G4S agrees to pay back £109m over electronic tagging scandal

Government upholds ban on G4S winning new contracts despite tagging deal

Nigel Morris
Wednesday 12 March 2014 10:56 GMT

G4S has agreed to pay nearly £110m back to the taxpayer following a scandal in which it charged for the monitoring of non-existent electronic tags, including some which had been assigned to dead offenders.

The private security giant, which reported a pre-tax loss of £170m in 2013, had had an earlier offer of £24.1m plus VAT rejected by the Ministry of Justice (MoJ).

Chris Grayling, the Justice Secretary, announced the department and the company had agreed a settlement of £108.9m plus VAT to cover overpayments for tagging and prisoner escort services.

It includes £4.5m which relates to G4S contracts to operate court buildings. Both this and the tagging contracts have been referred to the Serious Fraud Office.

Mr Grayling said the payment represented a “good deal” for the taxpayer as it recovered all the money owed to the MoJ.

The repayment will comprise £75.9m in cash and credits of £33m. An exact figure after VAT has been added has not been disclosed.

The world’s biggest security company will hope the payment draws a line under the episode, in which it charged the state over many years for tagging offenders who were actually dead, back in prison or did not even exist.

However, Mr Grayling said the department would consider whether it was owed further cash if police decided to bring criminal charges against G4S.

The other firm caught up in the tagging scandal, Serco, has agreed to pay back £70.5m plus VAT.

The Cabinet Office is reviewing 28 contracts worth around £9bn held by G4S and Serco, including work operating private prisons and running welfare-to-work schemes. The episode raised questions over the Coalition’s drive to outsource work to private contractors.

A ban on G4S bidding for new Whitehall contracts will not be lifted by ministers until they see evidence of “corporate renewal”.

The cost of overhauling the business since the tagging scam was exposed contributed to G4S reporting an £170m annual loss, compared with a £158m pre-tax profit in 2012.

Its chief executive, Ashley Almanza, who last year replaced Nick Buckles as chief executive officer, admitted that the company had achieved “barely any growth” in Britain during 2013. He added: “The reasons for this are well-known.”

G4S also suffered severe damage to its reputation after its failure to fulfil its contract to provide enough security staff for the 2012 London Olympics, forcing the Government to draft in members of the armed forces at short notice.

Mr Almanza said: “We have repaid all amounts overbilled and have implemented significant changes to strengthen contract management and controls and to ensure our business is always conducted in a manner which is consistent with our group values.

“We believe the conclusion of this matter, together with the actions we are developing on corporate renewal, will enable us to maintain our position as a strategic supplier to Government.”

Sadiq Khan, the shadow Justice Secretary, said: “This large sum of money G4S are repaying taxpayers shows the true scale of the wrongdoing that went on. This, in addition to its poor performance on a number of other contracts, has led to huge damage to the public’s confidence in our criminal justice system.”

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