breath, the sky truly blue instead of a film of muck, the quiet overwhelming, bringing us back to our true selves. And that we can just peel off all the labels that help divide us, Chinese, Italian, English – or Brexiter or Tory or white or male or middle class or all the others – and realise with a sudden rush of recognition that, faced with this awful challenge, we are all one. Not that we should be, but that we already are. And that as one, we could be unstoppable, there would be nothing we could not do.
But it cannot last. Already the traffic here is about half way back to normal. Already I can taste the diesel fumes in my throat, my senses heightened by breathing clean air for the first time since …when? Already work has restarted on the development near us. Already the stupidity, division, of politics, the pointless, insulting tribalism and point scoring, is starting up again. Soon we will all go back to exactly the same ideas and standpoints and feuds we had before. Soon the second home owners will rush off to their places in the country or in France, we will start booking fights and hotels, buy another machine, and another…. We will miss the opportunity to change the way we think, act, organise, produce, consume, live.
And when we go back to traffic jams all day long, and breathing air acrid with fumes, and peering at skies crowded with vapour trails and Heathrow Hell and busyness and rush everywhere and everywhere Nature and peace being trashed and trampled on, we will miss these days like a dream of something better, something we truly do not deserve. For it is a dream that belongs to some other species than Man. We are too busy, too greedy, too lacking in wisdom, restraint, kindness.
We shall miss these days. And we shall never see them again.
Didn't there used to be something called the 'Labour Party'? Headed by Clem Kinnock or someone? If you see it, please don't approach it, as it may be toxic, but call a vet.
Meanwhile, since we no longer have any politics in this country, here's some recent glass, made since I started learning painting on glass from the very gifted Anna Gillespie of Charlbury.
Now HERE'S a leader!
Listen to these old soldiers, and weep: here
A surprising, and potentially explosive, twist to the ongoing SERCO fraud scandal (see previous blogs):
The shareholders, including the BBC, BA and Shell Pension Funds, are suing SERCO in the wake of disclosure, in a court hearing last summer, that SERCO’s margins on the tagging contract had been way ahead of forecasts as early as 2006. Presumably they will claim that SERCO’s concealment of their true profit margin artificially inflated share prices, and that eventual discovery of this led to a catastrophic collapse in the share price and thus the pension funds’ assets. Potentially, the claim could be for many hundreds of millions.
This is of particular interest given that Judge William Davis observed last summer that the fraud had been organised by and for the benefit of the SERCO main company, but that no ‘directing mind’ within the main company could be identified and charged. It will be interesting to see the argument run, that SERCO is not liable for the civil suit, because no one was actually directing the company.
In a recent post, I said that the SCERO/G4S electronic monitoring scandal (“this one will run and run” – Serious Fraud Office) had given rise to many scandals, one nesting inside the other, as it were.
Another has come to light. The Financial Reporting Council, regulatory body for accountants, actuaries and auditors, has published findings against Deloittes and two auditors. The findings were of misconduct in:
failing to respond to clear indicators of the risk of potential fraud on a UK Government Department, despite such indicators being visibly set out on the SERCO Geographix audit file (for the years in question)
failing to comply with important audit standards and included failings in relation to identifying the risk of fraud or material misstatement and the exercise of professional scepticism.
These are the accounts which, the SFO alleges, were manipluated so as to enable SERCO to give a false account of the profitability of its electronic monitoring contract to the MoJ.
Deloittes was fined £6.5m and the individuals also fined. Deloittes was also severely reprimanded and required to put in place extra training.
It perhaps may be a good idea for Deloittes to look for a new trainer, as previous fines and severe reprimands against Deloittes for professional failings in the Aero Inventory and MG Rover cases (2016 and 2015) have clearly not had the desired effect. They were also damned by the House of Commons Select Committees' inquiry into the Carilion collapse. Either Deloittes is out of proper control or it cynically shrugs off such reprimands, severe or not, as the price of doing business. With a turnover of over $40bn, the fines are loose change; as for reputational damage – well, it's not entirely clear that how easy it would be possible to damage Deloittes reputation.
