In May this year, a huge company listed on the
London Stock Exchange found itself
in the midst of controversy about a prison it runs for the government
– Thameside, a newly built jail next to Belmarsh, in south-east London.
A report
by Her Majesty's Inspectorate found that 60% of its inmates were locked up all
day, and there were only "vague plans to restore the prison to
normality". The prison campaign group the
Howard League for Penal Reform
talked about conditions that were "truly alarming".
Two months later, the same company was the
subject of
a high- profile report published by the House Of Commons public
accounts committee,
prompted by the work of Guardian journalist Felicity Lawrence.
This time, attention was focused on how it was managing out-of-hours GP
services in Cornwall, and massive failings that had first surfaced two years
before.
Again, the verdict was damning: data had been falsified, national
standards had not been met, there was a culture of "lying and
cheating", and the service offered to the public was simply "not good
enough".
Three weeks ago, there came
grimmer news. Thanks
to its contracts for tagging offenders, the company was now the focus of panic
at the Ministry of Justice, where it had been discovered that it was one of two
contractors that had somehow overcharged the government for its services,
possibly by as much as £50m; there were suggestions that one in six of the tags
that the state had paid for did not actually exist. How this happened is still
unclear, but justice secretary Chris Grayling has said the allegations
represent something "wholly indefensible and unacceptable".
The firm that links these three stories together
is
Serco. Its range of activities,
here and abroad, is truly mind-boggling, taking in no end of things that were
once done by the state, but are now outsourced to private companies.
Amazingly,
its contracts with government are subject to what's known as "commercial
confidentiality" and as a private firm it's not open to Freedom of
Information requests, so looking into the details of what it does is fraught
with difficulty.
But the basic facts are plain enough. As well as
five British prisons and the tags attached to over 8,000 English and Welsh
offenders,
Serco sees to two immigration
removal centres, at Colnbrook near Heathrow, and Yarl's Wood in Bedfordshire.
You'll also see its logo on the Docklands Light Railway and Woolwich ferry, and
is a partner in both Liverpool's Merseyrail network, and the Northern Rail
franchise, which sees to trains that run in a huge area between the North
Midlands and English-Scottish border.
Serco runs school inspections in parts of
England, speed cameras all over the UK, and the National Nuclear Laboratory,
based at the Sellafield site in Cumbria. It also holds the contracts for the
management of the UK's ballistic missile early warning system on the Yorkshire
moors, the running of the Manchester Aquatics Centre, and London's "Boris
bikes".
As evidenced by the story of how it handled
out-of-hours care in Cornwall, it is also
an increasingly big player in a health service that is being
privatised at speed, in the face of surprisingly little public opposition:
among its array of
NHS contracts is a new role seeing
to "community health services" in Suffolk, which involves 1,030
employees.
The company is also set to bid for
an even bigger healthcare contract in Cambridgeshire and
Peterborough: the NHS's single-biggest privatisation – or, if you prefer,
"outsourcing" – to date, which could be worth over £1bn.
But even this is only a fraction of the story.
Among their scores of roles across the planet, Serco is responsible for air
traffic control in the United Arab Emirates, parking-meter services in Chicago,
driving tests in Ontario, and an immigration detention centre on Christmas
Island, run on behalf of those well-known friends of overseas visitors the
Australian government.
In the US, the company has just been awarded a
controversial $1.25bn contract by that country's Department of Health. All
told, its operations suggest some real-life version of the fantastical
mega-corporations that have long been invented by fiction writers; a more
benign version of the
Tyrell Corporation from Blade Runner, say, or one of those
creations from James Bond movies whose name always seems to end with the word
"industries".
The strangest thing, though, is the gap between
Serco's size and how little the public knows about it. Not for nothing does so
much coverage of its work include the sentence "the biggest company you've
never heard of".
I first heard Serco's name about eight years ago,
when I was just starting to understand the amazing growth of what are now
called "public service companies". Once I started looking, their
logos were everywhere, suggesting a shadow state that has since grown
ever-bigger. Their names seemed anonymously stylised, in keeping with the sense
that they seemed both omnipresent, and barely known: Interserve, Sodexo,
Capita, the Compass Group.
