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Research exposes ethical deficit at the heart of companies taking over public sector

In the ongoing campaign against the cuts and privatisation there's been little mention of the environmental and ethical track record of the companies profiting from the selling-off of our public services. Until now.

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 (click to enlarge).

Company ratings - by Ethical Consumer magazine

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.

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 has been criticised for conditions at the Colnbrook immigration removal centre.

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's 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 which should be off-limits to the private sector.

Simon Birch writes for Ethical Consumer Magazine.

False Economy adds: Ethical Consumer's valuable research is worth reading alongside One Society's new report on pay differentials.

One Society notes: "Companies with large public sector contracts typically paid their executives much more than the highest-paid public sector employee. For example Serco, which receives over 90% of its business from the public sector, paid Christopher Hyman an estimated £3,149,950 in 2010. This is 6 times more than the highest-paid UK public servant and 11 times more than the highest-paid UK local authority CEO.

"In contrast to the suggestion that no-one in a public sector organisation should earn more than 20 times more than their lowest-paid colleague, none of the ‘public service industry’ organisations we examined paid their CEO less than 59 times UK median earnings."

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