The Serious Fraud Office (SFO) is conducting a criminal investigation into Serco (and G4S) regarding electronic monitoring contracts – specifically concerning the tagging of prisoners. Although the case was opened and announced in 2014, the case is still ongoing, and is listed under ‘current cases’. Serco is reliant on the UK public sector for half of the group’s sales: £1.2 billion last year. As a “strategic supplier”, Serco’s contracts include running prisons, Royal Navy tugs and the Atomic Weapons Establishment.
Labour’s Richard Burgon has written to justice secretary David Gauke to express concern over the appointment of a new junior minister who previously worked for the outsourcing giant Serco – which is under criminal investigation for overcharging Gauke’s own department.
In 2013 Serco agreed to pay £68.5 million for overcharging the Ministry of Justice. There were allegations that the government had been billed for the electronic monitoring of people who were still in jail, were not tagged anymore, or were even, in a few cases, dead. Serco also had to pay back £2 million over claims of fraud concerning its prisoner transfer contract. In May 2014 a Survation poll for campaign group We Own It, found that 63% of respondents thought Serco should be banned from bidding for any new public contracts after the firm was investigated for overcharging on government contracts.
Despite the ongoing criminal investigation, it’s rather worrying that Serco continues running one of its most lucrative operations after it was announced in 2016 that the struggling government contractor was to retain its role in the manufacture and maintenance of the warheads for Britain’s Trident nuclear deterrent, and in the storage of UK atomic waste, especially given claims that the company has “mishandled” the disposal of nuclear waste.
After months of contractual wrangling in which investors had feared that Serco and its joint venture partners would lose the work, the Ministry of Defence announced that it is keeping the contract to run the Atomic Weapons Establishment, based at Aldermaston, other sites in Berkshire and at Coulport in Scotland.
It was revealed in the Paradise Papers that Appleby, an offshore law firm, regarded Serco, who run “sensitive” government services in Australia and the UK, as a “high-risk” client, expressing concern about its “history of problems, failures, fatal errors and overcharging”. The company had also presented false data to the NHS at least 252 times, was accused of fraudulent record keeping and had allegedly manipulated results when it failed to meet targets, Appleby’s compliance team warned.
In health services, Serco’s ‘difficulties’ include the poor handling of pathology labs and fatal errors in patient records. At St Thomas’ Hospital, the increase in the number of clinical incidents arising from Serco non-clinical management has resulted in patients receiving incorrect and infected blood, as well as patients suffering kidney damage due to Serco providing incorrect data used for medical calculations. A Serco employee revealed that the company had disgracefully falsified 252 reports to the National Health Service regarding Serco health services in Cornwall.
On 24 October 2017, it was reported that Serco was preparing to buy healthcare contracts from facilities management business Carillion. The deal included 15 contracts, with annual revenues of approximately £90m, for which Serco would pay £47.7m, with Carillion losing £1bn from the value of its order book.
Chief among the law firm Appleby’s concerns about Serco were the numerous allegations of fraud, the cover-up of the abuse of detainees, and the “mishandling” of radioactive waste in the UK.
Serco say: “Within the UK and Europe we work across public service sectors in Justice, Immigration, Healthcare, Defence, Transport and Citizen Services. From providing critical air navigation services for our aviation customers to pursuing innovative approaches to reduce reoffending in our prisons, we seek to transform the experience of our services users”. The company have a finger in many lies.
Edward Argar, Conservative MP for Charnwood, has replaced Phillip Lee at the Ministry of Justice (MoJ) following Lee’s resignation last week over the way Theresa May is delivering Brexit. He is ex-head of UK and Europe Public Affairs at Serco, working there until nine months before he was elected as MP for Charnwood in 2015.
Argar was previously head of UK and Europe public affairs at Serco, which has a number of prisons contracts and previously ran Hassockfield Secure Training Centre, in County Durham, prior to its closure in 2014. Serco runs a total of five private prisons on behalf of the MoJ – Doncaster, Ashfield, Dovegate, Lowdham Grange and Thameside. Doncaster was criticised by inspectors in 2016 who found vermin infestations and “overwhelmed” staff.
