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Outsourcing: Scamming the system

Written By: - Date published: 9:32 am, July 19th, 2013 - 21 comments
Categories: capitalism, democracy under attack, education, employment, john key, national, poverty, prisons, Privatisation, uk politics, welfare - Tags:

Recent legislation by the NZ government is resulting in more necessary and basic public services being outsourced to being run by private entities. With this in mind, it is sobering to read a new report on the UK government’s extensive “outsourcing” (of public services) programme.  The report is by a think tank, Institute for Government (IfG), that includes some people with academic backgrounds as well as a few people who worked with Blair’s government.  The report exposes major ways that outsourcing contracts are “gamed” (meaning scammed) and the negative impacts of the outsourcing being monopolised by two main players, G4s and Serco.  However, rather than call for outsourcing to be scrapped, the report recommends that the government slow down its outsourcing programme, and tinker with it to improve the regulation and oversight.

The report is by a think tank, Institute for Government (IfG), that includes some people with academic backgrounds as well as a few people who worked with Blair’s government.  The Independent of 18 July, lists these major findings (among others) from the report:

* Private care companies sending residents to hospital for minor conditions – developing a mentality of “just ring 999” to transfer costs on to the NHS.

* Private contractors cutting corners in the Government’s welfare-to-work programme by “parking difficult cases” and “creaming” money for getting people into work who would almost certainly have done so without their involvement.

* Significant concerns that plans to outsource the probation service will not be cost-effective and private companies could be paid for work carried out by local authorities and the NHS.

The scamming of the UK welfare-to-work programme is particularly concerning for for NZ, as our government has just brought in significant changes to the welfare systems. As Simon Collins and Teuila Fuatai report in the NZ Herald:

A further 1000 sole parents and 1000 people with mental health problems will be handed over to contractors who will be paid from $2250 to $16,500 for each person they place in employment for at least a year.

The Independent article says of the IfG findings on the welfare-to-work programme:

The report found particular concerns with the Work Programme, where private companies are paid by results to get the long-term unemployed back into work. It found companies regularly playing the system to ensure they made money. One expert adviser told them: “If providers cannot make money doing the things you expect them to do, they will make money by doing the things you don’t want them to do.”

One director of a Work Programme contractor added: “These contracts are on the edge of being financially viable. You have to aggressively cream and park.”

[…]

Providers were also cutting costs by using “group sessions” and telephone calls rather than face-to-face contact. Providers claim the low fees paid by the Department for Work and Pensions (DWP) discourage them from focusing on more challenging groups.

The IfG report also indentified the tendency for a couple of private companies to dominate, particularly G4S and Serco.  These two companies have already been facing criticisms for scamming outsourced public sector work:

The report comes just days after the Government placed all the contracts held by two of the UK’s largest outsourcing firms, G4S and Serco, under review, after an audit showed they had charged for tagging criminals who were either dead, in prison, or never tagged in the first place. The two firms are the major private players in both the privatisation of the criminal justice system and the Work Programme. Experts say it is difficult to see how any further large-scale outsourcing of police, probation or prison projects can succeed without their involvement.

The IfG are wedded to the philosophy of market solutions to social needs and problems.  However, this just encourages profiteering, over putting the care of people first.  David Walker is onto this in the UK Guardian of 18 July:

In politics, ideological conviction remains intact. Tory commitment to ‘the market’ is untouched and shrinking the state and outsourcing the state go hand in hand. Labour, so keen on contracting when in power, is still on board. Contractors retain their friends in high places, including NHS England. Their lobbying power is formidable.

Walker also points out that government contractors (like G4S and Serco) are becoming quite dependent on public sector work. He continues,

And yet they may still be facing a moment of vulnerability, even danger – at least in balance sheet terms. If £1 in £3 of public service spending now goes through contractors, you see ratios of up to 75% in contractors’ dependence on the state (not just UK central government of course). Tony Travers of the London School of Economics calls them ‘para-statal’, not so different from arm’s length bodies or quangos.

As with the privatisation of Whanau Ora, the accounts of private contractors are less open to public scrutiny than if the public sector work was being done by in-house state agencies.

