Those of you with shares in G4S or Serco will have noticed a rather alarming drop in their value last week. This followed a House of Commons statement by Chris Grayling, the Justice Secretary, ask after it emerged the two security firms had overcharged the government by tens of millions of pounds for non-existent electronic tags.
Now the two companies together are valued by the stock market at over £6 billion and they will not have a problem repaying any money that they shouldn’t have received. What will concern them more is the damage to their reputation and, in the case of G4S, an investigation by the Serious Fraud Office.
What will worry the government is that questions will be asked about the desirability of outsourcing government functions to the private sector. Since the coalition government took office, contracts worth £20 billion have been awarded to the private sector and yielded cost savings to the public purse.
Governments see outsourcing as a win/win. They win because it costs less; the companies win because they deliver savings and continue to make a handsome profit. Too good to be true? Yes because there are losers, those who work for the companies. They are paid less and can be on zero hours contracts, where they are only paid if there is work available.
Also, last week the head of NHS England Sir David Nicholson warned that the NHS faces a £30 billion shortfall over the next seven years, which is on top of the £20 billion gap in funding previously announced. In short, the NHS is broke. Is outsourcing the answer to its troubles?
It appears to be so in part of Suffolk. In March 2012, Serco was awarded a contract to deliver all the county’s community health services to start in October last year. It allegedly put in the lowest bid and proposed to cut staff by 17%. Is this a template for the NHS? And in particular NHS dentistry?
If Serco can run all Suffolk’s community health services, why can it not bid to run all Suffolk’s NHS dental services? It could probably put in the lowest bid, mainly by reducing staff costs and still make a profit on the operation. What it needs is new time limited contracts (see last week’s blog) and clinical care pathways, which put more emphasis on prevention and simple interventions.
The new contract pilots look too good to be true, happy patients and happy dentists. But remember the old maxim: if it looks too good to be true, it probably is.