Corruption is contagious. I hasten to add, I am not suggesting used dollar bills were handed over to Deloittes in brown envelopes: it’s clear from the FRC report that is not what happened. But in a way, frank corruption like that is easier to guard again, investigate and deal with. No, what I mean here is a sort of moral contagion: when one person, or company, decided to cut corners and bend the rules, then other bodies, other companies and individuals adjacent to the wrong doer, or doing business with it, may well come under pressure to turn a blind eye, not raise awkward questions, in short, not to exercise ‘professional scepticism’.
No such action has occurred in relation to G4S, further evidence that in accounting terms, the two companies dealt with the issue in different ways, as I noted in my last piece.
The Serious Fraud Office’s six (!) year investigation of the electronic monitoring scandal that broke in 2013 took a smallish step forward this month, as regards SERCO – albeit a rather damp squib, the SFO having concluded that, while they were satisfied that alleged fraud was organised by, and for the benefit of, the main company, there was no evidence of ‘a controlling mind’ (just sorta happened, I guess!). So only a couple of smallish fry were offered up.
That leaves G4S. From the start, G4S were uncooperative with the inquiry, and were not offered the deal (Deferred Prosecution Agreement) such as the SFO and SERCO agreed, that allowed SERCO to, in effect, buy off a corporate prosecution (not that they needed to worry - the SFO told the judge that SERCO were too important a supplier of public services to be prosecuted – too big to prosecute, one might say.)
There may be differences, of course. G4S’s equivalent of SERCO’s Geographix reported losses in 2010 and 2011 and only a 11% profit in 2012 – such rotten luck, at a time when SERCO’s Geographix, in the same business, with the same UK customer, was reporting a profit of 80%! However, the position is obscured by the fact that G4S was doing similar business outside the UK.
Any outcome with G4S will rather point up the contrast with SERCO – if G4S are charged corporately, why not SERCO? If G4S aren’t charged at all, why were the SERCO officers charged, and for that matter, how did the SFO manage to take 6 years working out that G4S should not be charged?
If an outsourcing company is charged corporately with fraud, that would be devastating. Except that G4S isn’t beholden to the UK Government to the extent that SERCO is. The UK still accounts for 40% of SERCO’s revenue, and its main customer is Government (central and local Government, including justice, defence and transport, healthcare and immigration). Hence the new Chairman’s preoccupation with its penitence, reform and helpful suggestions for a new start on outsourcing.
G4S, by contrast, is a truly global company, taking less than a sixth of its profits from the UK and Ireland, moreover its exposure within the UK to Government is far less – and rapidly reducing. It has been taking steps to rid itself of the UK Government as customer (1) – G4S already announced that it is exiting Secure Training Centres and Immigration Removal Centres, and while it has bid into the Prison Operators Services framework competition, I suspect that in the aftermath of the Birmingham prison fiasco, there will be no more appetite in G4S for these tight margined, operational difficult and reputationally hazardous contracts. G4S’s exposure to the UK Government is now minimal. That in itself is a headache for the MoJ, since 2 suppliers is not a competitive market. They must be relying on MITIE and others to take up the role, perhaps buying out the long term G4S PFI contracts. That would be a brave decision, in Sir Humphrey’s words, given the state of the prison system, and the serial incompetence of the customer.
Thus, G4S could be far better positioned than SERCO to fight any charges. I hope they do. Because that is the only way, we, the public, will ever learn what actually happened, including, crucially, the multiple failures by the MoJ itself, that helped facilitate the loss of hundreds of millions of pounds of taxpayers' money.
(1) The UK Government. But curiously, the Scottish Government has only last month let the contract for EM in Scotland to G4S. Perhaps they know something we don't, or perhaps they just don't care what the English do!
lick here to edit.
Postcript added 18 December
Readers of my book, and of this blog, will be aware of my keen interest in the saga of the scandal which broke as long ago as 2013, involving SERCO and G4S wrongly billing the Ministry of Justice for huge amounts of public money on their contracts for tagging of offenders. The companies were forced to repay nearly £200m – many times the take of the Great Train Robbery or Brink’s Mat heist.
