Another Crisis in the Outsourcing Industry: Capita Now in Trouble

Yesterday, Mike reported on his blog that the outsourcing giant, Capita, was now in trouble. Its share price has apparently halved, knocking £1.1 billion of its stock market value. It has axed its scheme to issue £500 million in dividends to its shareholders. Instead, it intends to raise £700 million, partly by selling off parts of the company, which it needs to balance the books. There are also fears that it will make part of its 67,000 strong workforce redundant as well as concerns for the firm’s pension fund.

Mike in his article notes that the company was responsible for assessing the infamous fitness for work tests, for which the government has imposed hidden targets. One of these is that 80 per cent of reconsidered cases should be turned down. Mike therefore comments that if the crisis means that some of these assessors get a taste of what they inflicted on benefit claimants, this would be a case of poetic justice. He also wonders what the firm was doing when it devised the scheme to issue those massive dividends to its shareholders. Did they believe that the government’s magic money tree would continue to allow them to give heaps of money to their rich shareholders? He also asks other searching questions, such as whether it was deliberately underbidding to get government contracts, and then using the money to help finance those projects it had already won.

Mike concludes

So: First Carillion collapsed. Now both Interserve (remember them?) and Capita are in trouble.

Who’s next? And what will happen to public services while the Tories dither over this crisis?

See: https://voxpoliticalonline.com/2018/01/31/in-the-crap-ita-government-contractor-responsible-for-benefit-assessments-is-in-deep-financial-doo-doo/

Capita, or as Private Eye dubbed it, ‘Crapita’, has a long history of incompetence behind it. Way back in the 1990s it seemed that hardly a fortnight went by without Capita turning up in the pages of the satirical magazine. And the story was nearly always the same. The outsourcing company won a government or local authority contract to set up an IT system or run IT services. The project would then go over time and over budget, and would be massively flawed. And then a few weeks or months later, the company would be given a contract somewhere, and do exactly the same thing there.

You’re left wondering how Crapita kept winning those contracts, when it was so manifestly unfit to carry them out. Who did it have on its board? Or was there a deliberate policy by Major’s government to support outsourcing, no matter how inefficient and incompetent they were, because it was private enterprise and so preferred and supported for purely ideological reasons?

In any case, what seems to have placed the company in a very precarious financial situation is the usual tactics of big companies in this stage of capitalism: award massive dividends to the shareholders. This usually goes along with starving the rest of the company of investment, which seems to have been done to. And granting massive, and massively unsustainable pay awards to senior management. There’s no mention of that in Mike’s article, but I don’t doubt that this was done too. I’ve got the impression that it’s just about standard practice across a huge swathe of industry.

This is a financial strategy that has driven far more than one company to the wall. I also wonder if the executives weren’t also trying deliberately to create a debt, so that they could dodge corporation tax for five years. This is one of the tricks Stewart Lansley and Joanna Mack describe in their book on contemporary British poverty, Breadline Britain.

Over the years the outsourcing policy has been in operation, there’s been one crisis after another. The outsourcing companies have repeatedly shown themselves to be incompetent, not just in the case of capita, but also notoriously with G4S and the scandals over the violence and brutality it meted out towards asylum seekers in the detention centres it ran. And, of course, when a whole load of prisoners escaped on their way to court. Or jail.

Private industry has repeatedly shown that it is incompetent to do the work of the state sector. These firms have the disadvantage of having to make a profit for their shareholders, as well as the demands of their management for multi-million pound pay packets. The only way they can afford this is by cutting wages to their workers, and spending as little as possible on the service they are meant to be providing. The result of this has been a series of financial collapses. Carillion was the first. Now Capita and Interserve, another outsourcing company, is in similar trouble.

The only sensible recourse should be to cancel these companies’ contracts, and take everything back in-house. But this won’t be done. I think there’s a problem in that the state sector has been so decimated by the past four decades of Thatcherism, that it no longer has the capacity to run these services itself. There’s also the additional problem that too many politicians and media magnates have connections to these companies, or to firms in a similar position hoping for government contracts. Acknowledging that outsourcing was a failure would damage the interests of these politicos and press barons. There’s also the challenge of actually facing up to the fact that a central plank of Thatcherite dogma – that private enterprise is always more efficient than the state – is absolutely, undeniably wrong. Anybody who makes this point is denounced as a Communist in screaming headlines. You only have to look at the way the Tory press has vilified Jeremy Corbyn for daring to want to renationalise the NHS, the electricity net and the railways. His policies are very far from the total nationalisation demanded by Communists and Trotskyites, but you wouldn’t know it from the frothing abuse hurled in his direction by the Tories and Blairites.

