Nine spectacular council outsourcing failures

Alan White and Kate Belgrave give us more reasons why you don’t want the private sector in the NHS.

One of the many concepts that free marketeers refuse to abandon in the face of all evidence is the idea that the private sector is better at providing public services than the public sector. Private companies have been cashing in on this fable for years at council and government level. As we file this report, another glorious outsourcing triumph is breaking: the Ministry of Justice has asked police to investigate alleged fraudulent behaviour by Serco staff in its Prisoner Escort and Custodial Services contract.

The national news stories are coming at such a rate we can barely keep up with them. But what happens at a local level often slips under the radar. That’s why we’re crossposting and adding to this False Economy blog by Kate, which features a list of some of the many spectacular council privatisation failures of the past few years (hat-tip to Barnet Unison for the idea - they published a Top Ten Commissioning Failures list last month).

The list below shows how much councils have spent to get out of private sector contracts and/or to deal with contract disputes and cost overruns. A lot of the companies featured on this and Barnet Unison’s list are sniffing excitedly around the NHS - to which they’ll doubtless bring this long-honed craft of getting heaps of public money, ditching service the second the contract is framed and delivering huge returns to their shareholders.

Feel free to add your own, or send them through to us at thesecretcuts@gmail.com

1) The Somerset county council and Southwest One dispute (via the eminently reasonable Barnet blogger Mr Reasonable)

This row was over savings not made by the joint venture partnership that the council had formed with IBM company Southwest One. The contract was to provide back office functions and services for Somerset, Taunton Deane borough council and Avon and Somerset Police.

As this Somerset County Gazette story observed: “Almost £5.5m of taxpayers’ money has been spent settling a dispute between Somerset County Council and an organisation it hired to cut costs.”

Mr Reasonable reported: “The dispute has now been settled, but the process has racked up a huge legal bill. As revealed in a Freedom of Information request, the total legal bill came to more than £2.6m. The lion's share of fees went to Pincent Masons, but it was interesting to see that Barnet's lawyers Trowers & Hamlin were also in receipt of fees in 2011/12.” (Barnet’s lawyers are worth a mention, as they’ve been much to the fore as Barnet residents, bloggers and campaigners have fought Barnet Council’s own mass privatisation plans.)

Somerset council cabinet member for resources, David Huxtable, told the BBC: "In this kind of dispute with a major international blue-chip company you wouldn't want to go forward with inexpensive lawyers."

The BBC reported overall costs to the council of the debacle of more than £5m. Tony Collins reports at Campaign4Change that some Southwest One services will be brought back into the council and run in-house.

2) Barnet Council vs Catalyst Housing

Shambles-prone Tory Barnet council is probably worthy of its own list and will doubtless continue to be as it pursues its ill-thought-out and unpopular mass-privatisation plan. But we start a few years back, nearer the dawn of Barnet’s disasters: In 2011, Barnet council was forced to pay out about £10m following a disagreement with private company Catalyst Housing over a contract dispute over care buildings.

This followed a very bitter two-year industrial dispute between careworkers and Catalyst Housing’s partner organisation the Fremantle Trust. The Trust cut careworkers' salaries by as much as £300 a month in a bid to “save” money and improve finances, but ultimately had to concede that the salary cuts and slashed leave allowances had not balanced the books.  

3) Bedfordshire County Council and the exit from the HBS contract

Still a loud warning to all in council circles. The outsourcing expert Dexter Whitfield investigated this in detail: In 2001, Bedfordshire County Council (BCC) and the HBS Business Services Group had a 12-year, £267m Strategic Service Delivery Partnership which covered financial, information technology, human resources, school support services and contracts/facilities management. There was also a loose notion of creating a regional business centre which would provide similar services to a range of public sector organisations. Unfortunately, a few years in, there was no sign of it (“no evidence of centre” Whitfield noted in his report).

