New Times,
New Thinking.

The rotten state

How corruption and chumocracy are pulling Britain apart.

By Will Dunn

Behind the football club on the outskirts of Calmore, Hampshire, on the eastern edge of the New Forest, there is a patch of waste ground – one day, it will be an Aldi supermarket – and beyond that, there is a small caravan site and a scrapyard. At the back of the yard more than 1,000 pallets had been piled up, two or three deep, in the open air. In places their wrapping bulged and split, and their contents – thousands upon thousands of bales of plastic medical aprons – had begun to spill out, blowing away into the neighbouring nature reserve.

When the BBC and national press caught up with the story last summer, the “PPE mountain” was said to have been dumped or fly-tipped, but that wasn’t true. As I discovered from a yard worker and a series of government contracts, it was being stored by a local plastics company commissioned to produce aprons for the NHS in 2020 in a deal worth more than £26m. Pictures of the site were enough to rouse an angry public, however, for whom it embodied the profligacy and opportunism exposed by the Covid pandemic.

The aprons are gone now, turned into plastic bags. PPE Mountain should perhaps have been preserved, as a national monument to fiscal carelessness. Ministers and private secretaries could have been made to climb its disintegrating flanks as a training exercise. No matter: we have plenty of reminders of how far the integrity of the state has fallen.

We have the Future Fund, established in 2020 by the then chancellor, Rishi Sunak, at a cost of £1.1bn to support British start-ups. The taxpayer has lost more than £300m on the Future Fund, which has given money to the businesses of Sunak’s centimillionaire wife, Akshata Murty, the Cabinet Office minister John Glen, and one company now being investigated by the Insolvency Service. We have a Foreign Secretary, David Cameron, who appointed Michelle Mone to the House of Lords in 2015 and, when out of office, lobbied the government on behalf of Lex Greensill, whose company is now being investigated by the Serious Fraud Office. In Grant Shapps we have a Defence Secretary who promoted a get-rich-quick scheme under the name of Michael Green and today spends a lot of time promoting his personal brand (as Shapps) on the Chinese social media platform TikTok.

Sunak entered Downing Street promising “integrity, professionalism and accountability”, in contrast to the cranks and crooks that had captured his party: the partying prime minister, the chancellor who avoided paying millions in tax, the health secretary whose neighbour, a pub landlord, received a contract to produce medical equipment for the NHS. But there is little evidence of change.

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how Progressive Media Investments may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU

On 30 January the UK sank to its lowest ever level on Transparency International’s index of corruption perceptions, sharing 20th place with the Seychelles, a tax haven. The head of the National Audit Office (NAO), Gareth Davies, told MPs on 16 January that our government wastes tens of billions of pounds a year on shoddy contracts and poor management, and the British public increasingly suspects this is more than just incompetence. In a recent poll released by the Anti-Corruption Coalition, politicians were the group that the public thought most likely to be associated with economic crime. Kleptocrats – thieves by definition – came second.

A major new report from the UK Governance Project’s Governance Commission recommends improved scrutiny of politicians’ financial affairs, stronger regulation of the “revolving door” between politics and business, and an end to the prime minister’s control of the honours system. The commission’s chair, Dominic Grieve, a former Conservative minister, told me: “We are in a period of crisis, in terms of standards in government.”

There are strong echoes of the sleaze years of the 1990s, when Conservative politicians were exposed as having procured prostitutes for arms dealers and taken envelopes full of cash as bribes, among other corrupt actions. The difference is that the risks and rewards are now so much higher: since 2010 the volume of government outsourcing has almost quadrupled, from £64bn a year to more than £220bn.  Britain’s chumocracy has never been so lucrative, but with government borrowing at a 60-year high, the cost of allowing it to continue has never been so great.

How did we get here? Margaret Hodge, whose career of more than 50 years in politics included five years as Public Accounts Committee chair, told me that in the course of a generation Britain has lost its status as one of the most trusted jurisdictions in the world.  

