As the government goes on a fire-sale exercise with our public services in the name of austerity, Simon Birch and Tim Hunt ask: How ethical are the companies that will run our public services?
Photo: Demonstrators outside an ATOS office in Leeds (from Indymedia)
There are many arguments against the privatisation of public services such as the creation of monopolies and the lack of democratic accountability. However up until now the environmental and ethical track record of the companies that are profiting from the privatisation of public services has gone unnoticed. In a groundbreaking piece of research Ethical Consumer has put 20 of the biggest of these companies under the ethical spotlight, the results of which are presented in the table below.
Disturbingly our research shows that some of the companies lining up to take a slice of the mushrooming multi-billion pound public service sector are among the most unethical in the UK and many remain largely unknown to the public.
We’ve found that the biggest companies that are playing an increasingly important role in running our public services have the bottom rating for many of our ethical and environmental criteria, including environmental reporting, supply chain management, human and workers’ rights and political activity.
The government is now selling our public services to companies seemingly without any scrutiny of a company’s ethical or environmental policies. This apparent policy vacuum challenges the coalition’s stated claim that ‘this will be the greenest government that the UK has seen’. This is significant as it threatens to undermine the progress that the previous government had made in terms of its ethical and environmental purchasing policies.
Losing past gains
The government is itself a massive shopper, every year spending around £200 billion on everything from coffee to new canteens. The sheer scale of this spending – or procurement as it’s called – has the potential to have a major positive impact on the market for ethical goods and services.
The UK Government has now begun to introduce ethical and sustainable procurement policies with the result that there are now targets on buying everything from Fairtrade coffee to sustainable timber. However there is a very real danger that because the companies buying into the state sector have inadequate environmental and ethical policies in place, we will lose the ethics embedded within the government’s own ethical and sustainable procurement aims. The companies we surveyed also scored badly with regard to human rights, with 13 out of the 20 companies picking up the bottom rating in this category.
Of particular concern are the companies that run the government’s immigration removal centres: G4S, Serco and Sodexo. As well as being responsible for maintaining the UK’s nuclear weapons through its subsidiary AWE, Serco - which last year had a turnover of £4 billion - has been criticised for conditions at the Colnbrook immigration removal centre. Government inspectors recently made 191 recommendations to change current practices at Colnbrook after reports of poor conditions.1 There were also reports of abuse at Serco’s Yarl’s Wood detention centre which resulted in a number of detainees going on hunger strike.2
The one category in which all the companies bar three scored bottom rating was political activity, something which again, raises real concerns. What we have also uncovered is an embedded corporate culture of widespread lobbying to gain access to Whitehall power-brokers, donations to political parties and a revolving-door policy of former government ministers heading straight into jobs with some of the companies surveyed.
For example healthcare providers Alliance Medical came under the spotlight in 2005 when they were awarded a controversial contract to supply scanning equipment to the NHS after a company which part-owns it, Bridgepoint Capital, hired former Labour Health Secretary Alan Milburn as an adviser.4 More recently G4S were awarded a lucrative four year contract just months after appointing former Defence Secretary John Reid to a £50,000 a year position offering ‘strategic advice’.3
Paying tax (or not)
Another area that gives great cause for concern is the evidence we have uncovered that shows that 13 of the companies we surveyed have subsidiaries in countries that are widely considered to be tax havens, something that is included in our Anti-Social Finance category. This implies that the companies concerned, including some of biggest names in the outsourcing industry such as BUPA, Capita and Sodexo, are managing their finances in such a way that they may be actively avoiding paying tax here in the UK.Ironically, this June, Capita was awarded a £100 million contract by the Driver and Vehicle Licensing Agency to crackdown on vehicle tax and insurance evasion.
The Tax Justice Network has also found that global accountancy giant KPMG, which had a $21 billion turnover in 2010, itself uses 47 out of 60 global tax havens. On its UK website the company openly states that it is able to substantially reduce companies’ tax bills through a series of financial manoeuvrings.
