Tagging the Dead – Incestuous Financial Relationships

“Tagging the dead” was a recent popular newspaper headline¹. The story told how G4S – of Olympic Security fame – and Serco were invoicing for tagging 18,000 offenders a day, when only 15,000 were actually being tagged and monitored. Besides invoicing for the few that were actually dead, other fraudulent invoices included people who had moved abroad, been returned to prison, or had never left prison in the first place!!

Chris Grayling, the Justice Secretary, called in the Serious Fraud Office to investigate one company, and subsequently said that both companies needed to have a period of “corporate renewal”. The period has been short as 2 months later Grayling has said the two companies can tender again for other work for the Ministry of Justice (MOJ), once they have a clean bill of health!!

In the meantime the tagging contracts have now been given to four different companies Astrium, Buddi, Telefonica and Capita – this last-mentioned company long ago re-named ‘Crapita’ by satirical magazine Private Eye.

Surprisingly, the background to this unseemly farrago has never been addressed by the mainstream media or Westminster politicians. The raison d’etre of privatisation and contracting-out has always been that the expertise, experience, enterprise and the competition of the private sector would deliver better and cheaper public services to and for the taxpayer.

Yet companies like G4S, Serco and Capita are not established companies from the private sector who, through competition, were expected by politicians and free market supporters to rejuvenate public service delivery. Instead, they are three large conglomerates created specifically to obtain outsourcing contracts from central and local government. They tender for the whole gamut of services, including, etc social security, correctional services, employment services, the NHS, the educational sector, the care sector. Often, the companies have no direct experience in these spheres, they are unelected and have been called a ‘Shadow State’ by Social Enterprise UK² , the national body for social enterprise companies.

Social Enterprise UK² also points out that around 40% of the shares in these companies are foreign-owned. This doesn’t sound too bad until you look at the actual shareholders in these companies – they are mainly an assortment of financial services companies. The largest shareholder in Capita, with 22.4%, is Invesco, an American company ranked the 27^th largest finance company in the world. The third largest shareholder, with 5.2%, is Blackrock, another American finance company claimed to be the world’s largest asset manager³. Blackrock also owns around 5% of Serco and around 5% of G4S, and among its never-ending list of assets can be found Cuadrilla, of fracking fame. Any remaining belief that the private sector can bring enterprise, competition and efficiency to public service delivery goes out the window when it emerges that the largest shareholder in G4S is – yes, you’ve guessed it – Invesco with 15.03%.

The reality is that any individual or company owning more than 10% of a public company effectively controls it, and Invesco controls G4S and Capita. When G4S and Capita tender for the same contract, it doesn’t matter which one wins – Invesco and Blackrock cannot lose. In fact, the only losers are the UK taxpayers, whose lack of awareness has allowed successive Governments – Labour, Tory and Lib Dem – to sell off the family silver at knockdown prices.

Nevertheless, on 11th July, Justice Secretary, Chris Grayling told the House of Commons that the companies who over-billed for tagging “Have said they take the issue extremely seriously, and assure me that senior management were not aware of it.” No surprise there then!

Not being aware might have some credibility if it had been an individual or a small group of people producing the fraudulent invoices and stuffing the money into their pockets or dodgy bank accounts. But the money was going into the accounts of G4S and Serco, so questions should also be asked of their auditors, who managed to miss this overcharging of the taxpayer since possibly as long ago as 1999 – a mere 13 years!!⁴

If the directors of either of these companies wish to argue that their company is so large that they cannot know what’s happening in every part of it, then their management structure is useless, or else they need to considerably reduce the size of the company. If senior management and the directors were unaware of what was happening, then they should be fired for incompetence. And if they were aware, they should be arrested, charged, tried and, if found guilty, sent to prison.

PS Surprise, Surprise Capita⁵, G4S⁶ and Serco⁷ are among the ever- increasing number of companies trading in the UK that pay very little tax. In Capita’s case, it’s doubly ironic as they have a contract to crackdown on vehicle tax evasion. You couldn’t make it up!!

Mike Gold,

michael@radicalsoapbox.com

^{1.http://www.theguardian.com/business/nils-pratley-on-finance/2013/jul/11/g4s-serco-allegations-serious-fraud-office}

  ^{2. http://www.socialenterprise.org.uk/uploads/files/2012/12/the_shadow_state_3_dec1.pdf 3.http://www.nytimes.com/2013/05/19/business/blackrock-a-shareholding-giant-is-quietly-stirring.html?pagewanted=all&_r=0}

^{4. http://www.mirror.co.uk/news/uk-news/electronic-tagging-scandal-g4s-police-2046181}

^{5. http://blogs.independent.co.uk/2012/03/24/say-no-to-tax-avoidance-for-public-service-providers/}

^{6. http://www.dailymail.co.uk/news/article-2287216/Revealed-One-UKs-companies-pay-tax.html}

^{7. http://www.pcs.org.uk/en/news_and_events/pcs_comment/index.cfm/id/AEAE3A14-FFF1-4F07-B4643A37DD6A9C64}

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