Serco is among the biggest of them all. At the
last count, its annual pre-tax profits were up 27%, at £302m. In 2012 alone,
its British workforce grew by 10,000, to 53,000 people (tellingly, as many as
90% of them are said to be
former civil servant employees). In terms of employees, that makes
it more than twice as large as the BBC, and around 20% bigger than Philip
Green's Arcadia group.
A very significant player, in other words, and one that
has come a long way since its foundation 1929, when it was a branch of the
American RCA corporation called RCA Services Ltd, involved in the then booming
UK cinema industry.
It was renamed Serco in 1987, after a management buy-out,
and floated on the stock exchange the following year. In the 25 subsequent
years, during which the UK has grown ever-fonder of outsourcing and
privatisation, Serco has grown at an amazing rate.
The current chief executive of the global Serco
Group is 49-year-old Chris Hyman, born in Durban, South Africa. His annual
remuneration is around £700,000, plus bonuses; in 2011, the value of his total
package rose 18%, to £1.86m (the company's finance director had to slum it at
£948,295).
In 2010, Hyman was given a CBE for services to
business and charity; he is also an enthusiastic fan of motor racing and an
evangelical Christian. Four years ago, he was asked about his company's very
low profile, and
he said this:
"We had a dilemma – what do we do with the
Serco name. We are proud of it. We thought we needed billboards at airports and
places like that, to be seen with Tiger Woods on. But we worked out very
quickly that is not what we are meant to do. We are meant to be known by the 5,000
not the five billion. The people who serve the people need to choose who
supplies the service. We are delighted when the public knows who we are, but
really, we need to be known by the people who make decisions."
When Serco made its bid to run NHS community-health
services in Suffolk – district nursing, physiotherapy, OT, end-of-life
palliative care, wheelchair services – it reckoned it could do it for £140m
over three years – £16m less than the existing NHS "provider" had
managed, which would eventually allow for their standard profit margin of
around 6% a year.
When it started to become clear that Serco was the
frontrunner, there was some opposition, but perhaps not nearly enough.
"Suffolk isn't the most politically active part of the country," says
one local insider. "And the staff were very lackadaisical. It was: 'NHS
Suffolk wouldn't made a bad decision.' So it was hard to get a campaign
going."
Serco was officially awarded the contract in
October 2012, which meant that hundreds of staff would leave the NHS, and
become company employees. Within weeks, the company proposed a huge
reorganisation, which involved getting rid of one in six jobs. This has since
come down to one in seven, two thirds of which will apparently go via natural
wastage.
In terms of their pay and conditions, the hundreds of people who have
been transferred from the NHS to Serco are protected by provisions laid down by
the last government, but it is already becoming clear that many new staff are
on inferior contracts: as one local source puts it, "they've got less
annual leave, less sick pay … it's significantly worse."
Meanwhile, other people are reportedly quitting
their jobs, and the service given to patients is said to be getting worse.
"In my team alone, we're 50% down on staffing hours compared with last
year," says one former NHS worker, who provides home-care to patients who
are largely elderly.
Thanks to poor morale, she says that the team in which she
works has lost around a third of its staff, and she is also having to see to
administrative tasks that were previously carried out by someone else: in
addition, she claims, support for a new IT regime is "farcical".
"We've still got the same number of
patients," she says, "so the workload has massively increased."
As a result, she and her colleagues are having to cut people out of their
previous entitlement to treatment at home. "That completely goes against
our ethics," she says, "but that's what we're having to do."
The NHS is a relatively new area of controversy
for Serco, but concerns about their practices run across many other areas.
Right now, the controversy over alleged overcharging, focused on both Serco and
its fellow tagging- contractor G4S, seems to have only just begun. When the
news was made public, 8% was wiped off Serco's share price.
The
Cabinet Office has announced a review "into government-held G4S and Serco
contracts to ensure that contracts are well-managed and in good order",
which will report in the autumn. Work for the British government accounts for
40% of Serco's revenues; to quote from the Daily Telegraph, "Without
Serco, Britain would struggle to go to war". That gives you some idea of
how deeply its work penetrates the state, and how unthinkable any kind of
corporate crisis would be.