BCC was forced to pay HBS £7.7m to terminate the outsourcing contract prematurely. According to The Register, the local authority was "deeply dissatisfied" with HBS's performance and served a written termination notice on the company for alleged breach of contract. The Register also reported that Unison produced a dossier of evidence to back up its claims that the quality of the council's services had suffered, not improved.

4) Barnet Council, again

Once you start looking at Barnet council, it’s hard to look away. This one is about IT.

Earlier this year, Barnet Council had to pay thousands of pounds for “emergency” IT services after its regular provider went into administration.

The local press reported:

“The authority has been forced into a costly interim arrangement with business processes firm Capita after IT company 2E2 Ltd called in administrators. Finance officers are now looking at how the authority can reclaim £220,000 in advance payments to 2E2, which passed a council credit check days before it collapsed.” (You could say this actually represented a slight procedural improvement from the council given that during another scandal - the council’s failed contract with security firm Metpro - it didn’t check the company’s finances at all).

As the excellent Barnet blogger Mrs Angry reports, the council decided that the way out of the 2E2 problem was to give more than £72,000 a month to Capita to pick up the “service”:

To get themselves out of a hole quickly, Barnet Council have appointed Capita, without any form of tender, on the basis that it was an emergency and they had already had discussions with Capita to take over the running of this service. This new contract will cost £72,595 per month.

Mrs Angry also made this interesting observation:

The Council states that they did undertake a risk analysis of 2e2 in January “using Experian reports” and that “the report stated the company was satisfactory”. However a quick check on the internet would have shown that suppliers have not been able to get credit insurance on goods supplied to 2e2 for some time and that 2e2 were handed a number of County Court judgements in 2012.

5) Swansea city council and contractor Capgemini.

A salient lesson in the importance of listening to staff, or indeed to anyone with any sort of expertise. Staff took strike action from the moment that Swansea CC revealed that it would outsource IT. The Register reported: “they warned that the move would lead to a less effective service and lost jobs.” Sadly, none of that stopped the council from cantering towards the inevitable conclusion - a conclusion that was so inevitable that even PriceWaterhouseCoopers was compelled to take the long view of the Swansea foray during a later analysis:

Said Computer Weekly in 2007:

Swansea City Council failed to apply key principles of IT management properly when it agreed an £83m outsourcing deal that is struggling to deliver anticipated benefits, a report by auditor PricewaterhouseCoopers has concluded.

The council's original outsourcing contract with Capgemini, to replace back-office systems and create online public services, promised to deliver £70m savings over its 10-year life when it was signed in 2006.

But:

the council scaled back the contract to a £40m project a year later, predicting savings of £26m over 10 years. To date, it has achieved savings of £6m, PwC revealed.

The Register quoted a Councillor Mike Hedges who said that after outsourcing, “the email system was so unreliable he has switched to using his Yahoo! account for council business. He said email notifications of shut-downs of up to 24 hours are now a weekly occurrence.”.

6) Cornwall council’s mega-outsourcing deal

Cornwall hit all kinds of self-erected hurdles with its plans for a mega-outsourcing deal with BT or CSC – and council leader Alec Robertson was ousted - before a smaller deal was finalised this year.

Tony Collins wrote on Campaign4Change about the costs of the fiasco:

The council’s own budget for the outsourcing project so far has escalated. An independent panel set up as a “critical friend” to scrutinise the council’s plans for outsourcing has learned that the costs to Cornwall’s taxpayers of planning for the scheme were £375,000 in July 2011.

In March this year the “Single Issue Panel” members were told that the costs for the project would need to be increased from £650,000 to £800,000.

The current estimate of the cost of the procurement process at the time of writing this report is £1.8m,” says the panel in its July 2012 report.

7) Birmingham, “Service Birmingham” and Capita

As large as it is unreal. We’re adding this one, because we don’t really know what is going on with it. There is a lot of confusion about how much the Capita “Service Birmingham” venture is costing, although people seem to know it’s costing a lot.

