Oh dear, Capita: MPs put future UK.gov outsourcing in the spotlight The UK government faced an urgent question in Parliament today over its reliance on troubled outsourcing firm Capita following a serious profit warning by the public sector provider – just weeks after Brit construction firm Carillion went bust. Labour MP Rachel Reeves asked about the serious financial concerns at Capita, after …
"Dowden said the government met with Capita yesterday to discuss contingency plans, but declined to discuss details, citing commercial confidentiality."
"Commercial?" This is a company taking massive wads of our money, in a democracy they should not be able to hide behind "commercial" reasons without an extremely good reason. If they can't be open and transparent in their dealings with local and national government then they should not be dealing with them.
Absolutely.
It's a total disgrace.
There's a list of FoI requests that our little rail travellers' association have put to DafT to which their first response is "We think that's commercially confidential, so we'll have to check with Southeastern before we answer it"
Basic stuff like "did the operator meet this or that condition of their contract, and if not what sanctions were imposed ?"
It's OUR money, and the service is critical to millions of people getting to and from work. But, hey, can't have transparency in providing that service, can we ?
minister for implementation at the Cabinet Office
Now there's a Peter Principle title if there ever was one, where managers rise to the level of their incompetence. Never mind about Capita though, they have not really started to do the usual - i.e syphon off the pension fund and trust the auditors to look the other way.
Never mind about Capita though, they have not really started to do the usual - i.e syphon off the pension fund and trust the auditors to look the other way.
I take it that was sarcasm. Between 2011 and 2016, Capita almost doubled their dividend payments, whilst keeping their contributions to the pension scheme static or lower; The pension fund deficit in the same period almost quadrupled. Now, paying the board fat bonuses, paying investors fat dividends, and running up a deficit on the pension fund - isn't that in practical terms syphoning off the pension fund?
Scroll down the link below to see this in graph format.
https://www.professionalpensions.com/professional-pensions/news/3025735/-capita-shares-plunge-by-over-40-frank-field-intervenes-over-pension-deficit
Outsource the work with the pension deficit (Staff), get shares in company and pay over the odds for the work, reap the rewards for a few years, sell the shares when it goes to sh*t, company goes bump, shareholders are happy and staff have been fiddled out of their pension. Pass the work to another company, get shares and so on and so on.
Is this how outsourcing works?
The problem is now, anyone who was going to tender to Capita is having to quickly reverse ferret, as the "we had no idea" defence so beloved of fuck-up-meisters everywhere is shot.
So Capitas order book is going to start to thin out. Guess what's been propping up the back end ?
He noted that Labour had been responsible for handing Carillion one-third of its contracts, with one-third being awarded by the coalition government, and another third by the current government.
This is a politician seeking to share the blame with other parties, but what this suggests is that the number of contracts issued to Carillion per year is increasing. Sorry, I mean was increasing. Yes, Minister?
" He noted that Labour had been responsible for handing Carillion one-third of its contracts, with one-third being awarded by the coalition government, and another third by the current government."
This is a politician seeking to share the blame with other parties, but what this suggests is that the number of contracts issued to Carillion per year is increasing.
Errr, no. Assuming that he is talking about contracts currently in place, what it suggests is that some of the older contracts have finished. That is all.
@AC - About the same number of years that I've spent ranting in opposition regarding such a quick-fix, sticking-plaster measure, that, far from delivering improved services / cost-benefit outcomes, won't work unless full and complete business oversight is in place doing a full-time audit. That measure would itself require more skilled civil servants to do the invasive monitoring, which would render the economic value nul, if not actually cost more than doing the majority of such tasks in-house! Feckin' short-sighted governments! Grrrrrr, just grrrr.
A properly-resourced client ?? Can't have that else we couldn't keep billing for non-existent tagged offenders or wait until the last minute for it to be found out that we can't actually deliver security for the Olympics (OK, they were G4S, not Crapita or Carillion, but the principle's the same)
Paying dividends when the pension fund is in deficit.
