The Public Accounts Committee (PAC) last week rightly criticised A4E's track record in securing employment for workless people as "abysmal": 9% success against a target of 30%. Data about their recent performance in regard to the new Department for Work and Pensions work programme isn't yet clear, but instinctively many commentators think it won't be any better than before, particularly in the most economically challenged communities. Yes, times are tough economically but comparable state provision, via the Jobcentre Plus network, has routinely outperformed many of DWP's celebrated private contractors.
What's been most fascinating, aside from the poor performance data, is the lack of political uproar about the remuneration and dividend payouts taken by those who own A4E.
When Stephen Hester was in line for a £1m bonus (for running a £45bn business) politicians were lining up to denounce it. Yet until last week, few were even aware that the taxpayer (the only customer of A4E) had provided a dividend and salary payout of around £9m to A4E chair, Emma Harrison, who also owns 87% of the shares in the company and is a friend of successive political leaders. A4E is currently at the centre of a fraud investigation.
The difference seems to be one of mindset (or group-think) between politicians and the media – that RBS is "owned" by the taxpayer, while the taxpayer is merely a "customer" of A4E. If we can't establish the principle that it is the government's job to get maximum value for the taxpayer's pound, whether as owner or purchaser of public services, we are going to see many billions more go to waste.
The government spends £236bn of taxpayers' money each year. We all have an interest in it doing so for maximum long-term value, hence the widespread support for Chris White's public services (social value) bill.
The government shouldn't buy from businesses that aren't performing well – such as achieving 9% against a target of 30%. That isn't an ideological viewpoint about social value – it's just common sense. But the government may not have a choice if it makes its own markets in the way that DWP has with welfare-to-work contracts. It needs to reassess its understanding of risk – if you do not want to be beholden to an oligopoly of companies that do not perform to target, there are plenty of things you can do. Don't create a market structure that means only one kind of company can enter – a large company with a large balance sheet, that has large appetites to satisfy in terms of dividends.
The PAC highlighted an absurdity: a company's track record being excluded from government procurement decisions on the basis that this would be anti-competitive. Ability to deliver and previous track record has no apparent role within procurement any longer. Current thinking appears to suggest that the size of the balance sheet and breadth of the ICT infrastructure are the only essential criteria in delivery.
There are many hundreds of businesses, large and small, that can provide fantastic value for money and they are doing it every day. They exist in the private sector and the social sector. And there is plenty they can do together.
Having witnessed the stellar work of organisations such as the Wise group (an organisation whose previous outstanding track record is not taken into account when tendering), and others – PM training, Acumen Trust, Central Surrey Health, Create, Change Kitchen, Goodwin Development Trust, Bromley by Bow Centre, Brighter Futures, Argonaut Enterprises, Clarity and Bikeworks – if true plurality existed within the government's supply chain, there would be no opportunity for predatory capitalists to exploit weak contracts, form oligopolies and walk away with millions in taxpayer dosh.
You can call this social value, or common sense. It is not OK to give taxpayers' money to anyone who doesn't deliver, whether through bonuses, dividends, or massive unwieldy public service contracts.
In response, we will soon be launching our Profit Watch campaign. We'll be monitoring where the biggest leaks of taxpayer cash are pouring out of our economy, and looking at what would happen if procurement didn't discriminate against businesses that are committed to maximising social value and solving some of society's most pressing problems.
Peter Holbrook is chief executive of Social Enterprise UK and will be speaking at the Social Enterprise Exchange in Glasgow on 27 March.
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