Walker concludes his article with the question that the IfG report doesn’t ask:

On a genuine like for like basis, do private companies provide a better service – defined qualitatively or by price? Perhaps no such general formula is possible, perhaps too much depends on the detail of commissioning or the specifics of the sector (social care will always be very different from bin emptying). But the absence of the algorithm makes the entire debate somewhat flaky – and prey to the ideologues.

The same can be said of all the outsourcing that Key’s government is initiating.

Wanted Poster Paula Bennett large

21 comments on “Outsourcing: Scamming the system”

  1. paul andersen 1

    I am trying to figure out how I can tap into whanau-ora and relieve the tax-payer of some(lots) dosh. If I could tie it into a charter school,I could really clean up.If I rorted the government of enough,I might even bag a knighthood.!! score!!!

    • One Anonymous Knucklehead 1.1

      Step one: contact your local National MP and tell them you want to make a sizeable donation in exchange for some government contracts – you can always pay the bribe later when the money comes through.

      • Dv 1.1.1

        A better plan would be to offer the donation for the exchange AND then not pay it.

      • ghostwhowalksnz 1.1.2

        That would get you rebuffed in an instant-they arent that silly

        The way to really make it work is to call the local national electorate chair, who will be your conduit – for a cut of course- to the party HQ and then to the top cabinet members.

  2. AsleepWhileWalking 2

    There is nothing much to add to your article except my complete agreement with the concerns you raise.

    The 1000 test batch of beneficiaries should be carefully scrutinized as the contractors will surely be on their best behavior – after all, if the preliminary results look bad they will lose out for future contracts. Whatever issues arise it now seems obvious that Work and Income will be hell bent on implementing the policy as we have seen happen with the drug testing (that according to GETS/NRT beneficiaries will be expected to pay for themselves) strong objections were raised by the Ministry of Health but ignored in favour of ideology.

  3. red blooded 3

    +1

    having said that, out-sourcing has been going on for years, including under the last Labour govt. I remember attending policy development seminars focused on the curriculum and assessment for secondary schools about 8 years ago, and they were convened by ‘consultant convenors’ with no link to the education sector at all. They didn’t understand anything about the issues under discussion and were spokes in the wheels rather than facilitating useful discussion and decision-making. Ditto with the original development of NCEA – there was a deliberate policy to exclude teachers from decision-making because of what was termed “provider capture”. Sheer idiocy, and getting even worse with schemes like charter schools.

  4. johnm 4

    The U$K is a steadily worsening disaster: they trying to privatise everything including the NHS. The Artist Taxi Driver puts it as Transferring public money into private hands ( Outsourcing). He covers these issues passionately and thoroughly.
    http://www.youtube.com/watch?v=xhv8qwS0kuY&feature=c4-overview&list=UUGThM-ZZBba1Zl9rU-XeR-A

    Post WW11 the UK was a very poor country with an immense debt owed to the US for the war effort. Yet a socialist system was brought in of the NHS and security in misfortune with a benefit system. Mostly everyone wasn’t rich and there was no feeling of greed to get more than your fair share. No speculative Capital Gain Housing Bubbles for instance.Despite that basic life style for everyone the UK was a happy country and the 60s and 70s were a period of growth and almost full employment.

    Then Thatcher got in and the rot of greed and privilege took off again and the UK’s socialist system was attacked and destroyed and the process is reaching the bitter end now with outsourcing and privatisation of the NHS. The U$K rotted by the greed for unearned wealth especially in the City where Shonkey worked For Merrill Lynch is a miserable place now without hope or optimism for those who didn’t grab their bit of pie. Look at the riots? Almost certainly there’ll be more unrest.

    basic point is Shonkey is b@ggering our society the same way! If Camoron can do it so can he, both are from the same stable of greedy wretches for a society of winner takes all. For a refugee from Nazi Austria his policies will turn many kiwis into destitute refugees in their own homeland. The guy’s evil in that he doesn’t know any better, he has no concept of the commonwealth or socialist principles.

  5. I find it really bizarre that they keep following these techniques even after they’ve proven to fail …we in NZ then seem to pick up and run with them even though they’ve already failed elsewhere…. Crazies running the show

    • karol 5.1

      Well, they certainly fail public sector services. The key part of the articles I quoted is this:

      One director of a Work Programme contractor added: “These contracts are on the edge of being financially viable. You have to aggressively cream and park.”