The Birmingham Mail reported earlier this year:

The venture, run by the council and private sector contractor Capita, operates the authority’s call centre, IT infrastructure, Library of Birmingham IT and support and the collection of debts and council tax until 2020. The arrangement was formed in 2005 with £55 million-a-year running costs. But costs were thought to have spiralled to about £120 million-a-year following a renegotiation in 2011 and the addition of extra services, including council tax collection.

That story also said that “new checks will be carried out on Service Birmingham’s accounts amid complaints that councillors had 'little idea' of how much the arrangement was costing.”

In an extraordinary statement which we trust is genuine (it was made close to 1 April), Councillor John Clancy said Birmingham City Council members were being “deterred from getting a grip” on the nuts and bolts of the “complex” deal because the facts were unclear.

“Nowhere is there a clear, total figure for what we are paying and what we should be paying,” he told a scrutiny meeting.

“The biggest issue is transparency, we have little idea of what is going on.”

8) North Tyneside council and Capita

As recently reported in Tim Minogue’s excellent “Rotten Boroughs” page in Private Eye, Jim Allan, the Labour group leader at North Tyneside council has been found guilty of bringing the council into “disrepute” after a standards investigation by law firm Eversheds on behalf of the council and its consultant chief exec, Graham Haywood.

Allan expressed disappointment over social media last year that the council’s then-Conservative cabinet hadn’t investigated the risks linked to an outsourcing contract worth £260m with Balfour Beatty and Capita Symonds.

He claims he was merely stating facts. As Minogue reported: “Part-time chief exec Haywood had told him members needn’t worry about the risks in the contract because they were the ‘responsibility of officers’. Haywood was previously chief exec at Sefton council, where in 2008 he helped negotiate a £70m outsourcing contract with, er, Capita Symonds. This year Sefton brought services back in-house after cutting short Crapita’s contract years early.”

And as Minogue points out: “The report into [Allan’s] three tweets ran to 223 pages, took more than six months to prepare and cost an estimated £15,000. Terrific use of taxpayers’ money at a council seeking to make more than £21m savings this year.”

9) And a recent big one: Sandwell Council to part ways with BT and end £300m contract

Said the local Express and Star paper:

Sandwell Council has been in a 15-year partnership with BT called Transform Sandwell, in which the company manages services such as finance, customer contact and communication. The current deal, signed in 2007, sees the council paying BT around £15m a year.

In July, the authority told the telecommunications giant it wanted to bring its contract to an end, unless BT addressed issues raised by the council within 30 days.

And today it can be revealed that both parties have begun to thrash out how they will end their contract by March next year.

Those details will be interesting.

The council was apparently unhappy with BT’s service and began dispute proceedings last September.

Ones to watch (feel free to send others):

There’s a growing list here of local and council services that have been privatised this year. One potential wreck is Capita’s new contract with Lambeth council. Undeterred by the famous failure of the ALS-Capita court interpreting service, widespread loathing of the company at Barnet, or whatever is going on with Service Birmingham, Lambeth council and Capita signed a nine-year deal last week. The contract is for, among other things, ironically-named “customer service support.” Time will tell whether the customer is first served, or Capita. Lambeth has cut tens of millions from its budgets in the last three years, too. You can see why people mutter that there is always plenty of money around for companies like Capita, if not for children’s services, etc.

There’s also Cheshire council’s outsourcing of youth services. In July, Children and Young People Now reported:

Cheshire youth services will be delivered by independent organisations in the future, following a local authority decision to outsource its youth work provision.

We’ll be watching that - when you remove services from council, you remove a lot of the democratic accountability around them, as those of us who report on these things know too well. Earlier this year, we and families of service users were chucked out of a care cuts meeting when the board in charge of the service said it didn’t have to speak to people because it represented a private company.

And. . .

We might as well finish with Barnet council. Two major contracts worth (price tag varies) £500m with Capita. Service users hate it, residents hate it, staff hate it and local journalists hate it. This can’t end well. Or cheaply.