Whilst our research has shown that those companies who will profit from the latest round of sell-offs have an alarmingly poor ethical record, Ethical Consumer takes the view that even if the companies involved were amongst the best performing in the UK economy in terms of their ethical record, we would still be critical of the coalition’s dash to privatise and outsource more of our public services. We believe that profit-seeking companies are unsuited to deliver many public services and that there are whole sections of the economy, such as healthcare, which should be off-limits to the private sector.
There are more than 100 stories behind our survey. Here are just a few of them:
Atos is at the centre of a fierce campaign run by disability activists. The French company is responsible for carrying out the government’s drive to assess everyone claiming incapacity benefit and deciding if they are fit enough to work. There are 8,000 tribunals hearing ‘fitness to work’ appeals every month across the UK and 40 per cent of decisions are being reversed.5
As well as being one of the UK’s biggest companies Capita also has a well documented record of poor service provision. The company was sacked by Lambeth local authority after tens of thousands of unprocessed housing claims left many families in danger of eviction.6 It has had similar problems in Manchester and Blackburn.
In 2010 the Brook House immigration removal centre run by G4S was described as ‘fundamentally unsafe’ by Dame Anne Owers who at the time was Chief Inspector of Prisons. Dame Anne found there had been 105 assaults, mostly against staff and 35 incidents of self-harm by detainees over a six month period. There were said to have been serious problems with bullying, violence and drugs.8
Global management consultancy McKinsey was heavily criticised earlier this year by Greenpeace. The campaign group claimed that McKinsey was giving inaccurate and unethical advice to countries such as Indonesia and Papua New Guinea which could potentially drive deforestation whilst allowing the countries to generate revenue from new UN-backed forestry protection schemes.9
Paris-based multinational Veolia is subject to a boycott call from the Boycott Israeli Goods (BIG) campaign for its involvement in Jerusalem’s new transport system - one of its subsidiaries is a leading partner in the consortium. According to the BIG website the company was ‘directly implicated in maintaining illegal settlements in occupied Palestinian territory ‘.11
Telecom giant Vodafone has long been criticised by tax-avoidance campaigners. It has also been implicated in helping former Egyptian dictator Hosni Mubarak to disrupt activist communications during the recent Egyptian revolution. It also attracted criticism for sending out pro-Mubarak propaganda via its text messaging service. Vodafone then faced a backlash when it released an advert suggesting it had helped inspire the country’s revolution.
Who’s running what
Construction and facilities management: Balfour Beatty, Ferrovial, ISS, Serco
Custodial services: G4S, Serco, Sodexo
Health care commissioning: KPMG, McKinsey, United Health
Information and communications technology services: Atos, Capita, HP, IBM, Serco, Vodafone
Local education authority outsourcing: Capita, Ferrovial, Serco
Management Consultancy: IBM, KPMG, McKinsey
Secondary healthcare: Alliance Medical, BUPA, Circle
Tertiary education: A4E, BPP (Apollo), Capita
Waste management: Veolia
The list of companies was compiled from ‘The rise of the public service industry’ published by Unison, and a list of the top 19 government contractors published by the Cabinet Office.
- Ask your MP to sign our Early Day Motion based on this research. Find out more.
1 Report on an unannounced full follow-up inspection of Colnbrook Immigration Removal Centre and short-term holding facility. 16–27 August 2010. by HM Chief Inspector of Prisons. 2 www.corporatewatch.org/?lid=3534 3 www.dailymail.co.uk/news/article-1161911/Security-firm-lands-MoD-job-months-John-Reid-joins-consultant.html
4 www.telegraph.co.uk/news/uknews/1490977/Medical-company-linked-to-Milburn-in-row-over-care-service-scrutiny.html 5 www.bbc.co.uk/news/10159717 6 www.guardian.co.uk/society/2001/jul/02/ppp2 8 www.bbc.co.uk/news/10582084 9 Bad Influence: How McKinsey inspired plans lead to rainforest destruction. Greenpeace April 2011 11 www.bigcampaign.org/veolia/