29 Aug 2012

Public sector outsourcing: the political connections

In the final part of our special series into the private companies who run some of our public services, Channel 4 News looks at the connections between the firms and government.

Who runs your world graphic (Ciaran Hughes)

Extra-curricular activities help politicians keep in touch with the real world, they argue, and also bring the experience and expertise of leading political figures into other spheres. And of course they help pay the bills for said political figures.

On the other hand, roles like these can raise problems. What if, as an MP, you advise a company which subsequently wins and perhaps then botches, an expensive government contract? Or, as an ex-senior civil servant, you are linked to a controversial private healthcare provider?

Channel 4 News looks at the links between political figures and outsourcing companies – and asks whether these links ought to be more transparent.


It is not illegal to have connections to businesses outside Parliament but they must be registered officially. According to the Commons rules, MPs must declare “any pecuniary interest or other material benefit which a Member receives which might reasonably be thought by others to influence his or her actions, speeches or votes in Parliament, or actions taken in his or her capacity as a Member of Parliament”.

When it comes down to business, networking is a critical way of making links to potential partners and the business of government is no exception to this.

There should be sanctions and enforcement on the issue of disclosure of potential conflicts of interest. Campaigner Heather Brooke

As public sector services and contracts are moved into the private sector, expertise about how government works (and who works in government) is arguably becoming a premium selling point.

Read the other parts of this series: Do you know who runs your world? and Who really runs the public sector?

The so-called revolving door between Whitehall and the private sector is whirling as quickly as it ever did, with the boards of firms involved in outsourcing sprinkled (arguably, sometimes packed,) with former ministers and senior bureaucrats.

In some ways the appearance of former senior public servants on the payrolls of private firms charged with providing education or health services say, can make them resemble a private civil service.

Former minister

For example, the beleagured security firm G4S, which benefits annually from £600m of contracts from government, has a former government minister, Whitehall advisers and civil servants on its board.

These include, former home secretary and defence secretary John Reid (now Baron Reid of Cardowan), former Met police commissioner Lord Condon (who earns £124,600 as a non-executive director of G4S), former prison governor Tom Wheatley and helpfully for G4S’ energy meter monitoring arm, the former energy regulator Claire Spottiswoode is a non-executive director (earning £56,800).

Taking as an example the world of healthcare outsourcing, you can trace strong links between some firms and the current government. Interserve is one company which has contracts to operate care homes for the state sector. On its board is the former head of John Major’s policy unit, Lord Norman Blackwell who is also on the board of right wing think-tank the Centre for Policy Studies.

Also on the board of the Centre for Policy Studies, is John Nash, former chairman of Care UK which provides residential care for elderly people. Mr Nash’s wife Caroline donated £21,000 to Conservative party central office in November 2009. Care UK told Channel 4 News it does not donate to political parties.

Care UK was bought out by Bridgepoint private equity which counts among its advisers, former chair of the Conservative party and current Chair of the BBC trust, Lord Patten as well as former health secretary under Labour, Alan Milburn.

Conservative MP and former shadow health minister Mark Simmonds, is paid £50,000 per year by Circle Health, (the private firm which took over the management of Hinchingbrooke Hospital becoming the first private firm to run an NHS hospital,) for strategic advisory work. Circle Health also works with Interserve in its private care homes business.

Mandatory register

Tracing such links is time consuming and not all information is publicly available.

Campaigners such as Heather Brooke who uncovered the MPs expenses scandal, believe this task should be made much easier: “There should be firm ethics guidelines, proactive disclosure and, crucially, sanctions and enforcement on the issue of disclosure of potential conflicts of interest,” she told Channel 4 News.

“There needs to be a mandatory lobbying register which puts the onus on the lobbyist to declare all meetings with public officials.”

And as the services which make up the public sector are outsourced to a wide variety of private providers tracking ownership and interests not only becomes more tricky to trace but the contracts themselves become secret.

As outsourcing expert Peter Smith explained: “Once the Department for Work and Pensions or Ministry of Defence have outsourced some large piece of work – and they’re often outsourcing work that includes an element of procurement as well, so the outsourcer is then buying services down the supply chain – we can’t ask the same questions.”

But with outsourcing now such a crucial part of providing public services, it is this transparency which is now becoming increasingly critical.