National Inefficiency: A4e and the public-private nexus

March 7, 2012

“Efficiency efficiency they say
Get to know the date and tell the time of day
As the crowds begin complaining
How the Beaujolais is raining
Down on darkened meetings on the Champs Elysée

John Cale, Paris 1919

Public sector inefficiency vs private sector efficiency. It’s one of the hoariest of chestnuts used by lobbyists and think-tank warriors to sell the outsourcing of government functions and the erosion of public expenditure on anything other than wars, debt servicing and sporting mega-events.

The argument usually goes as follows. Public sector bodies are organised bureaucratically, fighting for funding from central government and responding to political pressure, not to the desires of service users such as patients or job seekers. Private companies, on the other hand, are driven to make huge efficiency savings by paring away unnecessary expenditure. They are forced to compete on an open market against other companies, fighting for their lives in a brutal environment where winner takes all, until, that is, it becomes wasteful and a new challenger emerges to take its place.

In this version of the world, consumers (including disease sufferers, schoolchildren and job seekers) are the big winners, because they benefit from the sleek efficiencies offered by competitive firms. Acting purely for their own gain, such firms deliver public benefits that bureaucratically organised and politicised public services simply cannot.

But is this at all accurate? Well, the case of A4e suggests strongly that there is a great deal of fiction written about such efficiencies.

ImageA4e is a firm which purports to specialise in finding work for the unemployed, and it has received hundreds of millions of pounds in public money over the past ten years to do this. In the process, its chairwoman, Emma Harrison, became a self-styled evangelist for social enterprise (“doing well by doing good” being a favourite line of hers). She inveigled her way into positions at the Eden Project and the NSPCC, headed the “Working Families Everywhere” campaign for David Cameron and founded the Foundation for Social Improvement (a charity with the novel mission of “improving society”).

Given all of the PR guff that she created, and her habit of cultivating close links (personal and financial) with government figures, Harrison rose to a fabled status amongst believers in outsourcing employment assistance, a kind of Delia Smith of job seeking. And, like Delia, she is minted, having taken home £8.6 million in share dividends last year. She comes from the same millieu as the Camerons, despite being a scion of Sheffield. As she said in 2005 (when she was worth £55 million), having such largesse means that “I can afford to have my entire life project-managed. I don’t have to think about paying bills, cleaning the house or mundane things like that.”

And now, she has fallen like Martha Stewart, having abandoned ship at A4e, leaving the firm wracked by allegations of massively wasteful expenditure on parties and overseas trips, and many millions of would-be clients signing on, jobless. And this is where the point about efficiency comes in. A4e spent lavishly on champagne and canapés (“If the marketing director wanted to take out a team of 10 marketing people for a night out you wouldn’t get change out of £2,000” said one former employee). Fact-finding trips to New York cost over £20,000, billed to the company, for just one traveller (Harrison, who ran up an $800 restaurant bill in the same trip).

Most damningly, a former work experience staffer at the firm told the Guardian that there were “missing receipts for taxi, rail, bus, train, tram, parking and wrong calculations of payments” within company records, while he was told “not [to] spend a lot of time scrutinising every [expenses] claim and with each expenses invoice” as London-based employees submitted “lavish wine and dine bills.”

There is clearly a problem here regarding contractors. Supposedly, such firms compete with each other to offer the best service, and trade on their reputations. But in the case of A4e, this degenerated into a revolving door of habitually granted contracts, whether or not the firm did a good job or had a spotless reputation. In fact, the firm appears to have been both lavishly wasteful and corrupt. In one documented example, a worker in Teesside fluffed up the numbers of jobseekers who were successfully placed on an EU-funded scheme. These were disabled or otherwise vulnerable jobseekers as well, the kind of people for whom expertise and care is essential in order to ease them into work. And did they get that from A4e? Of course not. The firm manipulated the process in order to appear competent, reduced its costs and thought that the awarding body would not complain, or assess its own. Well, actually this is partially true. An assessment procedure was accounted for, but as it was awarded to A4e, it seems to have missed the corruption going on. How strange.

This isn’t really a case of one bad apple. A4e is emblematic of what happens when government functions are hived off to private contractors without an enormous amount of due diligence and a competent political culture which is a) not easily corrupted by the promise of money or jobs from the contractors or b) ideologically wedded to reducing the “size of the state” and enhancing the role of social entrepreneurs in delivering public services. Unfortunately, in Britain we have had both factors in play for decades. So when Emma Harrison says that “We call ourselves a social purpose company. Social purpose is at the heart of everything we do but it is run on a totally commercial line” this reflects perfectly the nature of British governance.   There is a mystical belief that social purpose and profit are conjoined, but the reality is quite the opposite.

Exporting the culture of the financial sector, where hyperactive profit seeking is branded “innovation” to the delivery of public services is a deeply inefficient way of improving society. Dynamism is all very good, and preventing the development of sclerotic bureaucracies likewise. But there is no natural division between slovenly, power hungry bureaucrats, and zestful, efficient entrepreneurs. It is better to see firms like A4E as representing the replacement of one set of unresponsive, detached managers with another, hungrier for cash, but no closer to the lives of jobseekers.  As Harrison put it in a 2007 editorial for Management Today, her firm “has attracted incredibly talented people who would normally be found in the City” – by offering the same incentives and cultural norms that those slicing and dicing CDOs enjoyed at Lehman Brothers and RBS.

So it is no surprise that several employees of Harrison have been investigated by police on suspicion of fraud and that Harrison herself is suspected of leasing out several expensive properties to A4E itself, in order to cream off a little extra income from her social project.

But it would be grossly unfair to Harrison and A4e to view the firm in isolation. Other prominent contractors have been embroiled in similar cases in the past, for the reasons outlined above, showing no more competence or efficiency than the average local government department. Capita Financial, for example, was heavily fined by the FSA in 2006 for allowing vast amounts of fraud to be perpetrated on its customers while “Advanced Language Solutions” – another Capita subsidiary – has performed so poorly in delivering translators to courtrooms, that its £300 million contract has basically been abandoned. Other cases saw Capita subsidiaries failing to process housing benefit claims in time to prevent evictions. The list goes on. In Capita’s case, its advancement was partly bought by huge donations to New Labour, disguised as loans.

Vast amounts of public money are poured into the pockets of private contractors (helped by the PFI schemes of New Labour, the Olympics, the debacle of NHS IT reform, education reforms, wars…) under the assumption that partnering with not-for-profit organisations such as co-ops or mutual societies, or using a public-sector solution would be less efficient (delivering less “value for money”). But the reality is that a hugely inefficient public-private nexus has replaced public services, or is gnawing away at them, making millions for well-connected “entrepreneurs” and changing the lives of ordinary people not a jot. It matters quite a lot, however, that we reclaim the idea that publicly provided (or truly “socially” provided) services can be efficient, responsive, democratic, and more so than the vampire-like firms which currently lay claim to such a title. Our jobs, health, education, housing, security, energy, mobility, environment – the things which we value the most may rely on us making the case.

With firms like A4e and people like Emma Harrison around, this should not be all that hard. And this feeds into the ongoing (and increasingly successful) campaign against “workfare” – the practice of forcing those receiving unemployment benefits to work for free for corporations. Indeed, A4e has been one of the leading contractors involved in funneling jobseekers into supermarkets (“no more than modern day slave traders” intones the Socialist). The corruption of A4e is a welcome hook to use when attacking such exploitation, but it is also a chance to push for broader, socially organised work schemes under democratic control.

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