George Obsorne - CEO of Britain PLC

“The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.” So wrote Karl Marx and Friedrich Engels in 1848. And today George Osborne confirmed how true this observation remains.

The chancellor, or should that be the chief operating officer (CEO) of Britain PLC, announced that firms involving in fracking – the highly-dangerous, controversial, ecologically-damaging extraction of shale gas – will only have to pay a 30% top rate on production.

That compares to 62% on new North Sea oil operations, rising to 81% for established offshore fields. Leaving aside for a moment that Osborne’s father-in-law is head of a lobbying organisation for big oil and gas companies, the position is clear.

The government, any government, will use its authority to command the state to do what’s best for business – often to the detriment of a particular community or society at large.

Desperate to create new energy supplies as North Sea oil runs down, the government is hoping that a shale gas bonanza is the answer to their prayers. Hence the tax breaks announced today.

Every day there’s another example of this ever-closer alliance with business that is the hallmark of this particular period of globalised capitalism. Last night, the UK’s state-owned blood supply was sold to a US-based private equity firm.

The Department of Health sold an 80% stake in Plasma Resources UK to a Bain Capital. This company was founded by Republican presidential candidate Mitt Romney, which paid £230m for a controlling interest.

This is consistent with the approach of all governments over the last 30 years. In 2004, New Labour prime minister Tony Blair said: “Our aim is to open up the system, to end the one-size-fits-all model of public service, which too often meant one supplier fits all, with little diversity, irrespective of how good new suppliers – from elsewhere in the public sector, and from the voluntary and private sectors – might be.”

In 2011, David Cameron remarked: “From now on, diversity is the default in our public services. What does that mean? It means that instead of having to justify why it makes sense to introduce competition, as we are now doing with schools and in the NHS, the state will have to justify why it makes sense to run a monopoly.”  

As a result, public services wholly provided for by the state are an increasing rarity. Today roughly £1 in every £3 that government spends on public services goes to contractors of one sort or another. That’s about £100 billion a year. That’s a bigger proportion than in any other country, the US included.

With the state lacking expertise in contract negotiating, let alone auditing what’s going on, the scene is set for creaming off the top, also known as scamming or gaming. Last week it was revealed that government contracts for tagging offenders held by G4S and Serco had been suspended.

The firms had been charging for tagging people who were either dead, in prison, or never tagged in the first place. Even this government had to act when the truth came out. This week, an extensive report by the Institute for Government into the outsourcing bonanza, gave chapter and verse on “gaming” by all sorts of agencies. The report noted:

“Such ‘gaming’ behaviours included excessive ‘parking’ of service users with complex needs and ‘creaming’ of users who are easier to support, and therefore more profitable to serve… Such gaming was most apparent in the Work Programme where the combination of low fees and specific design choices in the ‘payment by results’ system of reward acted to discourage investment in helping those who were less likely to get back into work swiftly.”

Choosing easier-to-pass qualifications is an education form of “gaming”, often used to maintain or attract fund. One head teacher told the researchers: “Schools that turn themselves around often do it… [by] exploiting tactics to improve exam results in the short term which are not about the experience that every child gets in every lesson.”

For Osborne and his corporate chums, however, it really is one big game which ends with directors and shareholders laughing all the way to the bank.

Paul Feldman

Communications editor

Market state wrecks public services

The ConDems’ health bill is part of a major shift in the role of the state that dates back to the Thatcher period and the onset of corporate-driven globalisation in the early 1980s. Rather than a roll-back of history, we need real alternatives to what is effectively a market state.

As local councils struggling with reduced budgets prepare to “outsource” huge swathes of their services, and GPs line up to commission health services from all and sundry, the so-called “public services industry” (PSI) is licking its lips.

The PSI is made up mostly of commercial companies, many of them global operators like Serco, as well as some “third sector” voluntary, non-profit organisations. Together they take taxpayers’ money in return for providing services formerly delivered by the state

By 2007, driven by the Blair governments, the PSI had grown to mammoth proportions (link) with revenues of £80 billion year, representing 6% of the economy and employing 1.2 million people. These figures are undoubtedly far higher now.

Lobbying organisations such as the CBI Public Services Strategy Board, the PPP
Forum, the Business Services Association and the NHS Partners Network (which is actually part of the NHS Confederation) have developed close relations with government and the media.

Contractors have recruited many former government ministers and senior civil
servants as directors and advisors. Former health secretary Alan Milburn took several jobs with private health companies after leaving office.

The NHS concluded a contract with Bridgepoint Capital’s daughter company, Alliance Medical, six months after Milburn joined the parent company. Under the contract, Alliance Medical agreed to supply 130,000 MRI scans, of which fewer than half were eventually used. The government was nevertheless compelled to pay the full £16m contract price. The full scale of the revolving door between Whitehall and big business was revealed by Transparency International in its report, “Cabs for hire”.