For Hodge, the change began with Margaret Thatcher’s programme of privatisation and deregulation in the 1980s, and its continuation by both Conservative and Labour governments. The “massive deregulation” of private enterprise, especially financial services, was the engine for economic growth but required in return an ever more permissive environment in which to operate.

At the same time, Britain was becoming a knowledge economy, based not on the manufacture of goods but the provision of services. The process accelerated after the 2008 crash, when services recovered more quickly than the rest of the economy, and the UK became a consultocracy, in which the top exports are banking, accountancy, law, and consulting. We sell nearly as much advertising to the world (£15bn-£16bn) as we sell food. When Tony Blair came to power in 1997 we exported £5.3bn in professional and management consulting services; by 2022 this had grown to more than £69bn.

The growth in professional services was hugely beneficial for millions of people, but it has created new problems for government, which could only modernise itself by buying those same services – such as IT programmes – at a ballooning cost. New technologies and bigger projects made it harder than ever to assess value for money. Dominic Grieve, also a former attorney general, agreed that there has been “a major change“ in the way government operates. “Government is in a sense running a huge business,” he told me, “with business relationships, which was not the case 40 or 50 years ago.”

By 2010, it was obvious that this business was in trouble. Simon French was an economic adviser at the Cabinet Office when Francis Maude, as the coalition government’s paymaster general, began attempting to rein in waste and misspending – a project French says was “long overdue” even then. The Efficiency and Reform Group that Maude set up in 2010 was very successful; in 2012-13 it saved £10bn and in 2013-14 a further £14.3bn, according to the NAO. In a single year, 2013-14, the government cut its spending on consultants by £1.1bn (against 2009-10 levels).

French recalled the Cabinet Office discovering that one of the big management consultancies was charging public bodies 140 different rates for the same work, and the meeting when the company was informed it would now be paid the lowest of these rates across the board. “They looked across the table and agreed, because they realised that if they didn’t agree, they’d be locked out of forward contracting. That shows the commercial negotiating power of government if it actually collates its data, and drives a hard bargain.”

But the Efficiency and Reform Group’s improvements were soon to be “unpicked”. After the 2015 election the new Conservative majority meant the careful business of efficiency was set aside in favour of ideology. Maude left the Cabinet Office, and a new and very different ERG – the European Research Group, which brought together Brexiteer MPs – came to prominence. “Brexit just ate up so much bandwidth of the government,” French recalled, “that the ability of the Cabinet Office to lead [on efficiency] just evaporated.”

Brexit also ultimately handed power to Boris Johnson, and a new era of questionable contracting began. Shortly after the 2019 election Johnson’s housing minister, Robert Jenrick, approved the billionaire Conservative donor Richard Desmond’s application to build luxury flats in east London. Desmond, whom Jenrick had previously met at a fundraising dinner, wanted approval quickly to avoid a new tax introduced by Tower Hamlets Council. Jenrick issued it the day before the new tax could be applied, which would have saved Desmond more than £40m.

By the time this episode was revealed, however, a new and much more aggressive strain of chumocracy had become apparent. A pandemic had arrived, and with it a global outbreak of fraud, corruption and waste.

Three days before Boris Johnson told the nation on 16 March 2020 to stay at home, representatives of major banks went to the Treasury to meet officials and the then City minister, John Glen, to discuss how they would lend money to businesses as the country came to a halt. This meeting was the key opportunity to discuss the risks of removing the usual fraud protections to deliver tens of billions in state aid at speed. It would be helpful, then, to know what was said, but when I submitted Freedom of Information requests to the Treasury to provide details, the Treasury first refused and then told me that “we do not hold minutes for the meeting”, for which there was “no formal agenda”.

Why did the people who arranged these schemes not pause to take notes? Perhaps they were too busy, or perhaps they had some idea of what was about to happen. By 2022 it was estimated by the Commons Public Accounts Committee that the taxpayer would lose £17bn on the £71bn in loans issued to businesses. This money was handed out with such abandon that border agents would find people trying to leave the country with suitcases full of bank notes. Tens of millions were claimed by gangs of organised criminals from other countries, who swapped tips on the dark web; one claimant was found to be using his fraudulent loans to fund Islamic State (or Isis).

