Friday, July 12, 2013

Contracting out means fraud

One of the big trends in public services in the last twenty years has been "contracting out" - handing over core services to outside providers, who supposedly run them cheaper. We do this in New Zealand with some welfare and disability services, but the real leader in the field is the UK, where they contract out everything from helping beneficiaries to get jobs to deporting refugees. The two biggest providers of such services are G4S and Serco. And both are now being investigated by the Serious Fraud Office for massive fraud in their contracts:

Whitehall contracts running into billions of pounds are being urgently reviewed after the Government disclosed that two major firms had charged the taxpayer to monitor non-existent electronic tags, some of which had been assigned to dead offenders.

In an announcement that throws the Coalition's privatisation drive into disarray, the Serious Fraud Office was called in to investigate G4S, the world's largest security company, over contracts dating back over a decade.

Serco, one of Britain's largest companies, also faces an inquiry by auditors over its charges for operating tagging schemes.

The firms supply an array of services to the public sector from running courts, prisons and immigration removal centres to managing welfare-to-work schemes and the Atomic Weapons Establishment.

This isn't an isolated incident: last year Serco was caught falsifying its performance data on a healthcare contract. The upshot: fraud simply seems to be a standard way of doign business for these companies (though G4S does murder as well).

But this isn't just about the UK. Serco runs a prison for us in New Zealand. And if fraud is their normal business practice in the UK, we should assume it will be happening here as well.

Contracting out doesn't just mean we lose control. It also removes the public service ethic and replaces it with the profit motive. And in the case of these large multinationals, this seems to lead inevitably to fraud, as they try and scam more money to meet the demands of their rapacious foreign shareholders. We don't need to expose ourselves to this risk. If we have government services performed by government, then there's no incentive for this sort of fraud, so it doesn't happen. The choice is entirely up to us.