Does all this outsourcing really represent good value in terms of quality or cost?

Both companies rely on government contracts, but G4S has business in 125 countries

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The Independent Online

One might have thought the reputation of G4S couldn’t get much worse after it failed to hire enough staff to handle security at last summer’s Olympics, resulting in troops just back from Afghanistan having to pick up the slack, but au contraire. The claims of over-charging on contracts for tagging prisoners mean that, if they are proved true, it could plumb depths not seen since G4S was plain old Group Four and a target of stand-up comedians, thanks to a run of howlers when it was transporting prisoners (it took them to the wrong prisons at times, if they even got there).

Unsurprisingly, shares in both G4S and the similarly accused Serco immediately came under pressure in the City, amid fears that the revelations would cast a pall over both of them when it comes to bidding for future work. It surely ought to.

Companies like G4S and Serco rely on government contracts. However, Serco is much more reliant on British taxpayers’ pounds (45 per cent of its revenues, according to JP Morgan Cazenove) than is G4S (8 per cent). The latter has become a truly multinational business with operations in 125 countries. Such an event in its home market is very embarrassing (as was the Olympics fiasco). It could still prove quite costly, given the way government spending with G4S has been growing.

But – and here’s the thing – it is not going to threaten the dividend when taxpayers in Asia and the US are there to pick up the slack. City analysts may tweak their numbers a bit but G4S may very well feel it can thumb its nose at Chris Grayling, the Justice Secretary, who ignited the firestorm.

Perhaps the worst it will suffer is the need for another name change. So if you haven’t registered as a domain name, you should hurry because you might be quids in if you do.

Perhaps this all goes some way towards explaining the markedly different responses from the two firms to Mr Grayling’s fulminations. While G4S says it has done nothing wrong, Serco has agreed to assume the position.

Mr Grayling will no doubt say he is asking tough questions, but what he probably won’t do is ask the questions that ought to be asked  – namely, whether the mania for outsourcing to companies like these, and others that have grown fat off our taxes, really represents good value in terms of quality or cost. It is episodes like these we ought to remember when people like the Education Secretary, Michael Gove, talk about handing schools over to profit-making enterprises. Would you want to be sending your son or daughter to G4S First School? The very thought of it makes my blood run cold.