Failure by contractors in areas like health service data management, the upgrade of the London Underground and care homes has left the state to pick up the financial pieces. Twenty-two hospitals face bankruptcy because they cannot meet exorbitant “private-finance initiative” contracts. Even the ConDems have had to come to the rescue with £1.5 billion of taxpayers’ money.

The ConDems’ bill to restructure the NHS in England is the latest chapter in a 20-year journey from a planned system to a competitive market for the supply of health care services. This began with the development of the internal market in the 1990s and the New Labour government extended it with the introduction of “patient choice”, foundation trusts, payment by results and independent sector treatment centres (ISTC).

There are nearly 35 ISTCs now operating alongside the NHS, carrying out surgical and other medical treatment on the basis of local contracts. Information about ISTCs is hard to come by on the grounds of “commercial confidentiality”, but a British Medical Association report says:

“The BMA is concerned because what evidence does exist suggests that where patients’ care is bought and sold, and where hospitals, doctors, nurses and carers have to compete with one another like businesses, we find poorer health outcomes for patients, lower quality care, rising bureaucracy and the erosion of relationships where co-operation is replaced with competition.”

As the state’s role is to enhance the development of capitalism, none of this should come as a surprise. As opportunities for making profit out of producing things declined in Britain, markets in public goods emerged to compensate. The private sector in turn drove down wages and conditions when they took over. Now the ConDems plan to drive down wages in the public sector to create a “level playing field” with big business.

Outsourcing state services is a project that all the major parties have championed. So returning to some mythical golden age of state ownership and provision is impossible. Instead, we need strategies aimed at ending the rule of the market state altogether, with policies and plans that shape a democratic future beyond profit and capitalism.

Paul Feldman
Communications editor

Privatisation by stealth set to soar

Whatever the result of the general election, private sector corporations are eagerly looking forward to getting their hands on larger and larger areas of public services as state spending comes under pressure because of the budget deficit.

The trend was set as soon as New Labour was elected in 1997 when prime minister Blair declared that what mattered was “what worked” – not what sector the service was in. Within a short period, contracting out in Britain surpassed every other major industrial country in its size and scope.

Total British government expenditure stands at about £620bn, of which just over a fifth is contracted out to companies operating for profit. You name it and the private sector is involved. They clean your streets, maintain social housing, run prisons and detention centres, train military pilots, transport prisoners, collect parking fines, maintain databases, inspect schools, administer the criminal records bureau and collect TV licence fees.

This is in addition to full privatisation of public services, as well as the so-called public private partnerships (under which the London Tube system is part-privatised) and private finance initiative (PFI) partnerships. Under these, the private sector build new projects like hospitals and schools which they then lease back to the public sector at vast expense because the state picks up the interest on the finance.

With all the major parties promising to cut state spending and find cheaper ways to run services, the leading companies in the field are rubbing their hand with glee. Their shares on soaring as the market anticipates rich pickings.

Shares in Capita, the back-office specialist, closed at 796p on Friday, a record. Shares in Serco, which runs prisons and welfare-to-work schemes, are at their highest since November 2000. The firms have told the parties that they can run services 30% cheaper. “There is almost no area of public services where we wouldn’t be able to help provide efficient and quality services,” said Chris Hyman, chief executive of Serco.

Local authorities account for a fifth of Capita's business, which describes itself as “the UK’s leading outsourcing company”. Outsourcing is increasingly being applied to "frontline" services. Recently outsourcing firm Tribal Group announced it had won a £64m five-year contract from the government funded education inspection body Ofsted to inspect almost half of England's nurseries.

“It will be a really great opportunity,” says Ruby McGregor-Smith, chief executive of Mitie, the facilities management group whose contracts include providing security services for courts across the UK. “I think the challenge can be met.”

In 2008, the DeAnne Julius report commissioned by the government estimated that services outsourced to the private sector cost 20% less. The explanation is obvious. The “savings” are more often than not achieved by cutting jobs and hiring new staff on inferior pay and conditions.

Dubbed “stealth privatisation” by trade unions – whose leaders have done precious little to resist the process – the prospect of an even larger market in the near future has produced a spate of mergers. Babcock, which makes most of its profits from defence contracts, has taken over VT, formerly Vosper Thornycroft and once famous for shipbuilding, which reinvented itself as a provider of services to cash-strapped government and local authorities in a bid to diversify its business.

With all the parties capable of forming a government after May 6 committed to contracting out, oursourcing, private-public partnership – call them what you will – it is just one more reason that the election is a fraud. The best thing you can do in these circumstances is hang on to your vote and instead use your energy to begin to create real democratic politics and a society where services are provided because they are needed.

Paul Feldman
Communications editor