In September 2013, Serco was accused of extensive sexual abuse cover ups of immigrants at Yarl’s Wood Immigration Removal Centre prison in Bedfordshire. In August 2014, Serco, along with G4S, was criticised for using immigrant detainees as cheap labour, with some being paid as little as £1 per hour.
The decision to give the company a new £70 million eight-year contract to run Yarl’s Wood has been criticised. Natasha Walter, of Women for Refugee Women, said “Serco is clearly unfit to manage a centre where vulnerable women are held and it is unacceptable the government continues to entrust Serco with the safety of women who are survivors of sexual violence.”
In January this year, a damning report by the Commons Public Accounts Committee described the programme – by this point five years late and £60 million over budget – as “a catastrophic waste of public money which has failed to deliver the intended benefits.”
Argar’s new role will include overseeing the establishment of proposed “secure schools” as part of efforts to place a greater focus on the education and rehabilitation of young offenders.
Argar’s voting record reveal a staunch and mean neoliberal, who believes, unsurprisingly, that the government should make the asylum system more ‘strict’ and should be ‘tough’ on illegal immigration. He strongly supports academy schools, austerity; welfare cuts, including the bedroom tax; mass surveilance and of course, increases in the tax-free allowance. He supports the replacement of Trident 100%, too, which is also unsurprising, given Serco’s role in the nuclear industry. He’s not so keen on equality and human rights legislation, however.
Labour’s shadow justice secretary Richard Burgon has quite rightly asked whether Argar will be dealing with any contracts related to his former employer as part of his work.
The letter, sent on 15 June by shadow justice secretary, Burgon, says: “It is essential that government ministers can command public confidence that they are capable of holding such companies [as Serco] to account.”
It goes on to ask whether “Mr Argar will be involved in any way in liaising on behalf of the Ministry of Justice with the Serious Fraud Office about the ongoing investigation” or “dealing with any of the ministry’s contracts with Serco in his new ministerial capacity”.
The campaign group Transparency International has said that the government should have “mechanisms” in place to avoid the possibility or perception of any firm ‘gaining an advantage.’
Research manager Steve Goodrich said: “When appointing new Ministers it’s imperative that all real or potential conflicts of interest are fully scrutinised and addressed, and mechanisms are in place to avoid any decisions made in the interest of previous employers.
“Failing to do so can lead to the perception or reality that a Ministers may seek to put private interests first at the public’s expense.”
An MOJ source stressed: “There is no conflict of interest simply because someone has worked for a particular employer earlier in their career.
“The Government benefits by having Ministers with a breadth of previous experience.”
And big business benefits by having Ministers in government with a breadth of big business experience, who vote on issues that affect and promote big business interests.
The Ministry of Justice has declined to comment further, when asked if any mechanisms of transparency and accountability would be put in place, but said that Argar had been appointed “in line with normal procedures and rules.”
You can’t help but wonder just how many catastrophic failures it will take to demonstrate conclusively to an ideologically paralysed government that in reality, existing public services markets are a far cry from the paradigm of ‘competitive efficiencies’ in perfect markets. Serco alone has perpetrated more scandals than a public agency would have ever survived. Yet this government has rolled over hundreds of major outsourcing contracts in 2017 without review, many of them 10 years long, because of the current Brexit workload.
Within the neoliberal idiom of public services, there is clearly a fundamental inability to consider collective public interests because of the private profit motive.
You also have to wonder what part of this idiom constitutes “sound public finance.” Yet despite the clear wake of crises thrown up by a fatally flawed outsourcing model, the government stumble on dogmatically, hiding their own ideological reach behind a privatised wall that completely blocks out transparency and democratic accountability.