      Private businesses aim to make a profit. It’s not possible to make a profit out of public services without cutting corners one way or another.

    • QoT 5.2

      It’s only bizarre because you assume the goals of these techniques are the ones they publicly mention.

  6. Everyone appears to be scamming the system, yet people seem to get the most angry when it is poor people who are being accused of it.

    Foreign Exchange: meh
    Libor: meh
    Banks: meh
    Ratings Agencies: meh
    Out Sources Companies: meh

    Sickness Beneficiary works for one hour more than they’ve declared: GET that bennie and HURL them off welfare they should STARVE The audacity of those beggars! SNARL

    • Draco T Bastard 6.1

      +1

    • tinfoilhat 6.2

      +1

    • emergency mike 6.3

      BL you have to understand that the people you are talking about own the system. So if they want to cheat, well that’s just fine, that’s what the system is for after all, to make them more rich. (Just try to be discrete about it please, we’ve got an illusion to maintain here folks.)

      The slaves however, they can’t be allowed to cheat. Because then there wouldn’t be a system at all. And that just wouldn’t do!

      • Draco T Bastard 6.3.1

        +1

        The double standards amongst the rich would be truly awe-inspiring if it wasn’t so sickening.

      • blue leopard 6.3.2

        @ Emergency Mike,

        That is the problem in a nutshell.

        It is my view (although am aware the point is debatable) that the people who ‘own the system’ now have not always owned it, I believe they have taken advantage of their positions, taken over and corrupted it and in doing so are burning their own nests (along with everyone elses’ first).

        I guess this view assists me in the thought…hope… that this sorry state of affairs can be rectified. :(

  7. the pigman 7

    Good article Karol. Although the Institute for Government sounds like the kind of think-tank that might promote, well, big government (which I have no objection to) this issue needs to be brought into the MSM narrative.

    I saw it first-hand in the UK working as a child protection lawyer. Social workers would palm off parents for “parenting capacity assessment” reports at shitty, inadequately-staffed private residential facilities (for the cool price of something like 50, 000 pounds a month IIRC) run by social workers who’d had enough of being drastically underpaid working at their local authorities. Had one mum stuff her newborn baby between the bed and the wall while being “assessed” and receiving “24 hour monitoring and parenting support” from the staff at the private facility. 1 dead baby, 0 accountability from the private residential facility.

  8. instauration 8

    It is Coming…
    The whole 9 metres of asphalt.
    Instauration usurps Insurrection.

  9. The Coming Instauration 9

    So many un-engaged.
    So much to do.

  10. lenore 10

    “Private contractors cutting corners in the Government’s welfare-to-work programme by …“creaming” money for getting people into work that would almost certainly have done so without their involvement.”
    That cuts both ways though. When I worked for a small org working to support people back to work. I was always seeing the best outcome was for these people getting the skills, confidence etc to do it themselves. When they did, Work & Income or ACC would just say well they did it themselves, why should we have to pay you? Yes they did it themselves – isn’t that the whole point that we want to build people’s competencies so they are independent of having to get ongoing support by orgs such the one I worked for. Some of the case managers only saw outcomes if we had directly played the part and that was frustrating to me as it often meant that those people still may not have the competencies and it continued the dependence.

    Also we have to be careful not to lump everything as bad. I actually found a mixture of group, face-to-face and technology was useful. If you do it right, the group becomes a team and especially for people really isolated, they build up their own resources within the group. I remember one group of mainly guys and they talked about stuff they couldn’t talk to others about. So it depends upon the purpose and motivation. Heaps of the people I worked with weren’t tech savvy so getting them confident on the phone – say when they are getting a phone interview was also part of the whole development of competencies.

    I am out of that whole area now because Work and Income and ACC made it too difficult to be client centred and it was more about getting people off the books. Which leads me to one of my pet hates.
    What pisses me off is that all governments are/have been dishonest and continue to hide unemployment and under employment by taking people off the books when they go on short term courses. We used to run an 8 week course and as far as I was concerned, these people were still unemployed/underemployed looking for work. Yet they would not be counted while on the course.

  11. captain hook 11

    Of course its a scam. The ideology says that governments cant do anything properly but in the meantime a whole cohort of leeches and nitwits have profited by siphoning our money out of the system. Its all about stealing off the treasury and they cant or wont do anything about it.

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