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Why is Capita’s mass-outsourcing contract with Barnet council costing even more?

With the help of the excellent Barnet bloggers, we've written many times about Barnet council's plans (now underway) to mass-outsource council services to Capita. The council agreed to the first major contract (called the NSCSO contract) to pass services to Capita at the end of last year. But now, it appears that Capita is receiving more money than agreed. The post below, which is by the Barnet Bloggers, talks about the problem and shows why privatisation inevitably ends up being an awful lot more costly than its promoters ever admit:

From the Barnet bloggers:

Throughout the history of the One Barnet outsourcing programme, statements by the leader of Barnet council, Cabinet members, Conservative councillors and the senior management team have all maintained that as a fundamental commitment to the NSCSO contract, Capita would make a large upfront capital investment.

The necessity of this investment by a private sector partner was given as the reason why the authority refused even to consider an in-house option as an alternative to privatisation of council services.

If an in-house option had been adopted, not only would many local jobs have been saved, all efficiencies made through better management of such functions as procurement would have been retained by the authority, as opposed to a limited amount capped in the contractual agreement with Capita. By ignoring this option, it is arguable that the statutory duty of the authority to make the best use of taxpayers' money may have been breached.

We have now learnt that not only has Capita failed to make the promised capital funding, but that in August, in a complete reversal of  policy, the Leader of the Council sanctioned the payment to Capita of £16.1 million of taxpayers' money held in the authority's reserves, in order to cover the cost of the capital investment.

We believe that not only have the leadership, Conservative members and senior management team of Barnet Council promoted the need for privatisation - and the contract with Capita - on a totally false premise, they have continued to mislead residents by misrepresenting the facts, and maintaining that capital investment is to be given by the company, rather than admitting that money has been taken from the authority's reserves and paid to Capita for this purpose.

After the Cabinet meeting of 6th December 2012 which approved the contract with Capita, Councillor Cornelius made this claim in a statement published on the BBC London news website

Council leader Richard Cornelius said the combination of a saving to the taxpayer of a million pounds a month and an £8m investment in technology by Capita made it a "very, very good deal for the Barnet taxpayer".

This misrepresentation of the truth has continued even after the payment £16.1 million was formally authorised by the Leader of the council.

The business model approved by Cabinet on 6th December 2012 stated clearly that this investment was to come from Capita. How can it be lawful, therefore, that having approved the contract on this basis, we now find the reverse is true, and that taxpayers are paying for the investment?

If there is any financial argument for such a fundamental change, why has the authority not been open and transparent about this new agreement, and sought approval through the appropriate procedures?

The authorisation to add £16.1 million to the capital programme in order to pay for the capital investment was made on 5th August this year by Councillor Richard Cornelius, in an action defined as a 'non key' decision.

According to the council's own constitution, key decisions are those that are 'significant in financial terms or in their effect on communities comprising two or more wards'.

Clearly, the decision to remove £16.1 million from reserve funds in this way most certainly is a key decision, and departs in the most fundamental way from the business model approved in December.

Quite incredibly, on 6th August, the day on which the contracts were signed, and the very next day after the leader signed off the £16.1 million to cover the capital investment, Barnet Council issued a press release in which it is stated:

"Capita will also make an £8 million pound investment in technology to improve council back office services".

What is that statement, other than a deliberate misrepresentation of an unpalatable truth?

We note that the explanation of the NSCSO contract on the council's own website, updated after 5th August, continues to maintain falsely that an upfront investment will come from Capita: see here:

Capita will make an upfront investment which will provide improved Information Technology and telephone support to improve council back office services.

In regard to the approval of 5th August, the constitution says:

When key decisions are to be discussed or made, notification is published at least 28 days before. If these decisions are to be discussed with council officers at a meeting of the Executive, this will generally be open for the public to attend, except where personal or confidential matters are being discussed. The Executive has to make decisions that are in line with the Councils overall policies and budget. If it wishes to make a decision that is outside the budget or policy framework, this must be referred to the full Council to decide.

Unless the change of policy, and a radical change to the terms of the business model represented by the decision to use reserve funds for a capital investment payment to Capita has been formally agreed through the relevant constitutional procedures, therefore, it is reasonable to conclude that the payment may well be unlawful, and as residents, taxpayers and citizen journalists in Barnet we object in the strongest terms to what would appear to be a serious breach of the regulations that are supposed to protect our best interests, and we ask you to instigate an immediate investigation into the issues we have raised.


Derek Dishman

John Dix

Theresa Musgrove

Roger Tichborne

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