Managing chaos

<strong>Plundering the Public Sector: how new Labour are letting consultants run off with £70bn of o

It is easy to laugh at management consultants. They are grey men and women who like to think they are cowboys and cowgirls, who boast about "thinking outside the box", and who have invented their own dead language. Here, for example, is the consultancy firm Capital writing to Railtrack about the latter's Sentinel safety system: "In a facilitated workshop with senior management Capital first identified communications objectives to underpin Sentinel's newly defined vision and values, identified and analysed key stakeholder audiences, and outlined and secured agreement for desired messages."

New Labour is now so well trained in the language of the consultancies, which have been the main beneficiaries of the party's 1997 election victory, that it can speak it just as well as the consultants themselves. Private-sector sponsors for city academies, we have been told, will "animate the academy's vision, ethos and management structures". The academies are clearly in even worse trouble than I thought.

I do not mind people writing meaningless rubbish, so long as it is not my money they are spending, nor my safety they are playing with, nor my hospitals and my children's schools they are ruining. I was fine with it while the people paying were big companies and the money they were spending was that of their shareholders. Or rather, I minded less, and I probably thought that it was up to the shareholders, whose money it was, to protect it.

But as David Craig explains in this racy yet well-researched book, PricewaterhouseCoopers can now earn tens of thousands from the London Olympics for "cost-benefit analysis" and KPMG can earn similar amounts for "Olympic Games Validation". Capita made such a dreadful mess of the Criminal Records Bureau that in September 2002 thousands of teachers were not cleared in time for the start of term, and the cost went up from £250m to £395m.

The private finance initiative and public- private partnerships have been a goldmine for such companies. Just to draw up the PPP agreement for the London Underground, taxpayers paid out £455m to bankers, lawyers and consultants. In return they drew up a deal that allows consultants to fleece us more or less indefinitely and forces us to borrow money at much higher rates of interest than we would otherwise have done, but leaves us carrying almost all the risk.

This bonanza is not something the Tories set up. New Labour created it. In 1995, Craig tells us, the Management Consultancies Association reported that its members, who account for only about half the industry, earned £196m from the public sector. By 2004, that had increased 850 per cent to £1.87bn, excluding the costs of developing information technology systems. For our money, we get administrative chaos and spiralling management costs.

Craig is not a politician, nor is he a journalist. He is a consultant. He knows all the tricks consultants use to maximise their fees. He knows how to hire them and avoid getting fleeced, and he knows that civil servants are not trained in these dark arts. So when politicians send them out to hire consultants, they behave like every inexperienced client Craig has ever seen, and end up getting the taxpayer a very poor deal.

I glimpsed this recently, when hired by a contract publishing company to edit a magazine for the Teacher Training Agency (now rebranded, on consultants' advice, as the Training and Development Agency for Schools). I watched, amazed, as the company ran rings around the civil servants, flattering them extravagantly, telling them they were right about everything (though any fool could see they knew nothing about magazines) and laughing at them as soon as we were out of the door.

Because Craig is neither a politician nor a journalist, there are some things he misses. He says that prisons have been completely outsourced, whereas schools and hospitals have nurses and teachers who cannot be outsourced in quite the same way. In fact, new Labour has found a way to outsource teachers, too - that's the subtext of city academies.

But this is a gripping and important book, one that it is impossible to read without becoming angry. The Labour Party, created a hundred years ago to serve the poorest in our society, has ended up mainly enriching a few, already very rich, companies.

Francis Beckett's "The Great City Academy Fraud" will be published by Continuum in the new year

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