There’s also another problem with calling an end to the outsourcing scam. PFI contracts and outsourcing allow some of the costs to be written off the official government accounts sheet. They’re still there, and we have to keep paying them, but they’re not included in the official figures. It’s why Mussolini used a similar scam when he was Duce of Fascist Italy. Any government that restores these projects to the way they were handled before risks putting millions back the official figures. And if that’s the Labour party, you can imagine the Tories making their usual hackneyed and untrue comments about ‘high-spending Labour’, and then re-iterating the spurious arguments for austerity.

I’ve no doubt that the government will do what it can to shore up the current mess the outsourcing companies are in. But the collapse of Carillion and now the severe financial troubles faced by Capita and Interserve show that outsourcing does not work. And given these companies’ highly checkered history, they should never have been given governments to begin with.

And it bears out exactly the description the author of Zombie Economics used for them in the very title of his book. Outsourcing, and the rest of the Thatcherite economic strategy of privatisation, wage restraint, low taxation and declining welfare are ‘zombie economics’ as they don’t work, but haven’t yet been put it into the grave.

It’s high time they were, and Thatcherite free trade capitalism was abandoned as the failure it so glaringly is.

George Osborne Lies about Responsibility for the Collapse of Carillion

Published by Anonymous (not verified) on Wed, 17/01/2018 - 4:51am in

No, not Marillion, who had a hit in the 1980s with the classic, ‘Kayleigh’, and whose singer was called Fish, ’cause he drank like one, but Carillion, the outsourcing giant which has gone belly-up.

Mike’s put up a post about Carillion’s collapse, pointing out that the company was in dire financial trouble, and had issued at least three profit warnings. But miraculously it was still able to win government contracts.

George Osborne, our former comedy Chancellor to Dave Cameron’s comedy Prime Minister, decided to put his oar in today. Faced with the question of who was responsible for awarding these contracts to the ailing company, Osborne did what every Tory does: he lied and spun. Oh no, whined Osborne, now the editor of the Evening Standard, it’s not the Tories’ responsibility they got government contracts. It’s all the fault of civil servants.

Er, no, George. It’s not. It’s your fault, and the fault of every Thatcherite government since the days of John Major.

If you enter the civil service, you will be told that it is your duty to provide the government with impartial advice. This marks the British civil service out from its continental cousins, where the upper levels of the civil service belong to the ruling party, and so change with each election. There have been cases when the civil service has been less than impartial, such as when the rail network was privatised. This was the brainchild of a particular civil servant, who was a keen promoter of free market private enterprise. But this particular mandarin has been and gone.

Looking back, a scandal like Carillion was almost inevitable. When outsourcing began in the 1990s under John Major, firms like Capita, dubbed ‘Crapita’ by Private Eye, became notorious for the way they continually got government contracts, despite coming in late and over budget on just about all those they had been awarded. Or else the systems they installed just didn’t work. But it was Tory – and Blairite – ideology that private enterprise was always better than the state, even when, to most people, it most certainly wasn’t. And there was a revolving door between these firms and the Tory party. Under John Major, the various ministers responsible for privatising particular firms magically got jobs on the board of the same, now private companies, afterwards. Amazing! But civil servants weren’t to blame for that, although certain high level civil servants did benefit from the revolving door, particularly and most notoriously in the MOD. The system got so bad that John Major’s government got a justifiable reputation for ‘sleaze’. But a French politician was much more accurate in his description of it. He said that in Britain, we called it ‘sleaze’, but in La Patrie, they simply called it ‘corruption’. Indeed. Over the other side of La Manche, a civil servant or politician has to wait two years after they’ve retired from office before they can take up a job with a private firm. Which means that their address book, which is what the firm really wants, is out of date, and they’re of no value to them. Problem solved.