How can this still be allowed?
Tata Steel, BHS, Carrillion, Crapita. Always the same stories: paying out to shareholders is made a far higher priority than meeting its obligations.
Should be a law (etc).
"Should be a law"
For those feeding at the govt trough a better measure would be to make maintaining the pension fund fully funded a term of the contract. It wouldn't need any Parliamentary time. The problem is that HMRC has been known to enforce contribution holidays and then financial policy hits the valuation of the fund with low interest rates and a hole appears faster than it can be patched.
Should be a law (etc)
One of the main reasons there isn't a law in that regard is because it'd snag public sector pensions in with it. The actual cost of provision of those schemes is just over 50% of the emloyees salary, if you price up comparable defined contribution schemes, and in almost all cases, there is no money pot backing it.
If the government suddenly had to find the sort of money it would have to have to fund public sector pensions, they'd have to cut spending by a truly colossal amount that really would knacker most if not all public services.
There's a generational fairness issue in play too - almost everyone under 45, if they have a pension, has a defined contribution pension. These are invested in the shares - those greedy shareholders most people like to pillory are simply their younger colleagues. Stopping dividends would crater share prices, thus knackering everyones pension in short order, including the schemes you were trying to fund which will also be invested in the stock market.
I agree that it is immoral that billionaires run up these scheme deficits and bugger off on thier 3rd yacht leaving people close to retirement right in the shite. But our legislators have never covered themselves in glory, and the risks of legislating against dividends where schemes have a deficit has more potential to scupper the economy than almost anything else. Were such a law to be targetted at boards and owners personal assets however, it might bring their focus to mind on how stable their comapnies are in the longer term.
that needs to be looked at.
ALL Outsourcing is questionable.
All of us here know that it is done to get costs of the books but ALWAYS results in decreased service levels. You can't get owt for nowt!
All these companies sending their crown jewels (customer data) offshore need to be [redacted] and [redacted] and finally [redacted]
That goes for HMG as well.
Yes, my job has been outsourced to India (twice).
As for Crapita, I worked for a company that did some work for them on an infamous project. When we visited their Coventry offices we were not allowed anywhere to squat even if we going to be there for several days. We had to find space on the end of someone else's desk. Took forever for them to pay us.
By contrast Steria were far better payers.
Really?
"...Dowden was asked whether it was time companies contracting to the pubic sector should be subject to same transparency rules governing the public sector, rather than hiding behind the cloak of commercial confidentiality..."
I was taught one should always cover that sector, as it's dirty and shameful.
Yes, private companies are largely unaccountable to the taxpayers who fund their obscenely expensive government contracts, and indeed whatever little accountability there is apparently must be kept secret, because ... "commercial confidentiality", whatever that means.
Which is exactly why such government contracts shouldn't exist in the first place.
The alternative being that Cadrillion ( or whatever they're called ) being a government owned company getting cash showered upon it to prop it up, rather than ( what happened ) the shareholders losing their shirts and the government being mildly inconvenienced by having to re-tender contracts.
a distinction between private companies and public bodies
Ok, but you have to keep in mind that public bodies are by and large monopolies, which by definition MUST function better and be held to a higher standard than a private company. Private companies are by definition rarely monopolies and as such I have a choice of provision, thus guaranteeing a minimum standard of service.
I'm well aware that neither proposition is universally true - libraries exist privately (the London Library for example) as well as publicly, while where the passport office has outsourced something, I have no choice of provision - the same as if it were public.
"Immediately after the announcement, Barnet Council ... (it has more than half a billion pounds worth of contracts with Capita) – put contingency plans in place to examine how it would handle the fallout should Capita fail."
If they're that committed I'd have thought contingency plans should have been in place anyway.
Perhaps that would be a good discipline for anyone outsourcing part of their operation: think about contingency plans. It might lead to second thoughts on the whole idea of outsourcing.
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