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A police spy’s ex-girlfriend on abuse and the state: “I didn’t have a chance”

“Lisa” had the ideal partner. Then it turned out he was an undercover cop. 

In the summer of 2010, Lisa and Mark were driving a van through the mountains of Italy. Brought together by their love of nature, cycling and climbing, it was an idyllic holiday for the British couple.

Then, one day, Mark went for a cycle ride. While he was gone, Lisa opened the glove box of the van and began searching for her sunglasses. Instead, her hand enclosed on Mark’s passport. It was the first tug of the thread that has, seven years on, still not led her to the full truth. And with every tug, she would be forced to accept that more of the happiness she had experienced over the past few years was based on a lie. 

“I have tortured myself with that for quite a few years,” Lisa (not her real name) tells me when I speak to her on the phone. “What did I miss? What should I have seen? Of course, I can see things now that are clear indicators, but it is so important for me to realise I didn’t have a chance.”

Mark was not the environmental campaigner he had pretended to be for the past seven years, but Mark Kennedy, a former undercover police officer with a wife and children in Ireland. Reporting by the Guardian journalists Rob Evans and Paul Lewis, and their follow up book, Undercover, documented how, from the late 1960s, police had been infiltrating protest groups. Their deceit extended not just to having relationships with women while undercover, but even having children with them. In Kennedy’s case, he grew his hair out, pierced his ears and moved to Nottingham, where he began hanging around cafes popular with activists and introducing himself as Mark Stone. As well as gaining a reputation as an effective organiser, Kennedy had at least two serious relationships – the second with Lisa lasted six years.

When the revelations emerged, there was widespread horror at the idea that women had been manipulated in such a way. But seven years on, the public inquiry is cloaked in secrecy (hearings are ongoing, and there was one on 5 February 2018). Since 2014, the police have fought attempts to release details, in particular the aliases the undercover police went by. These are crucial as far as the activists are concerned, because it is these names, not the officers’ real ones, that will identify police spies. Meanwhile, the women, and in some cases their children fathered by undercover officers, have had to live with the consequences.

Undercover describes the woman named as Lisa in this article as a well-connected and trusted activist. At the time of the book’s publication in 2013, she had not spoken about her experience. Five years on, she says she needed time to make sense of what had happened to her.

Kennedy pretended to his activist friends that he was a professional climber, while hinting at a shady but lucrative previous life smuggling drugs. He was a reliable driver, and a regular at protests, including one where he was beaten up by police. One of the challenges Lisa grappled with was accepting that she was not, as she initially felt, simply too stupid to notice. “He was a trained manipulator who had the whole weight of the state behind his lies,” she says. “He had fake passports. He wasn’t a normal liar who I should have spotted.”

Another reason Lisa had managed to overlook the little things was because the relationship was one of the happiest she’d ever experienced. “What I realise now is, because it was important for this cover, he was putting a lot of effort into being my ideal partner,” she says. “That is hard.” Another woman in a similar situation described it to her as having a partner without an ego. “It is hard to think what a normal relationship would be like that after that.”

Lisa with Mark Kennedy, whom she knew as the environmental activist Mark Stone

I speak to Lisa in late December, shortly after the #metoo movement sweeps the world, when the words abuse and power seem to go hand in hand. In 2011, Kennedy told the Guardian there were “no lies” about his love for Lisa and that their relationship was “the realest thing I ever did”. In 2009, shortly after a raucous 40th birthday party with his activist friends, Kennedy’s handlers reassigned him to a desk job. He subsequently quit the police and returned to the activist scene – but crucially without the fake passport the police had previously provided for him.

How does Lisa understand the relationship, all these years on?  “I think it is something I will always wrestle with,” she responds. “I do want to believe he did feel in love with me, he said that he did, and I would like to think I could recognise genuine feelings.” Initially, she attributed the abusive nature of the relationship to his employers, but over time, her view has changed.

