In the first of a series, we take a look at some of the corporate movers and shakers headquartered in Bristol.
Illustration: Kleiner Shames
First up is the FTSE 250 outsourcing giant MITIE. With a stock market share price seeing a healthy spike the day after the election, MITIE is a top contender for lucrative government privatization contracts. Aiming to take a closer look beyond the “private sector good, public sector bad” ideas of mainstream politics, we look at the cold facts of Mitie’s record, with a healthy dose of opinion on top.
“Harmondsworth Immigration Removal Centre is in large parts a depressing, dirty place and in some cases has a destructive effect on the welfare of detainees.”
First line of Independent Monitoring Board annual report into “fairness and respect” at Harmondsworth Immigration Removal Centre. February 2015.
“We will be providing the best environment possible for the people in our care – putting decency, dignity, and safety at the heart of everything we do.”
MITIE CEO on being “delighted” to win £180 Million government contract to run immigration prisons. February 2014.
Along with other major public sector contracts, MITIE is now leading the charge to cash in on detaining poor people from the wrong country on behalf of the Home Office.
- March 2015: Over 200 people hunger strike at Harmondsworth Immigration Removal Centre. MITIE described the situation as “stable”.
- March 2015: Undercover footage at Harmondsworth Immigration Removal Centre reveals widespread abuses including increased lock-up time of detainees, in contravention of Government policy. A guard is recorded saying “It’s just gonna break. There’s only so much people can take.”
- February 2015: HM Inspectorate of Prisons finds several children have been detained by MITIE at Campsfield House Immigration Removal Centre for up to 62 days, despite a Government commitment to end the practice.
- September 2014: MITIE takes over from GEO Group UK LTD and commences a £180 Million contract to manage “super-size” detention centres at Heathrow after a series of abuses and failures by GEO. Corporate Watch research reveals members of GEO senior management joined MITIE in the lead up to the contract award.
Mitie Group PLC is headed up by Ruby McGregor-Smith. Moving from SERCO (famous for contaminated hospital equipment, abusing asylum seekers and defrauding the taxpayer) the CEO’s annual pay packet is £1.3 million, plus bonuses and share options. A signatory to a 2010 letter in the Telegraph supporting the Conservative Party’s “tighten our belts” austerity budget, Mrs McGregor-Smith has a salary over 100 times the minimum wage. A soft spot for excessive pay is shared with fellow director Crawford Gillie. In March this year, as Chair of Barclay’s Bank Board Remuneration Committee, Mr Gillie oversaw the ‘award’ of £16 Million worth of bonuses to 11 of Barclays’ top execs, including ‘awards’ that avoided the EU cap on banker’s bonuses.
- March 2015: A leaked company document details minimum wage underpayments amounting to £80,000 for 44 MITIE employees in South Wales.
- September 2014: MITIE reinstate a sacked trade union organiser at the Royal Opera House following a 100% Yes vote on industrial action and an employment tribunal claim.
- September 2013: 17 cross party MPs sign a Parliamentary early day motion that “notes with concern the threat to freedom of association and the right to protest posed by the facilities company MITIE”.
Health and Care
According to MITIE’s 2014 annual report, the company foresees “significant long-term growth opportunities” in the healthcare sector. But what is their record in the sector?
- May 2015: Bristol based MITIE spin off Mihomecare is given the lowest possible ranking of ‘Inadequate’ by the Care Quality Commission, an independent regulator. The report found that legal breaches in safeguarding, management and training had not been rectified following the ‘Inadequate’ status found in the 2014 inspection.
- April 2015: MITIE is fined 51% of profits by the NHS in Cornwall due to 50 incidents in its service provision, 12 of which were deemed “major failures” in one hospital in February.
- March 2015: A leaked Mihomecare company document detailed the widespread practise of “clipping” where care visits are scheduled back to back, without accounting for travel time. This means dramatically reduced care time, added workplace stress and payment below the minimum wage (see below).
- March 2015: 20 MITIE staff walk out of NHS Cornwall due to persistent pay packet underpayments.
- January 2015: 85 ‘service failures’ by MITIE are recorded by NHS Cornwall in January. 15 minor events, 64 medium, 4 major and 2 critical.
- November 2014: Serious failings are exposed at NHS Cornwall. From an extensive list, these include a bucket of dirty water left in a clinic for days, failure to conduct background checks on ward staff, and kitchen staff working on wards without training.
Privatisation: What’s all the fuss about?
Unfortunately the mainstream discussion is “public sector bad, private sector good”, when the real question should who is best placed to deliver the best services. Nevertheless, the gist of the arguments about privatization revolves around the following statements:
“Introduce competition into the sector and the taxpayer gets better value for money”
“Private companies exist to make profit, therefore the public and service user gets ripped off”
Without getting into a massive debate about it, here’s a few things to consider from my point of view.
Transparency and accountability:
Unlike public institutions, private companies are exempt from the Freedom of Information Act and are protected by commercial secrecy and confidentiality rules. However, it can be argued that Government or independent regulators can investigate them in the public interest. Whether they do adequately is another question.
The profit motive
There is not an explicit legal obligation on companies to maximise profits. However, the maximisation of profits is what any company aims to do. Along with increasing market share, the best way to gain profits is to cut costs. Whilst many see this as ‘efficiency’, it can look a lot like cutting corners, depressing wages, undercutting working conditions and failing to invest in training and infrastructure – as can be seen with MITIE above.
It can be argued that introducing competition into public services ensures the best value for customers and the taxpayer, as the contract goes to the provider offering the best deal. However, in many cases corporations or conglomerates effectively create monopolies or cartels. For example Information released in May by the NHS shows that four multinational corporations, Capita, KPMG, PwC and UnitedHealth dominate NHS procurement contracts, whilst smaller companies or 3rd sector groups lose out.
Indirect and direct costs
By outsourcing, the public sector can focus in on core service activities. So the argument goes. However, privatisation isn’t free of costs. Consider the massive taxpayer subsidies to train operators (£3.8 Billion in 2014) and energy companies (£775 Million annually) despite huge profits, shareholder payouts and high customer charges. When publicly operated, the East Coast Mainline made a net return to the treasury of £23 Million in 2013-14. Virgin and First Great Western made the public a net loss of £218 Million and £255 Million respectively. Despite the losses, both paid out 10s of millions in dividends. Nationalised following private operator failure in 2009, the government recently re-privatized the East Coast Mainline, awarding the contract to Virgin.
Whilst corruption is wholly possible in publicly operated services, the sum total of the murky world of contracts, commercial secrecy, and political donations mixed with a few billion quid makes ripe for what at least appears to be impropriety. Case in point? The 71 MPs who voted for the privatising Health and Social Care Act 2013 have direct interests in the sector.