Carillion was allowed to go on because of a series of legislation put in place by the Tories to protect the outsourcing companies. Like as private companies, they are not subject to FOIA, and any attempts to probe their financial affairs is automatically denied by the government on the grounds of ‘corporate confidentiality’. You see, such requests would jeopardise their position by opening them up to scrutiny by their rivals. We’ve seen this used when justifying giving contracts to private firms in the NHS. NHS performance is published and scrutinised, but not those of the private firms angling for lucrative NHS contracts.

This has been brought in by the Tories, including Dave Cameron and George Osborne.

And while we’re at it, let’s make the point that much government advice doesn’t come from the civil service. It came from private consultants, like Anderson Consulting, who were responsible for turning the Benefits Agency as was into the shambles it now is. Under Tony Blair this grew to enormous proportions, so that Blair was taking advice from SPADs -Special Advisors – from private industry, rather than the civil service.

So it’s fair to ask which set of private consultants argued that Carillion ought to be given a contract? Perhaps no-one did, but I think it’s a fair question, given just how much sponsorship the Tories received from private industry. Was Carillion one of their corporate donors?

So who’s responsible for the government awards given to Carillion? You are, George. You, Cameron, and your whole disgusting party. Now stop lying. You were rubbish as chancellor, and you’ve got no business editing a paper either.

Oprah Winfrey: The Corporate Democrat’s Choice to be the Next Presidential Candidate

The corporatist, Clintonite wing of the Democrats has looked at the success of Donald Trump, and drawn precisely the wrong lesson from it. They concluded that after a millionaire reality TV star won the Republican nomination and then the presidency, what they had to do was field their own millionaire TV star as a candidate. And in this instance, they’ve decided that this candidate might be Oprah Winfrey. The idea’s gone over well too in the press on this side of the Atlantic. The ‘Opinion Matrix’ column in the ‘I’ newspaper quoted two newspapers raving about what a wonderful idea this would be.

In this clip from The Jimmy Dore Show, Dore and his co-host, Ron Placone, talk about why Oprah would be a terrible candidate. There’s a lot in there, but essentially the argument is very simple.

They quote a long article from the Guardian, one of the few newspapers, which doesn’t think it’s a good idea to choose Oprah. This points out that the problems afflicting ordinary working Americans come from the very nature of free market capitalism. People are becoming poorer and more insecure because of the destruction of what remained of the American welfare net, outsourcing, privatisation, low wages and job insecurity. All of these need to be tackled.

But this is precisely what Oprah will not do. She’s another neoliberal, who believes that it’s not the system that needs to be changed, but you. If you look inside yourself, you can improve your place in society, and rise up to be anything you want. It’s a reassuring message for some people, as it tells them that America is still the land of opportunity. Even though it isn’t, and hasn’t been for a very long time. Way back in the 1990s there was little difference between social mobility in the UK and the US. An article commenting on this in the Financial Times made this point, and argued that what gave American society its attractive power was the myth that it was, that ordinary people could still move up to be president, or a company director, or whatever. This is now no longer true, and in fact there’s greater social mobility in Europe.

This explains why Oprah’s so attractive to the corporate elites. She’s a black woman, so if she got the presidency, it would be a symbolically liberal gesture. Just like Killary and her team were arguing that the election of Clinton would be a victory for all women. Even though Clinton has done and would do nothing for America’s working people, and especially not women, who do the lowest paid work. It was all identity politics, with Killary claiming to be the outsider because she was a woman. Even though she’s in the pocket of Wall Street and other corporations, and as thoroughly corporate and corrupt as any of them. But if you didn’t back her, and instead chose Bernie, who actually stood for policies that will benefit America’s working people, you were automatically smeared as a ‘misogynist’. This included women voters, who, La Clinton declared, were only doing what their husbands and boyfriends told them.

The same’s going to be the case with Oprah Winfrey. It’s more identity politics, even though identity politics didn’t work with Clinton, and they probably won’t work with Oprah. Winfrey offers ordinary working Americans nothing, which is presumably why the corporate press in Britain was raving about what a good candidate she is. All the billionaires now owning papers, who don’t pay tax in this country, are presumably salivating at the thought of another president, who’ll do just what business leaders tell them.

As for what effect her presidency will have on Black Americans, you only have to look at Barack Obama to see that this prospects aren’t good. Despite all the racist screaming from the Republicans that Obama was an anti-White racist, who was planning to exterminate White Americans, Obama in many ways was a completely unremarkable, corporate politico. And he did precious little to solve the various problems facing Black communities in America. Oprah will be exactly the same, only the poverty will be worse. Economists have looked at the decline in the household wealth of working Americans. This has declined drastically. But the decline in White household wealth is nowhere as severe as that experienced by Black families. It’s been estimated that in a few years, their average household wealth will be $8.

Oprah has nothing to say to that. Absolutely nothing. Except that people should look inside themselves, believe in themselves, work hard and then magically their dreams will come true.

Except we live in a harsh, cruel neoliberal corporate hell, rather than the dream reality held out by corporate shills like Killary.

And domestic poverty isn’t the only reason why Oprah would be an awful president. She’s another hawk in foreign policy. In this clip from the Sam Seder’s Majority Report, they comment on a piece in her show where she promotes the invasion of Iraq, repeating the lie that Saddam had weapons of mass destruction.

Hussein didn’t have any weapons of mass destruction. There was no connection between him and Osama bin Laden. It was a Likudnik and Neocon lie to invade Iraq, steal their oil and plunder their state industries. The result has been chaos and mass death, carried out not just by Sunni insurgents, but also by the mercenaries under General McChristal, who was running death squads against the Shi’a.

If Oprah gets in, there’ll be more wars in the Middle East and elsewhere, as the American military machine keeps demanding more conflict and more funding.

Now I’ve nothing against Oprah Winfrey personally. She’s glamorous, intelligent and a genial TV host. But that’s all she is. In terms of policies, she offers absolutely nothing to ordinary Americans, except more corporatism, bigger profits for the rich, and more poverty and exploitation for the poor, including and especially Black Americans. And as far as foreign policy goes, she’s a danger to world peace. The Iraq invasion destroyed one of the most successful secular states in the Middle East, where women were safe to hold jobs outside the home, into a sectarian bloodbath. All for the profit of multinational corporations.

But I don’t doubt that if ordinary Americans don’t vote for her, the Democrat propaganda machine will vilify them, just as they smeared everyone who voted for Bernie against Killary. If you don’t vote Oprah, they’ll scream, you’ll be a racist and a misogynist. And no doubt Blacks will be told that they’re all ‘Uncle Toms’ and ‘housen****ers doing what Massah tells them. All while the Black, female candidate doesn’t care a jot about doing anything practical to help working Americans with their real problems, but just promotes the neoliberal myth of American social mobility. While seeing that the corporate rich get even richer, of course.

Workers’ Chamber Book: Chapter Breakdown

As I mentioned in my last post, a year or so ago I wrote a pamphlet, about 22,000 words long, arguing that as parliament was filled with the extremely rich, who passed legislation solely to benefit the wealthy like themselves and the owners and management of business, parliament should have an elected chamber occupied by working people, elected by working people. So far, and perhaps unsurprisingly, I haven’t found a publisher for it. I put up a brief overview of the book’s contents in my last post. And here’s a chapter by chapter breakdown, so you can see for yourselves what it’s about and some of the arguments involved.

For a Workers’ Parliamentary Chamber

This is an introduction, briefly outlining the purpose of the book, discussing the current domination of parliament by powerful corporate interests, and the working class movements that have attempted to replacement parliamentary democracy with governmental or administrative organs set up by the workers themselves to represent them.

Parliamentary Democracy and Its Drawbacks

This discusses the origins of modern, representative parliamentary democracy in the writings of John Locke, showing how it was tied up with property rights to the exclusion of working people and women. It also discusses the Marxist view of the state as in the instrument of class rule and the demands of working people for the vote. Marx, Engels, Ferdinand Lassalle and Karl Kautsky also supported democracy and free speech as a way of politicising and transferring power to the working class. It also shows how parliament is now dominated by big business. These have sent their company directors to parliament since the Second World War, and the number has massively expanded since the election of Margaret Thatcher. Universal suffrage on its own has not brought the working class to power.