“I still think a lot of people were responsible for what happened to me and not the one person who I was in a relationship with,” she says. “However the feelings have faded and it is very, very obvious to me that there was a huge power imbalance in that situation.

“To put someone in a position that they were consenting to a relationship [that] if they had known all the facts they wouldn’t be consenting to – that is abusive.”

It is this power imbalance that continues to haunt Lisa, even after the hurt has waned. She is haunted by the idea of backroom staff “observing my most private and intimate moments without my consent, reading my text messages”.

She also thinks about the wives of the police officers, inadvertently co-opted into the undercover world. According to Undercover, officers with wives or stable partners were preferred as undercover spies, because they were less likely to form emotional connections with the women they slept with (a whistleblower also described to The Guardian how potential spies were vetted by visits to the marital home). Their wives did not seem to merit similar consideration. “I think it is a total disregard for women’s lives,” Lisa says. She thinks about Kennedy’s children a lot, and what it was like to have “a dad part time”.

It was family that gave Kennedy away. Lisa had accepted Mark’s excuses for his absences (work), and explanations for why she had never been introduced to his family, although she once had an awkward conversation on the phone with a brother. “I realise now it was because his brother probably didn’t really want to speak to me. His brother wasn’t a police officer and was dragged into it.” When she opened his passport that day in July 2010, though, it was the discovery that he had a child listed that startled her. “People change their names for all kinds of reasons but people don’t have kids and don’t tell you about it.”

There were many more tugs of the thread to get to the truth. After discovering the passport, she confronted Mark; he claimed that in a past life he had been a drug runner, and cried for hours. They went on holiday again. It was only in the autumn that she asked a friend to help her investigate.

Lisa still hoped that her suspicions were wrong: even the revelation that he simply had another family “wouldn’t be quite so devastating”. When her friends had unearthed enough to convince her that she was right, she changed her mind and wanted to fly to Ireland to confront him. Her friends talked her down.

Instead, they persuaded her to ask him to come to them, and to her surprise, he agreed (she thinks he needed to know what information they had on him). Even then, she held out “a tiny, tiny shred of hope it wasn’t what I thought it was”.

Kennedy, who spoke to the press after he was exposed, told the Daily Mail in 2011 that the confrontation, which took place in the house of several activists, was “hugely menacing”. Lisa, though, says such fear was misplaced: “For all we knew he was still a serving police officer. We suspected he was wearing a recording device.”

Where Lisa and Kennedy’s accounts agree, it is on the emotional devastation of the moment. Kennedy said that the accusations brought him to tears, and he was “destroyed” by the look on Lisa’s face. “I think the person who turned up was a shell of a person,” says Lisa of the encounter. “He had kept this up for a long time and it was about to come crashing down. I imagine that was scary, even though we weren’t scary people. The thing we wanted was to get to the truth. We wanted him to tell us the truth.”

Since that time, Lisa has tried to move on with her life. However, her fear of encountering another undercover officer is so strong that she has had to give up many things she was passionate about, including political campaigning. She has also moved to a new town. Yet the scars take a long time to heal. “While I have got some amazing friends I would trust with my life, I haven’t found able to trust anyone in an intimate relationship since then,” Lisa says, her voice breaking up over the phone.

In late 2017, at the time the #metoo movement was sweeping Britain, Lisa joined other women formerly deceived by undercover policemen in lodging a complaint with the United Nations. Describing their experience as psychological and sexual abuse, the women argue that the UK government failed to prevent institutionalised discrimination.

Campaigners against police spies estimate that only 10 per cent of operatives have been uncovered. Lisa hopes the complaint will unearth what remains elusive – the identities of those in the back rooms, who gave Kennedy his orders, and why. “The questions I still need answers to, they are not about him – who he was,” she says. “They are about who they were. Who was directing him, who was watching our relationship and what was it all for?”

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.