Business Secretary Vince Cable has said the Coalition will “toughen up” on private contracts after the Government disclosed two major firms had charged the taxpayer to monitor non-existent electronic tags.
The Ministry of Justice announced yesterday that Serco and G4S – two of the country’s largest government contractors – would undergo investigation by the Serious Fraud Office over contracts dating back over a decade.
Between them the two companies receive around £1.5bn a year from the taxpayer, but their contracts are worth billions because the vast majority run for several years.
Their ongoing bids for public funds were put on hold last night as the inquiries into allegations that they have overcharged the public purse got underway.
Echoing the concerns of Justice Secretary Chris Grayling, who announced the investigation in a House of Commons statement yesterday, Vince Cable told BBC Radio 4’s Today programme this morning: "There's certainly something bad happened here. There is an investigation into criminal fraud and the Serious Fraud Office is looking at that.
"The Government has been looking very carefully at how it gets value for money and has judged that there is some overcharging taking place and we are trying to get down to competitive costs,” he said.
"So there is now very tough auditing of funding and these companies have been found to be overcharging and we are doing something about it. We are reviewing them. We haven't yet identified any contracts that are a problem, but certainly we are going through this very carefully now.”
Asked whether the scandal cast doubt over the Government’s policy of outsourcing state activities to private providers, Mr Cable said: "There are lots of success stories that you don't hear about but where there is bad practice and lack of care then obviously we've got to tighten up.
"I think one of the good side-effects of the financial crisis is that the Government has been forced to look much more carefully at public spending across the board and squeeze out value for money in every corner. That's what we are now doing and we've identified these areas where there were bad contractual arrangements and they are being toughened up.”
The shadow justice secretary, Sadiq Khan, has described the revelation as "truly shocking" and said the police should be called in to investigate Serco and G4S for potentially criminal activity. "There can be no cosy relationship with either company if we are to truly get to the bottom of these very serious allegations," he said.