Alternative Working Class Political Assemblies

This describes the alternative forms of government that working people and trade unionists have advocated to work for them in place of a parliamentary system that excludes them. This includes the Trades Parliament advocated by Owen’s Grand Consolidated Trade Union, the Chartists’ ‘Convention of the Industrious Classes’, the Russian soviets and their counterparts in Germany and Austria during the council revolution, the emergence and spread of Anarcho-Syndicalism, and its aims, as described by Rudolf Rocker.

Guild Socialism in Britain

This describes the spread of Syndicalist ideas in Britain, and the influence of American Syndicalist movements, such as the I.W.W. It then discusses the formation and political and social theories of Guild Socialism, put forward by Arthur Penty, S.G. Hobson and G.D.H. Cole. This was a British version of Syndicalism, which also included elements of state socialism and the co-operative movement. This chapter also discusses Cole’s critique of capitalist, representative democracy in his Guild Socialism Restated.

Saint-Simon, Fascism and the Corporative State

This traces the origins and development of these two systems of government. Saint-Simon was a French nobleman, who wished to replace the nascent French parliamentary system of the early 19th century with an assembly consisting of three chambers. These would be composed of leading scientists, artists and writers, and industrialists, who would cooperate to administer the state through economic planning and a programme of public works.

The Fascist Corporative State

This describes the development of the Fascist corporative state under Mussolini. This had its origins in the ideas of radical nationalist Syndicalists, such as Michele Bianchi, Livio Ciardi and Edmondo Rossoni, and the Nationalists under Alfredo Rocco. It was also influenced by Alceste De Ambris’ constitution for D’Annunzio’s short-lived regime in Fiume. It traces the process by which the Fascists established the new system, in which the parliamentary state was gradually replaced by government by the corporations, industrial organisations which included both the Fascist trade unions and the employers’ associations, and which culminated in the creation of Mussolini’s Chamber of Fasci and Corporations. It shows how this was used to crush the working class and suppress autonomous trade union activism in favour of the interests of the corporations and the state. The system was a failure, designed to give a veneer of ideological respectability to Mussolini’s personal dictatorship, and the system was criticised by the radical Fascists Sergio Panunzio and Angelo Olivetti, though they continued to support this brutal dictatorship.

Non-Fascist Corporativism

This discusses the way the British state also tried to include representatives of the trade unions and the employers in government, economic planning and industrial policies, and suppress strikes and industrial unrest from Lloyd George’s administration during the First World War. This included the establishment of the Whitley Councils and industrial courts. From 1929 onwards the government also embarked on a policy of industrial diplomacy, the system of industrial control set up by Ernest Bevin during the Second World War under Defence Regulation 58a. It also discusses the corporative policies pursued by successive British governments from 1959 to Mrs Thatcher’s election victory in 1979. During these two decades, governments pursued a policy of economic planning administered through the National Economic Development Council and a prices and incomes policy. This system became increasingly authoritarian as governments attempted to curtail industrial militancy and strike action. The Social Contract, the policy of co-operation between the Labour government and the trade unions, finally collapsed in 1979 during the ‘Winter of Discontent’.

Workers’ Control and Producers’ Chambers in Communist Yugoslavia

This discusses the system of industrial democracy, and workers councils in Communist Yugoslavia. This included a bicameral constitution for local councils. These consisted of a chamber elected by universal suffrage, and a producers’ chamber elected by the works’ councils.

Partial Nationalisation to End Corporate Influence in Parliament

This suggests that the undue influence on parliament of private corporations could be countered, if only partly, if the policy recommended by Italian liberisti before the establishment of the Fascist dictatorship. Those firms which acts as organs of government through welfare contracts, outsourcing or private healthcare contractors should be partially nationalised, as the liberisti believed should be done with the arms industries.

