Is Whitehall still letting profit hungry contractors off the hook to rip off the state?

Chris Grayling: His £400m gift to contractor's profits sparked a pathetic clampdown pic courtesy: BBC

Chris Grayling: His £400m gift to contractor’s profits
sparked a pathetic clampdown pic courtesy: BBC

Remember the major row over  justice secretary Chris Grayling’s “poison pill ” contract to privatise the probation service. This allowed  the successful bidders to walk away with up to £400m profit on a ten year contract should an incoming Labour government have the temerity to cancel it if they won the next election.

Grayling  not so innocently said that this was just normal Whitehall practice. Margaret Hodge, the chair of the Commons public accounts committee said it was “It is not value for money. It is unacceptable and must be challenged before the event.”

She demanded something be done and now the Treasury have responded. They have written to every accounting officer of every ministry and every government agency laying down new guidelines. You can read the letter here and see my news article in Tribune this week.

In my view the response is particularly pathetic and certainly not nearly hard-hitting enough to protect taxpayer’s money.

Of  course accounting officers are reminded that they must consider value for money and must be able to justify such decisions but it does include some  remarkably helpful  “get out “clauses that allow such deals to continue.

One  says they should consider: “whether it is likely that, if the public body terminates the contract for policy reasons, the supplier would have a legal case to claim even without the clause being in the contract.” Well it might but I would be amazed if a judge allowed them to keep all projected profits.

They are also expected just to ask rather than instruct companies “whether the market be willing to bid without such clauses, particularly when outsourcing for the first time, or establishing a new market.” And they should ask whether such a deal is “normal practice in this area of business.”

To me this seems an open invitation for private contractors to say, of course it is, where if they had a private contact with another private firm, they would lucky to get all the money back if the other company just collapsed.

It is only that the Government cannot go bankrupt that they are in a position to negotiate such terms.

Now of course accounting officers could refuse to sign such one-sided contracts in the first place and demand the minister in charge directed them to do so. But in fact remarkably few permanent secretaries and chief executives  ever do this. They can be counted on the fingers of one hand in any financial year.

Once again this coalition government is running the country for the benefit of private companies not for the taxpayer or even to the benefit of the ordinary public.

 

 

6 thoughts on “Is Whitehall still letting profit hungry contractors off the hook to rip off the state?

  1. I don’t wish to trivialise your article, DH; but Grayling, in full profile, gets to look more like Humpty Dumpty all the time. With that job you’d think he’d take to wearing a Mozartian wig

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    • Partly because I am heartily sick of hearing, thinking and writing about outsourcing, let me trivialise this even further, and point out Grayling looks increasingly to me like Vic Reeves’ rather smug, bald, older brother. Disclaimer: if Vic Reeves has an older brother, I am not suggesting he is smug, and apologise for the comparison.

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  2. PS re Grayling: with a higher court fee and applications intended to be reduced, it takes the Admin Court staff three weeks and more to open a judicial review file and get papers out to be served. You have to issue at most 3 months after the decision to be reviewed; and his staff have a 1/4 of that period (and more) to perform some very basic admin tasks.

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