The Treasury meeting was not the only one at which government officials forgot to take records. In 2020 and 2021 ministers and officials held four meetings with suppliers, including the testing company Randox, which officials failed to record. Two further meetings, in which the management of contracts already awarded to Randox were discussed, also went unrecorded. During those two years Randox and its strategic partner were awarded contracts worth up to £776.9m. At the same time Owen Paterson, the Conservative MP for North Shropshire, was being paid £100,000 a year by Randox as a consultant. Paterson emailed the then health secretary on 26 January 2020 regarding Randox’s proposal to develop a test for Covid-19, followed up with WhatsApp messages on the 18, 25 and 27 February, and attended a meeting (which was recorded) between officials and the company on 9 April 2020.

There is no suggestion of any wrongdoing in the awarding of these contracts, and in March 2022 an NAO investigation reported that it had “not seen any evidence that the government’s contracts with Randox were awarded improperly”. Randox has also told the New Statesman that contracts were not negotiated in the unrecorded meetings (please see below for further details). However, the NAO also reported that “the Department [of Health and Social Care, DHSC] did not document key decisions adequately, disclose ministerial meetings with Randox fully or keep full records of ministerial discussions” involving the company. A few months later, the Public Accounts Committee also concluded that DHSC’s record-keeping at the time was “woefully inadequate”. In short, the government should have been much more careful in ensuring the transparency of the process.  

When the Parliamentary Standards Committee recommended Paterson be suspended the following year, however, the Johnson government attempted to change the rules, to make Paterson’s activity permissible. One of the MPs who voted in favour of this unprecedented swerve was John Penrose, husband of Dido Harding, who ran the Test and Trace programme at a cost of £29bn, including £10.4bn on testing. Penrose was at the time the UK’s anti-corruption champion, a position he resigned in June 2022; it has remained unfilled ever since. 

In Britain, we don’t call it corruption. Susan Hawley has been researching economic crime for more than 20 years and is now executive director of the organisation Spotlight on Corruption; she told me there is “an arrogance” that allows chumocracy to persist. The attitude, she said, is that “we’re British, we don’t do that. We’re not Italy, we’re not Nigeria, we’re not getting stopped by the policeman at the end of the road to pay a bribe.”  

It’s true that Britain does not have the kind of abject corruption experienced in other countries such as China and India. However, the French government prosecutes several hundred corruption cases per year, and this is not because the French are more corrupt, said Hawley, but because they have a well-funded agency dedicated to seeking it. 

In Britain, she said, we have a “don’t look, don’t see approach”. The subject may be taboo, but “there are some really serious issues about how conflicts of interest are managed. There’s just too much cosy networking, and that does mean that procurement processes get captured by those with access… Giving contracts to your mates is absolutely emblematic of a regime turning rotten.”

Illustration by André Carrilho

From a business point of view, however, the contract is just the beginning of the squeeze. One person with extensive experience of putting together bids for large government contracts told me that these deals are often built to fail.

Senior civil servants  are “who you dream of, if you’re a vendor”; they may be exceptionally bright people with Oxbridge firsts who have completed their training at the Major Projects Leadership Academy, but in practice they have never worked in the industry with which they are negotiating. More fundamentally, civil servants do not understand that the other side is designing its bid to arrive at what project managers call the OFM (Oh, F**k Moment), when a new set of costs suddenly appears. The engineers have found that they’ll have to drill through granite to build the tunnel, or the data scientists have found errors in the old system. “As long as you can find things which weren’t covered in the original contract,” they told me, “you’ve opened the door to expanding the scope and demanding more money.”

“It can go on for year after year after year like that,” they noted. “Unless there is a credible belief in the vendor’s mind that [the government] will walk away from it, you’ve got no reason not to just keep asking for more.” They added that “everyone” in their sector “makes more money when projects fail. A lot more money.”