Drawbacks and Criticism

This discusses the criticisms of separate workers’ governmental organs, such as the Russian soviets, by Karl Kautsky. It shows how working class political interests have been undermined through a press dominated by the right. It also shows how some of the theorists of the Council Revolution in Germany, such as Kurt Eisner, saw workers’, peasants’ and soldiers’ councils as an extension of democracy, not a replacement. It also strongly and definitively rejects the corporative systems of Saint-Simon and Mussolini. This part of the book recommends that a workers’ chamber in parliament should be organised according to industry, following the example of the TUC and the GNC Trades’ Parliament. It should also include representatives of the unemployed and disabled, groups that are increasingly disenfranchised and vilified by the Conservatives and right-wing press. Members should be delegates, in order to prevent the emergence of a distinct governing class. It also shows how the working class members of such a chamber would have more interest in expanding and promoting industry, than the elite business people pursuing their own interests in neoliberal economics. It also recommends that the chamber should not be composed of a single party. Additionally, a workers’ chamber may in time form part of a system of workers’ representation in industry, similar to the Yugoslav system. The chapter concludes that while the need for such a chamber may be removed by a genuine working class Labour party, this has been seriously weakened by Tony Blair’s turn to the right and partial abandonment of working class interests. Establishing a chamber to represent Britain’s working people will be immensely difficult, but it may be a valuable bulwark against the domination of parliament by the corporate elite.

I’m considering publishing it myself in some form or another, possibly through the print on demand publisher, Lulu. In the meantime, if anyone wants to read a sample chapter, just let me know by leaving a comment.

Afshin Rattansi on UK Army Recruitment and When Trump Was Anti-War

In this short clip from RT’s Going Underground, main man Afshin Rattansi reports on and comments on the British army’s latest attempts to recruit more squaddies, as well as the time when Donald Trump appeared to be an anti-war candidate. The clip was posted on July 15, 2017, when Defence Secretary Michael Fallon was attending an air tattoo here in the UK.

In order to find 12,000 new recruits for the army, the government started looking for them in sub-Saharan Africa. Rattansi then pointedly comments that if there are viewers from that region of the continent, from poor and starving nations like Malawi, Mozambique or Sierra Leone, and they fancy dying for Britain, they can get through to army recruitment on the following number.

He also talks about the army’s attempts to recruit child soldiers using a video, This Is Belonging. It shows one squaddy walking behind his a truck carrying a load of his mates. At first they tease him by slowing down, so that he thinks he can climb in, before speeding up and pulling slightly away. They then slow down again, he manages to climb him, and is greeted with cheers and comradely backslaps from his mates.

Rattansi discusses how this video has been criticised by an anti-war group, Child Soldier International, because it is aimed at young people aged 16-25. And in particular those from the poorest and least educated sections of society. The video is also targeted at the good folk of the northern towns, which have been hardest hit by Thatcherism.

He also quotes the response from the government’s outsourcing partner, Capita, which predictably finds nothing wrong in this.

He then goes on to say that there is evidence from America that when poor kids, like those targeted by Capita’s wretched film, do come back from fighting and dying, they vote for anti-war candidates. Like Donald Trump. ‘You do remember when Trump was anti-war, right?’ he asks. He then plays footage of Trump telling the crowd that if he gets in, he will not send any more troops to the Middle East. It’s unjust to the millions of people that’ve been killed there, as well as to America. Thanks to the wars in the Middle East, America’s roads and hospitals aren’t properly maintained. If he gets in, he’ll stop the war and spend the money on that instead.

Child Soldier International isn’t the only organisation that has expressed concern about the UK’s recruitment of child soldiers. The issue got into the papers, or at least the I a few weeks ago. We are the only nation in Europe, I believe, that recruits children of 16 years old. Michelle, one of the great commenters on this blog, has also posted comments talking about the concerns of peace groups about the way the British army goes into schools to recruit there.

This used to happen at my old school here in Bristol. I don’t remember it ever happening to us in the top streams, but certainly recruiting films were shown to the less bright in the lower bands. One of our art teachers, a woman of left-wing opinions, was outraged by this. Someone told me that her father had been an air-raid warden during the War, and so had seen the bits of bodies strewn amongst the rubble after a bomb strike. If that was the case, then it’s not hard to see why she hated war, and those who seduce the young into fighting in one, so much.

As for Trump, I do remember when he was anti-war. Just like he also suggested at one point he was in favour of Medicare for All. Now he’s turned out to be no such thing. It was all lies. The result has been that many of the people, who voted for him are seriously disillusioned, and this is contributing to opposition to Trump within the GOP. A few days ago I came across a video on YouTube with the title, ‘Trump Will Destroy Capitalism’. I don’t think he will, but he’s certainly doing his damnedest. And if he does destroy it, then it won’t come too soon.