Resisting the UK’s slide into a ‘middleman’ economy

My sister-in-law is severely autistic, and as such is entitled to receive support in the form of a carer who takes her out for various activities. Over the years she has had a number of care visitors of highly variable quality, provided by a badly-managed agency under contract to the County Council. Fortunately her current care visitor is a dedicated and caring person who has improved her quality of life immeasurably. She is visibly happier, calmer and getting much more enjoyment from life, and of course want this to continue. The carer herself earns minimum wage but the Council pays the agency over twice this for her time. We are now looking at employing this carer directly, which involves her becoming self-employed and being paid directly by the Council. If we do this the Council will pay her £14 an hour, which looks like a pay rise until you remember that she will be self-employed and so will not have any of the benefits or security of full employment such as holiday pay.  In fact she will be little better off financially and the main benefit is to remove the bad agency from the arrangement and ensure continuity of care with this particular valued carer.

What strikes me about this situation is that the council is willing and able to pay more then £14 per hour for her time, but not to benefit the carer herself – only to benefit a company who will take a large slice of the funding. Why?

My niece is a very bright young woman who graduated a couple of years ago with a first-class degree. She currently works for HMRC. Except she doesn’t – she works for a company who take on graduates, provide training and then sell their time to others. In this case they sell my niece’s time to a major international consulting firm who in turn are contracted by HMRC.  I don’t have the numbers but I suspect HMRC (i.e. the taxpayer) are paying 3-4 times what my niece earns for her time. Why?

The UK’s energy regulator, OFGEM, has over 1000 permanent employees and an annual budget of over £100m. It spends nearly £20m a year with consultants, and recently paid £420k to an outside consultancy to advise on the price cap changes. Why does a well-resourced quasi-Government body need to spend such large amounts of money with consultants just to perform one of its core responsibilities? Incidently, the same consultants contracted by OFGEM also work for the Big 6 energy suppliers – couldn’t they at least find one with some independence?

And of course we all know about PPE procurement during the pandemic where the Government spent a fortune with middleman companies, sometimes only a few weeks old and with no prior relevant experience, who simply bought (sometimes inadequate) PPE from Chinese manufacturers and sold it on to the UK at hugely inflated prices. Why couldn’t a Government with over 5 million employees manage to procure direct from Chinese manufacturers without the intermediaries?

If we compare the UK to France, a similar size of developed Western economy, we see that both have about 5.7 million public-sector employees.  In 2020 the UK Government spent about £2.5 billion with outside consultants, yet France spent only €894 million – a figure that Macron has received considerable criticism for. Why does a UK Government with the same number of employees as the French need to spend three times as much on consultants, and why is this rarely questioned?

There is scant evidence that this vast expenditure has actually improves functioning of Government. On the contrary it has starved the Civil Service of in-house experience, knowledge and expertise to the point that the use of consultants has become a dependency, and it leaves stake-holders a further step removed from the policy and decision-making process.

None of this is new – the trend for contracting out work, and buying in capacity and expertise has been underway for years under a variety of Governments. But our current administration seems to revel in it and the opportunity for patronage that it provides, with so much Government activity only functioning with parasitic intermediaries taking a cut of the tax-payer’s funding before it performs its intended purpose. Ironically, this trend has been justified in the name of efficiency and cost saving.

Liberal democracy requires good government, functioning in a transparent manner, without conflicts of interest, and with civil servants empowered to make the right decisions. A successful economy requires Government spending to be managed efficiently, close to the recipient, without unnecessary intermediaries. The machinery of government may be a niche interest, but nobody likes to see money being wasted or well-connected donors getting rich at our expense. The Liberal Democrats stand for good government and against crony capitalism, but we should make it absolutely clear in power that anyone after a slice of the taxpayer’s pie needs to prove they are adding true value.

 

* Nick Baird is Chair of the Liberal Democrats in Cheltenham, and member of the Policy Working Group on International Security.

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5 Comments

  • Peter Martin 5th Apr '22 - 4:04pm

    “Why does a well-resourced quasi-Government body need to spend such large amounts of money with consultants just to perform one of its core responsibilities?”

    When managers have an important decision to make, they are often reluctant to make it in case whatever choice they make turns out badly. Instead they will spend as much as they can possibly justify on an expensive consultant. They aren’t any more likely to get it right than the manager, but they don’t usually care too much. They are happy to pocket the money and move on to the next job.

    If it all works out well the manager will say that it’s money well spent. If it doesn’t then he’s shifted responsibility to someone else.

    Am I being too cynical? No. I’ve seen it happen! It’s just as likely to happen in any large organisation. It’s not confined to the government sector.

  • Mick Taylor 5th Apr '22 - 4:19pm

    Hear hear!
    We hear far too much in these columns about the evils of nationalisation and the peril of letting the state run things and far too little of how the state can do things better without needing to pay shareholders.
    What actually needs to happen is that the use of consultants should be stopped, period. Instead the civil service should focus on developing its own centres of knowledge and excellence, who can focus exclusively on facts and figures and not be driven by the need to charge fat fees to make excessive profit. Who know, they might even recruit some of those who do the job for the plutocratic consultant firms and earn more money!

  • >We are now looking at employing this carer directly, which involves her becoming self-employed and being paid directly by the Council.

    Alternatively, you could do as some other parents of vulnerable children have done and set up a trust and employs the carer (and thus pays them holidays etc.), this option opening up access to additional funding… I suggest having a conversation with Ed Davey.

    However, I agree the way care in the community is funded is daft, particularly when you look at the numbers and realise the Council would be paying out less and paying carers more by operating its own agency…

  • Jenny Barnes 6th Apr '22 - 9:34am

    I remember an incident at a meeting with consultants at a major private company. After listening to their ideas for about 10 minutes, one of my colleagues said “These ideas are a bit like one of those bread products, where they’ve mixed the dough and you have to do the final bit of cooking” The consultant, wanting to be agreeable ofc, took this on board, and within a few more minutes was talking about their own ideas as “half-baked”. You have to laugh.

  • The Tories talk about small government, but many prefer to live high off the state. The £37bn spent on failed Track & Trace is extraordinary, with more consultants on £6kea a day than staff in the Treasury.
    Or £11bn on PFI contracts without competitive tendering, handed to the likes of companies in Dog Food, Pest Control, Finance and one pub landlord, while non supporter professional suppliers ( with lower prices) were often ignored and inevitable the wrong spec’s were bought, without anyone seeking refunds.

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