Private partners succeed where transparency fails the public

Government accused of deliberate attempt to cover up fraudulent, incompetent and embarrassing outsourcing contracts

The Government is today condemned by MPs of all parties for hiding behind a “veil of secrecy” over the award of contracts worth nearly £100 billion a year to huge private companies. Problems are particularly acute at the Department for Work and Pensions, which is on the “verge of meltdown” over the privately-run operation of welfare reforms and employment programmes, they say.

The PAC calls today for Freedom of Information legislation to be extended to cover government deals with private firms, for contractors to be obliged to “open their books up” and for the National Audit Office to be given greater authority to scrutinise contracts. It also said suppliers should be required to have policies on whistleblowing in place.

“Too often the government has used commercial confidentiality as an excuse to withhold information, often in response to Freedom of Information requests from the public or MPs,” the committee says.

Conservative and Labour governments alike have turned to private companies over the last 30 years. The Government spends around £187 billion a year on goods and services, about half of which is estimated to be spent on contracting out to private and voluntary providers. Contractors are now responsible for vast areas of public services from managing offices, providing computer equipment and paying pensions to running prisons and immigration removal schemes, assessing benefit claimants and even maintaining nuclear weapons.

Coalition ministers are stepping up the process with the part-privatisation of the probation service and by handing responsibility to welfare-to-work programme to private companies. Ministers argue that the practice saves cash for the public purse because large companies can achieve economies of scale.

In a scathing verdict on the Coalition’s drive to contract out public services, the Commons public accounts committee (PAC) accused ministers of trying to cover up mistakes by refusing to divulge details of contracts. It said the Government was failing to get best value for money and lacked the expertise to ensure “privately-owned public monopolies” provided quality services.

The committee’s chair, Margaret Hodge, said: “If it’s not sorted out it will become the biggest ad for re-nationalising public services.” Protesting that contracts were too often “shrouded in a veil of secrecy”, she claimed: “We are in danger of creating a shadow state that is neither transparent nor accountable to Parliament or the public.”

The committee demanded that contracts with private companies are put into the public arena. It said four major firms it quizzed – Atos, Capita, G4S and Serco –were prepared to agree to the move, adding that it appears that “the main barriers to greater transparency lie within Government itself”.

Mrs Hodge said: “An absence of real competition has led to the evolution of privately-owned public monopolies which have become too big to fail.

TUC’s general secretary Frances O’Grady said: “It is time to end the default assumption that anything done by the public sector is better done by private contractors.

“The truth is that there has been a growing tide of outsourcing scandals, fraud and service failure. Some of this is down to government incompetence in contracting out, but much is an inevitable result of replacing the public sector ethos with the profit motive and cost-cutting.”

MoJ singled out in damning review of government contracting

The Public Accounts Committee’s 47th report, on contracting out public services to the private sector, cites several examples of contract mishandling by the MoJ.

Noting that the Cabinet Office admits that Whitehall 'has a long way to go before it has the skills required to manage contracts properly' it comments: 'This is a concern, given the speed at which some departments - such as the MoJ - are going ahead with outsourcing, despite a poor track record.’

Probation and offender rehabilitation are two significant areas the MoJ intends to outsource in the near future.

The report says it was ‘shocking’ that it took the ministry eight years to spot overcharging by G4S and Serco for the tagging of prisoners.

It also said fines of ‘a mere £2,200’ to Capita over its inadequate supply of interpreters to the court service did ‘not come close to taking into account the cost to the criminal justice system and to individuals caused by their failure to deliver’.

The report calls for the extension of the Freedom of Information Act to include public contracts with private providers to tackle the lack of openness around government contracts.