Who Is Accountable?
Author: Alain Catzeflis
Our moral compass as a nation is spinning. Nowhere is this more evident than in the jagged lines between the common good - our obligation to do the right thing especially for those who need it most - and private enterprise.
The outsourcing of the public good to the private sector is an open sore in need of urgent attention and revaluation after a series of failures that have eroded the public’s confidence the idea of public-private partnership.
Companies such as Capita, Atos, G4S, Serco and, of course, the ill-fated Carillion have contributed to this failure not least in the area of care where the tension between their public obligation and private gain is at its most acute.
These companies cover a vast swathe of public services from security, transport and waste collection to human services such as prisons, probation services, welfare and health. The people they cater for run into millions and their revenue from the state into tens of billions. Their record is, at best, patchy. In some cases negligent with virtually no effective oversight by their paymasters – the state.
The latest case to come to light is Motability, an ostensibly charitable enterprise created by the state nearly 40 years ago to provide cars, scooters and powered wheelchairs to help people with a disability get around.
The Motability charity was established in 1977, with all-party parliamentary support and incorporated by Royal Charter. The Queen is its chief patron. Other patrons include Theresa May, Jeremy Corbyn, David Cameron, Nick Clegg, Tony Blair and Iain Duncan Smith.
A private company, Motability Operations Ltd, was then set up to make the scheme work. It delivered its first vehicles to customers in July 1978. The scheme is simplicity itself: the company takes the allowance that disabled people get from the government for their mobility needs - currently in the region of £60 a week - and leases them suitably adapted vehicles depending on their needs. So far so good.
We now learn that this company, which owes its existence solely and entirely to the disabled, has ballooned over the past 40 years into one of the largest and most successful commercial car leasing businesses in Europe with a net worth of £1.6bn, revenues of £4.2bn, pre-tax profits of £258m and reserves (assets) of £2.4bn.
Its boss, Operations chief Mike Betts, earned just under a million pounds with bonus last year. He received a further £726,617 as part of a 3-year incentive plan. This adds up to £1.7m or 11 times more than the Prime Minister earns. It dwarfs the £200,000 earned by Simon Stevens the head of the NHS.
This extraordinary state of affairs seems to have come as a surprise to many including MPs and peers who are now up in arms. The company was hammered in March by MPs and peers as well as by the Financial Conduct Authority (FCA) which is now looking into what is described as a "bloated" company.
The company describes itself as the "main operating company and principal service provider" of the charity. It argues that its reserve of £2.4 billion is proportionate. It says these are held chiefly in its cars, as a "buffer" in a tricky market and to underwrite the loans it needs to renew its stock.
The scheme is undoubtedly complex to administer. The company requires the skills and the finances to stay afloat because so many vulnerable people depend on it.
But Motability Ltd is in effect fed by public money. It is in business solely because in 1977 a Labour administration, building on the impulse of the welfare state, launched the scheme. It has no other purpose. If miraculously all people with disabilities woke up next week without them the company would go bust.
There’s another disquieting aspect to this story. The revelations come at a time when the relentless austerity pursued by the government is crushing those who can least afford it: the poor, the disabled and the elderly. Among the victims of this policy are people with mobility needs. Figures provided by Motability itself last year showed that 51,000 people had lost access to the scheme after they were reassessed for Personal Independence Payments (PIP).
Since the Thatcher years we have drifted towards what has come to be known as neo-liberalism. The welfare state is slowly being outsourced to private companies whose ethos is profit. We can’t blame them for that. They are in the business of business not philanthropy.
But the sheer scale of the outsourcing project is staggering. Some estimates value outsourcing at £100 bn a year. Governments have placed their faith in the belief that the private sector can do what the state does, only better and cheaper. New Labour embraced the Tory idea of Private Finance Initiatives (PFIs) while in power partly as a way of raising capital to fund new hospitals and schools at terms that were hugely favourable to the companies. But also because it chimed with their desire to be seen as business-friendly: in Peter Mandelson’s timeless phrase being relaxed about people who are "filthy rich".
Local councils squeezed to the marrow by cuts of up to 40%, have resorted to outsourcing in a big way as a means of cutting costs even if they are a bit fuzzy about the question of how private companies can deliver expensive, resource-intensive services for so little money.
The answer of course is that they can’t. Somebody pays. Usually the two weakest links in the chain: employees often on zero-hour contracts and ‘service users’ who have to put up with a just-in-time approach to staffing. Companies can do things cheaper but not necessarily better.
In his book Who Really Runs Britain? about the companies that control a vast swathe of public services Alan White says that in the compromise between social democracy and neoliberalism, “outsourcing was considered a natural development in a corporate-led world”.
Beguiled by the notion that in order to achieve this miracle the private sector must be as lightly regulated and as free as possible to do things its way the project has slowly but surely spun out of control. What we have ended up with is a tangle of interlocked and often interchangeable hierarchy of civil servants and business executives where criticism and oversight by the state is not just light-touch it is almost imperceptible.
These companies are so big and hold the lives of so many people in their hands that they have become - like the banks - too big to be allowed to fail.
This isn’t a case of 'public good, private bad'. The nationalised industries of the post-war years were hardly shining examples of efficiency or quality.
The question is what are the risks of handing highly sensitive public sector projects like care or prisons to the private sector and who is responsible for seeing that they deliver a decent service at a reasonable cost with a public service ethos at its heart?
And who carries the can when things go wrong? When G4S bungles its security operation at the London Olympics, when Capita leaves a trail of broken victims poorly assessed for PIPs in its wake, when Carillion collapses while still raking in government contracts worth hundreds of millions when Motability is allowed to run riot in the market where does the buck stop?
I don't blame Motability for this appalling abuse of public funds. They were handed a goose that lays golden eggs and they’ve done what any business would do which is to make it lay as many golden eggs as possible.
I blame its patrons and trustees and successive administrations beguiled by the idea that only the market can deliver a public service efficiently and to do so it needs a very long leash.
If and when Brexit happens the trend towards the privatisation of the public good may well accelerate. There is talk of American companies being invited to tender for large-scale, integrated health projects. How will they be held accountable?
It’s worth briefly casting an eye across the North Sea. Scandinavian countries have chosen a slightly different path. While recognising that the state in a traditional sense cannot employ and manage armies of carers and waste collectors to provide all the needs of a growing population many have tempered the profit motive with a sense of civic good. Denmark favours non-profit welfare provision; Sweden too is open to the idea; Norway prefers public provision as long as there is sufficient capacity.
At the end of the day it comes down to ethos and what kind of country we want to be. Until we jettison the idea that care or any ‘public service’ are no more than a commodity detached from its intended purpose these abuses will continue.
It’s time to reset our compass.
The publisher is the Centre for Welfare Reform.
Who Is Accountable? © Alain Catzeflis 2018.
All Rights Reserved. No part of this paper may be reproduced in any form without permission from the publisher except for the quotation of brief passages in reviews.