This is backed up by empirical study. Bent Flyvbjerg, a professor of programme management at the universities of Oxford and Copenhagen and author of How Big Things Get Done, says projects are ruled by two principles: our fundamental cognitive bias towards optimism, which causes us to imagine that our experience will be different from that of others, and ambition, which causes us to push our own projects over those of others. These create an “iron law”: in almost every project, we underestimate the costs (optimism) and overstate the benefits (ambition). 

These cognitive missteps create opportunities for others. A consultant is not hired to tell a client their idea is less effective and more costly than someone else’s, but to help win the bid. Flyvbjerg’s research has shown that the norm in any competitive tender is for vendors to “lowball” their bids, offering results that they know they won’t be able to achieve. The companies he works with tell him this is standard practice: one vice-president of a well-known IT firm told Flyvbjerg their “business model is to underestimate cost and underestimate schedules in order to win contracts, and then deal with the problems later”. 

What does all this cost the taxpayer? It is surprisingly hard to say. Britain’s government lost somewhere between £33bn and £58bn to fraud, corruption and “error” (a very British way of saying that we’ve lost the money, but we’re not sure a crime took place) in the 2020-21 financial year, compared to GDP of £2.3trn. You could fit what we spend on policing, prisons and courts in the tens of billions between the upper and lower estimates – because the government doesn’t actually measure how much is lost or stolen on most of its expenditure.

This is not a sustainable way to run a country already spending almost twice as much on debt interest as it does on schools. Chumocracy is less affordable than it has ever been; the next government will face the tightest fiscal conditions since the 1950s, according to the Institute for Fiscal Studies.

“In the last decade, but particularly the last four or five years, the UK’s reputation for good governance has been really badly affected,” Dominic Grieve said. “That has an impact on whether people see the country as a credible place to do inward investment. In the past we derived a considerable level of advantage from a very strong sense that the UK’s institutions were very securely anchored.” Now, he added, “the sense of the cronyism, and the fact that codes appear to be capable of being flouted, without consequences, is not a good look. It has the potential to affect the UK’s economic well-being.”

Since leaving parliament Grieve has been working with others including Lord Neuberger, former president of the Supreme Court, and Helen MacNamara, the former deputy cabinet secretary, on the cross-party Governance Commission, which has taken evidence from more than 60 current and former politicians, civil servants and experts. In its report, published on 1 February, it recommends stronger and more independent regulators of appointments, honours and codes. This is, as Margaret Hodge (who is also a member of the commission) put it, not only an economic problem: “dirty money”, she told me, has “become dirty politics”. 

Dominic Grieve agreed that, regardless of whether we call this era of low standards cronyism, chumocracy or incompetence, “it has a damaging effect on people’s confidence in modern, pluralist parliamentary democracy”. This is the greatest danger – not the loss of money today, but the risk of a future in which people accept, as they do in many other countries, that there is no other way.

Correction

This article was updated on 20 March 2024. It originally stated that Owen Paterson “introduced” Randox to the government in March 2020 and “represented” Randox in meetings. The government was already aware of Randox as a provider of diagnostic tests and while the National Audit Office identified Paterson as a “participant” in meetings, it did not comment on his role. Randox has subsequently confirmed to the New Statesman that Paterson attended the meeting as an observer.

The previous version also incorrectly stated “Six of the eight meetings officials had with the testing company Randox, before the company and its strategic partner were awarded contracts worth up to £776.9m, went unrecorded, according to the NAO. Only two such meetings occurred before the first contract on Covid testing was awarded to Randox – and these meetings involved multiple suppliers and organisations, not only Randox. In total, other suppliers and organisations were present at four of the six unrecorded meetings that occurred between government officials and Randox in 2020 and 2021.

We apologise for this inaccuracy.

Content from our partners
<strong>The future of private credit</strong>
Peatlands are nature's unsung climate warriors
How the apprenticeship levy helps small businesses to transform their workforce

Topics in this article : , , ,

This article appears in the 31 Jan 2024 issue of the New Statesman, The Rotten State