Margaret
Hodge, the former Labour minister who now chairs the public accounts
committee, clearly thinks that all these stories point to huge issues. She
talks about "the inability of government to contract-out in a way that
protects the taxpayer's interest."
The Cornwall out-of-hours story, she
tells me, was reducible to "an absurd situation where you had a company
seemingly lying about what it was doing, but there was nothing in the contract
that could allow you to terminate it – indeed, they still appeared to be
eligible for their bonus payments. It's quite extraordinary."
There are even bigger issues at stake, though.
"There's also the inability of the public sector to monitor
effectively," she says. "The Cornwall story came to light because of
a Guardian journalist and a whole load of whistleblowers. Which is nuts: a
crazy way for the public sector holding to account the private sector when it's
delivering public services."
Even her committee, she says, cannot break
through a great wall of commercial confidentiality, and look at what the
companies delivering pubic services are up to – not just in terms of their bids
for public services and contracts with government, but such vital matters as
their costs, and the profits they make from particular jobs.
Does she feel any guilt about the fact that
companies such as Serco made their decisive breakthrough into public services
when Labour was in power? There's a murmur of agreement. "I think we were
as bad at managing this diversity of providers," she says.
"But one
of the things that gets me with this government is that they should have
learned from our mistakes. What is becoming really clear to me … is that the
Sercos, the A4s, the G4Ss, the Capitas – they're good at winning contracts, but
too often, they're bad at running services."
And what of the incredible range of what Serco actually
does, from school inspections to Boris bikes? "Interestingly, we are
looking at this. The National Audit Office is doing work around the development
of quasi-monopoly private providers, which is the world we're moving into. We
don't really understand the size of their empires. We've got to start getting
hold of this. It's a new phenomenon."
Once I'd spoken to Hodge, I got hold of one of
Serco's "media relations team", and arranged to send him a few
questions. On the subject of the out-of-hours GP fiasco in Cornwall, he quoted
a response from the doctor in charge of their set-up. "It's really
important that the local people in Cornwall do not lose confidence in this
essential urgent care service," he said. "It is a valued part of the
local NHS and we are proud of our professional team who provide it."
A
wider statement said the company had taken "swift and decisive action to
put the situation right and apologised to the people of Cornwall", and
made "a goodwill gesture to repay the bonus made [sic] to us in 2012,
which we were under no obligation to do." All told, I was assured, their
service "delivers a high standard against the national quality
requirements".
On the allegations about what has happened since
Serco took over community healthcare in Suffolk, and the claim that any new
starters aside from clinical staff are on inferior terms and conditions, the
same spokesperson said that such employees are "offered contracts in line
with Serco standard terms and conditions which are market comparable".
He
denied that anyone had been cut out of treatment at home, said that the company
had "recently realigned our clinical teams across Suffolk according
to the needs of the areas in which they deliver care" and claimed that new
IT systems are being implemented "slowly and carefully".
The controversy surrounding Thameside prison,
they said, had been followed by "a series of initiatives" including a
"gangs strategy", and measures to help prisoners with mental-health
issues. Some people were now allowed to be outside their cells "during the
core part of the day", and in August, Serco anticipated that this would be
extended.
As for the ongoing story about overcharging for
their tagging contract with the Ministry of Justice, Serco said this: "We
are working with our customer, the Ministry of Justice [on] this matter so
there is very little we can add at this stage."
I was also directed to a
statement from Chris Hyman, which said the company "will not tolerate poor
practice and behaviour and wherever it is found we will put it right", and
reminded that justice secretary Chris Grayling has said he so far has "no
information to confirm dishonesty had taken place" on the part of either
Serco or G4S.
There was one last question, concerning the
amazing spread of what Serco sees to, from parking meters, through nuclear
early warning systems, to an expanding share of the NHS. Is there any limit to
the fields they work in?
"We operate in a range of markets and
geographies," went its answer, "which means we are well placed to bring
a wide range of experiences and knowledge to help customers with the challenges
that they face."
That'll be a no, then.