The matter was referred to the Serious Fraud Office whose investigations – incredibly – are still not concluded, 6 years later. In my 2016 book, ‘Competition for prisons’, I devoted a chapter to this story, and noted then that it was unlikely the real story would ever be told, as it suited all parties that it should not be, and that the interminable SFO investigation has conveniently kept the facts under wraps (1). Trying to get at the facts, I have also pursued FoI applications, in one case as far as a FoI Tribunal (I won).
Why raise this now?
Because on 18 December we should be allowed to know at least some of the facts. In July, Mr Justice Davis approved what is known as a ‘Deferred Prosecution Agreement’ between the SFO and SERCO. This device, introduced by the Crime and Courts Act 2013, allows the SFO and the company it is investigating to reach an agreement by which the company avoids prosecution. In return, the company pays compensation, undertakes to fully cooperate with the SFO’s ongoing investigation against individuals and to agree to comply with independent review of its accounting procedures.
Mr Justice Davis also stated that the Statement of Facts drawn up by the SFO, and agreed with SERCO, would remain confidential until 18 December, when a decision is due on whether any individuals should be charged. We may, then, be within days of knowing a good deal more about this case.
It is already clear that we are dealing with not one scandal but a whole series of scandals – one nesting within another, as it were. They comprise:
[EXPLAINER:] If the case is no longer about wrongful charging for work never done, what is it about? It is about manipulation of accounts so as to give misleading information to the customer Government, about profit margins. This is important because the contracts, which appear to have been poorly drafted, did not reduce the unit cost per tagging operation with increasing volumes. One would expect that to be so, because some of the development, infrastructure, etc costs are fixed, and do not increase proportionately as volumes increase. And they did increase very substantially. Thus, if a fixed unit price prevails, profit margins will rise. To guard against this, SERCO was contractually required to report actual costs and revenues as they occurred, as the basis for negotiation of any abatement should the profit margin exceed that assumed at contract signature. The case now is about whether the wholly owned subsidiary of SERCO that made and supplied the tags, SERCO Geographix, manipulated its accounts so as to falsely reduce the apparent profit margin as made visible to the customer. (2)]
6. Lastly there must be some concern whether the outcome will ascribe culpability where it should properly lie. Mr Justice Davis noted: “As it was described in vernacular terms during the private hearing, SGL cooked their books to allow SL to retain the profit, 50% of which was believed otherwise would have been clawed back by the Ministry of Justice…” and “SL [SERCO, the main company, and owner of SERCO Geographix] was the beneficiary of the fraud. Thus, the scheme was devised by management within SL. “ But then added: “However, no “directing mind” of SL currently can be shown to have been involved in the devising and the putting into effect of the fraud. So it is that SL is not a party to the DPA.”
It would appear therefore that the entire hierarchy of SERCO itself is out of the picture, leaving the focus only on officers of its subsidiary, SERCO Geographix. But given that the latter was wholly owned by the former and under its control and direction, how can it be that only SERCO Geographix is now in the frame? Indeed, what possible point or benefit could be achieved by those in SERCO Geographix, if the benefit of the fraud was reaped exclusively by the main company? Is there not evidence of a history of manipulating the margin that historically, clearly involved the main company? (2) And, one might ask, does that not give SERCO somewhat conflicted interests in negotiating the DPA?
That must be a matter of keenest attention now, whether proceedings are launched or not.
POSTCRIPT 18 December
Announced this week that two SERCO employees were to be charged. But neither a Director of SERCO. Job done! Except for that awkward conclusion by Mr Justice Davis: "the scheme was devised by management within SL [ie the main company].....However, no “directing mind” of SL currently can be shown to have been involved in the devising and the putting into effect of the fraud. " That can only mean that the main actors are missing from the charge sheet.
I was formerly Finance Director of the Prison Service and then Director of the National Offender Management Service responsible for competition. I also worked in the NHS and an IT company. I later worked for two outsourcing companies.
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