G4S and Serco act fraudulently in UK but more contracts flowing

A key issue in my forthcoming book, Profits of Doom, is the role of multinationals in turning huge profits from warehousing the most vulnerable people in our societies, including asylum seekers.

These revelations in Britain (via The Independent) are interesting but sadly history suggests that like vampires these corporations continue scoring contracts because neo-liberal politicians and officials simply can’t imagine a world where providing the best, as opposed to the supposedly “cheapest”, is the goal:

Whitehall contracts running into billions of pounds are being urgently reviewed after the Government disclosed that two major firms had charged the taxpayer to monitor non-existent electronic tags, some of which had been assigned to dead offenders.

In an announcement that throws the Coalition’s privatisation drive into disarray, the Serious Fraud Office was called in to investigate G4S, the world’s largest security company, over contracts dating back over a decade.

Serco, one of Britain’s largest companies, also faces an inquiry by auditors over its charges for operating tagging schemes.

The firms supply an array of services to the public sector from running courts, prisons and immigration removal centres to managing welfare-to-work schemes and the Atomic Weapons Establishment.

Between them the two companies receive around £1.5bn a year from the taxpayer, but their contracts are worth billions of pounds because the vast majority run for several years.

They were also hoping to cash in on moves by the Ministry of Justice (MoJ) to hand them further large contracts to operate prisons and supervise offenders in the community.

The process of awarding all contracts was put on hold last night as the inquiries got underway.

The MoJ began investigating all its agreements with the two firms, including the running of major prisons, while the Cabinet Office started scrutinising all other Government contracts with G4S and Serco.

Shares in both companies fell sharply after the announcement by Chris Grayling, the Justice Secretary.

Shares in G4S – which suffered torrid publicity over its mishandling of the last year’s London Olympics security contract – finished the day 12.6p down at 213p. Serco tumbled by 54p to 626.5p.

Each of the companies relies heavily on Britain both for income and burnishing its international reputation. The move by the Government is unlikely to result in the wholesale loss of contracts, as the firms have few competitors of the same size but is a blow to their standing worldwide.

25 comments
  • Kevin

    Whilst this report is mostly good, it’s incredulous to suggest that because of one contract, either one of G4S or Serco should no longer be awarded contracts. Indeed, all it takes is a trip to serco.com to see that on the 5th April, an article was published which reported on how Serco has recently won the prestigious ‘Value for Money’ award, and also on how a call centre contract run by Serco in Hull saved £339k for the local government. Obviously that’s vastly less than the millions this has cost, but it’s apparent Serco and G4S will be paying this money back.
    Serco provide some of the best services worldwide (they run part of the Metro system in Dubai, IT services at Brussels Airport, IT services at the European headquarters for Coca-cola) and are going to suffer because of the poor judgement of a tiny part of their global business, not forgetting the poor judgement of the government official who awarded the contract in the first place, knowing the financial model and everything else involved in the contract.