The companies profit, while all of the risks of privatisation are carried by citizens using the diminished, ‘streamlined’, ‘efficient’ facade services. Meanwhile, democratic transparency and accountability is denied; due to the ‘commercial sensitivity’ of private companies, they cannot be held to account by public appeals to the Freedom Of Information Act (FOI), debarring openness and transparency – the essential foundations for democratic decision making.
Here is Richard Burgon’s letter in full:
Dear Secretary of State,
I am writing about the appointment of Edward Argar MP yesterday as a Justice Minister following the resignation of Dr Phillip Lee earlier this week.
Press reports today state that Mr Argar was formerly Head of Public Affairs in the UK and Europe for Serco, the outsourcing giant. A Serco spokesperson confirmed to the media that Mr Argar was employed there for over three years until August 2014.
As you know, Serco plays a significant role in our justice system, including by running five private prisons and in transporting 24,000 prisoners per month to court through the Prison Escort Contract.
The role of the private sector in our justice system is increasingly contentious given the widespread performance failings, for example in the probation service and in detention centres for young people such as Oakhill.
Serco itself has a controversial record in our justice system. It is currently under criminal investigation by the Serious Fraud Office for overcharging in an offender tagging contract. In 2013 it was forced to repay £68.5m to the Ministry of Justice after having charged for tagging offenders, some of whom had died or were back in prison. In addition, Serco previously had to repay £2m to the Ministry of Justice after being found to have falsely recorded prisoners as having been delivered to court on time.
It is essential that government ministers can command public confidence that they are capable of holding such companies to account, that the interests of the public, and not the profits of the corporations, are being put first and that there is no perceived conflict of interest.
Given this could you confirm whether Mr Argar will be involved in any way in liaising on behalf of the Ministry of Justice with the Serious Fraud Office about the ongoing investigation or will be dealing with any of the Ministry’s contracts with Serco in his new ministerial capacity?
Richard Burgon MP
As I’ve said elsewhere, in the UK market economy, everything is for sale, with the very wealthiest people finding considerable discounts on moral obligations and behavioural ethicality. It’s become very easy to lose track of why some things simply shouldn’t be. The Conservative’s privatisation programme has proved to be a theme park for economic crime and party profit; firms and politicians collude to ensure we have the ‘best’ system that money can buy. It’s a system, however, that is incompatible with democracy and human rights frameworks.
We hear a lot from the new right fundamentalists about how the market place extends ‘liberty’, but there is little discussion about the fundamental imbalance built into the system that has systematically disempowered many others who can’t afford to pay for their liberty. Or their legal fees and penalties. The market place is not neutral. It’s a place where class discrimination is rampant, traditional power relations are fortified and morally constrained behaviour is only ascribed to and required from the poorest citizens. All of this has profound implications for democracy.
‘Public choice’ economics has shaped the neoliberal reforms to the civil service and public institutions, resulting in the slippery sloped internal market in the NHS, the dismantling of the welfare state and outsourcing of many other state functions, student fees in higher education, the destruction of social housing, legal aid provision and the deregulation, bonfire-of-the-red-tape approach of the pro-market regulatory agencies of many other areas of public life, including the financial sector.
The wake of scandals to date, in which large corporations more generally, politicians, and bureaucrats have engaged in criminal activity in order to profit personally, facilitate mergers and block competition; in which officials accept private payments to facilitate private interests, and for public services rendered, demonstrates only too well the extent to which corruption is driven by the very economic and political reforms that are claimed to decrease it.
Neoliberalism and corruption: hidden in plain sight
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9 thoughts on “Serco, government contracts and the new minister for justice: what could possibly go right?”
Rigorously researched, compellingly argued and great to read, as ever. Thanks, Kitty.
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Excellent article. It illustrates all too clearly why public sector services should not be subject to the ‘market place’.
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hmm fraudulent just like our government backhanders bribes you name it any other country these crooks would be sorted out but on it goes justice isn’t for the peasants while they fleece us rotten jeff3
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