James Moore: Now the Government’s outsourcing responsibility for contractor debacle


The National Audit Office’s two reports into the contracting-out of state services aren’t exactly going to shake the sector’s big players to their cores.

In the wake of the recent scandal involving accusations of overcharging by Serco and G4S, combined with numerous previous foul-ups, you might think the industry was due a zinger. The NAO doesn’t quite deliver one. Its tomes are lengthy, and discursive, and sometimes have the air of a concerned but benevolent schoolteacher telling Humphrey from the civil service and Harry from the contractor that they could perhaps see their way to doing a bit better.

It does fire salvos against a lack of transparency over contractors’ roles, the rewards they make and the way they perform. It also worries that contracts are overly concentrated in the hands of a few big players and even uses the phrase “too big to fail” about them. Now where have we heard that before?

Other issues raised are the profits made by the contractors, whether they are justified, and how on earth they might be measured given the opacity of their financial statements. The NAO further frets about lax controls, and suggests that some Government departments aren’t really on top of things when it comes to drawing up contracts, and managing them.

Given what we have seen, the term “some” is questionable. One of the chief problems with the way these contracts are set out is the overwhelming importance attached to cost. The quality of service offered to taxpayers, and a consideration of whether the cheapest bidder will be any good, appear to come a distant second.

There is an ideological imperative at work here; an assumption that the private sector will do things better regardless. This isn’t necessarily so. The horrible mess that the Serious Fraud Office is picking its way through over offender tagging, and even the NAO’s reports, may lead to better management in the short to medium term.

But fundamental reform of a process that lacks any public confidence? That might still take another two or three fiascos to get going. Leave it to Margaret Hodge, the doughty chairman of the House of Commons Public Accounts Committee who prodded the NAO into action, to get to the heart of the matter. In outsourcing services, the Government has sought to outsource its responsibility for them. That needs to end.

Funds beware: The activists are getting more active

 Nice for Royal Mail that the children have been quiet since creating a fuss over its shares. By that, I mean Christopher Hohn’s Children’s Investment Fund, which became the Mail’s biggest private shareholder shortly after the much-ballyhooed privatisation.

At least Britain’s postal service operator isn’t alone. Mr Hohn and his kind are a growing presence on the shareholder registers of a growing number of companies. A report from Linklaters, the law firm, says the number of institutions globally with a stated “activist” strategy has more than doubled in the past decade.

They’ve moved out from their heartland of financial services, and they’re making an impact. A good thing?  That’s debatable. Their activities can have a positive impact on businesses with lazy and self-serving boards. But they’re often out for a quick buck by stripping companies of their cash reserves through forcing share buybacks or getting them to indulge in “financial engineering”. An example of the latter was forcing companies to sell and lease back property portfolios. It was once quite fashionable but the long-term results weren’t always good-looking.

The report, unsurprisingly, urges boards to gear up and get ready. Sound advice. But longer-term shareholders should also take note. The activists have done well because more traditional fund managers have been lamentably poor when it comes to governance and engagement. If these absentee landlords aren’t careful, they may find their houses getting burgled and burned.

A bumpy ride for investors  on the low-cost airlines

 After the shadows cast over the sector by Ryanair’s second profit warning, Flybe cheered the City yesterday by reporting that it’s back in (the) black.

Unfortunately there was a sting in the tail: another 500 UK jobs are to go. Tough luck on the workforce, who have already seen a large number of their colleagues pushed out of the door. Without the cuts, we won’t be viable, says Saad Hammad, the new chief executive, who argues that shrinking the company is the only way it for it to grow long term. 

He may even be right. Unite is going to scrutinise his business plans to see if it can save any members, while pilots want the Government to reduce Air Passenger Duty, which disproportionately impacts on smaller, low-cost outfits such as Flybe.

That may be a pipe dream for a Government that’s short of cash, and short of imagination. Just ask the retailers who’d like to open new shops but can’t because they’ll be asked to pay more in business rates than rent on too many high streets.

Investors were giving the shake-up a thumbs-up. They shouldn’t be too quick to cheer. Low-cost airlines are finding life tougher now they’re mature businesses. Shareholders are enduring the same sort of roller-coaster rides they get with more traditional carriers. The stock goes down, then up, then down. If they’re really lucky, they’ll be able to get off at more or less the same point as they got in with nothing worse than a shaky stomach.

peopleFrankie Boyle responds to referendum result in characteristically offensive style
Life and Style
Couples have been having sex less in 2014, according to a new survey
New Articles
i100... with this review
Holly's review of Peterborough's Pizza Express quickly went viral on social media
footballTim Sherwood: This might be th match to wake up Manchester City
Arts and Entertainment
musicHow female vocalists are now writing their own hits
New Articles
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
Blahnik says: 'I think I understand the English more than they do themselves'
Arts and Entertainment
Michelle Dockery as Lady Mary Crawley in Downton Abbey
TVInside Downton Abbey series 5
Life and Style
The term 'normcore' was given the oxygen of publicity by New York magazine during the autumn/winter shows in Paris in February
fashionWhen is a trend a non-trend? When it's Normcore, since you ask
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam