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plundering the private sectorHow consultancy giants have plundered the public sector

Review by Gerry Gold

This eye-popping account unravels the accelerating infiltration of government and public services by management and IT-systems consultants. It reveals the means by which vast and spiralling sums of taxpayers’ money have been, and are continuing to be laundered through a catalogue of largely catastrophic public sector projects.

David Craig shows how unregulated, profit-maximising transnational outfits like McKinsey, KPMG, Deloittes, PriceWaterhouseCoopers and PA Consulting have grown fat on the proceeds. By the end of its third term of office New Labour will have spent an estimated £70 billion (close to a year’s budget for the NHS) on a succession of management and IT consultancy projects.

The growing influence of transnational and global corporations on government policy became the signature of capitalist globalisation during the latter part of the twentieth century. In 1997, Blair’s New Labour inherited the Tories’ love of privatisation. Anticipating measures demanded by the World Trade Organisation, Blair injected a new enthusiasm for turning all aspects of government and public sector services towards for-profit exploitation.

New Labour’s love-affair with private consulting began with free advice from Andersen Consulting. Both it and its sister company, the accountancy firm Arthur Andersen, were major sources of inspiration for New Labour before, during and after the landslide election in 1997. This was despite the fact that Arthur Andersen had been banned from public contracts and sued by the Tory government for its role in the £77m DeLorean cars fraud scandal.

By becoming trusted advisers to a government eager to introduce modern business practices and technologies to civil and public services, the consultants have turned Blair’s New Labour into totally dependent addicts, and like drug-dealers everywhere have gained control of their clients.

Andersen, for example, recommended the Private Finance Initiative which has provided much of the lucrative work. In the early days there were five big accountancy firms which simultaneously promoted the policy through taskforces and secondments to key government positions, advised both public sector purchasers of the schemes and the companies which supplied their services, and subsequently themselves became established as major suppliers of consultancy and IT services.

From free advice to Labour in 1992 to influence and control at the heart of government took just 13 years. By the end of 2005, David Bennett had left his job as senior partner in top US consultancy McKinsey to run the Prime Minister’s Policy Unit in No.10, whilst at the end of 2005, ex-Accenture chief executive Ian Watmore was appointed head of Blair’s Delivery Unit at permanent secretary level.

These exchanges of personnel between only-for-profit enterprises and government and the public sector have been taking place at every level, in both directions. Craig’s lists are long – a few high-profile names will be familiar to readers: Lord (Geoffrey) Filkin was Minister for Education and Constitutional Affairs in the Home Office. He became Adviser to Capgemini’s government and public-sector practice and a Director of Accord plc. Former Health Minister Baroness (Margaret) Jay became senior political adviser to Currie and Brown, construction consultants active in PFI. Lord (John) Birt, former disastrous Director-General of the BBC, has made the journey in both directions, having been a McKinsey adviser, the Prime Minister’s “blue-skies thinker”, and an adviser to Capgemini, some of them simultaneously.

Anyone who thinks that the use of such expensive expertise provides any benefits to the running of government, the NHS, the education sector or to any members of the population will be swiftly disabused by this detailed account of many of the projects undertaken. By far the greater proportion of these have not only failed to deliver the expected improvements in either cost or better services, but have in many cases made things much worse. 

The infamous but typical £450m-plus system for the Child Support Agency was switched on in March 2003, 18 months late. A year later, fewer than half the 320,000 applications received had been processed. The cost of processing was 20% higher with the “new improved” consultant-designed business processes, and ultra-slow and badly functioning IT system from EDS. Staff were left crying from stress and frustration, and half a million children from broken relationships continued to suffer. Although the CSA chief executive took the blame and resigned, an internal document from EDS admitted that the IT system they had created was “badly designed, badly delivered, badly tested, and badly implemented”.

As an insider from within the industry, Craig is able to unpick the often fraudulent practices by which the consultancies boost their profits, earning between five and ten times the cost of each “warm body” consultant rented to the client. PA Consulting, for example, was paid more than £5,000 per week for each consultant they had working on the identity cards project – a relatively low rate. More senior consultants, with a few years experience in a “proper” job, can be charged out at rates as much as £25,000 per week, whilst being paid around £80,000 per year.

Plundering the Public Sector contains stark warnings about the colossal national NHS IT programme Connecting for Health started in 2002. Led by Richard Granger, former partner in Deloittes, the programme is around 100 times bigger than most of the New Labour catastrophes. Having ignored all of the lessons available from both private and public sector projects, large and small, the programme has alienated the doctors who will be the major users by failing to involve them. Surprisingly, Craig fails to mention that much of the early project management for the programme was placed in the hands of Kellog, Brown and Root, a subsidiary of US Vice-President Dick Cheney’s company Halliburton – a major beneficiary from the Iraq war.

The major conclusion of the book is worth quoting in full:

“Under New Labour, the whole process of democratic accountability has broken down and been replaced by cronyism, profiteering, spin and outright lies, If we are to save our public services, we must act to restore some semblance of democratic accountability. There are many measures that should be implemented in Britain to try and control the rapacious plundering of public funds by the consultancies. Unfortunately, none of these measures will happen because we have a government that is determined to protect its own reputation for infallibility, in which only it still believes. The fact that this means New Labour have put the interests of profit-maximising consultancies above the interests of those who pay taxes and use public services is, after the Iraq War, the greatest betrayal of the electorate  that once had such high hopes of the Blair and Brown administration."

* Plundering the Public Sector, David Craig with Richard Brooks of Private Eye, £9.99 Constable 2006

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