Wednesday, Sep 22, 2010
Companies fail due to delayed govt contracts, yet August deficit was a record high
Wilkins Kennedy (accountants): Public sector suppliers suffer surge in insolvencies as Government cuts take hold
The number of businesses supplying goods and services to the public sector going bust has leapt by 47% in the last year, says accountancy firm Wilkins Kennedy. Data suggests that the Government’s austerity measures are now leading to corporate failures and job losses. There were 168 businesses in the health & social services, education and defence sector that went bust in the first six months of 2010 versus 114 in the first half of 2009. Corporate insolvencies as a whole have fallen by 5% over the same period. “Whilst the real cost-cutting that this Government has threatened has yet to take place we are already seeing a wide range of companies – be they in recruitment, outsourcing, construction or marketing services – fail because of delayed contracts."
8 Comments
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1. mark wadsworth said...
Yippee!
The government spends £1.66 on the private sector for every £1 it spends on public sector salaries and pensions. I'd happily cut the latter by a third, but cutting the former by about half looks 'about right' - I am sure the waste and overpayment in 'private sector procurement' is considerably higher than with good old fashioned useless penpushers.
2. drewster said...
MarkW,
That's quite a contentious statement. Beyond a handful of high-profile cases, what evidence do you have that "the waste and overpayment in 'private sector procurement' is considerably higher than with good old fashioned useless penpushers" ?
3. letthemfall said...
drewster
About as much as he has for all his other proclamations.
4. miken said...
Public debts will mount whilst the government fail to make real cuts. What we're seeing right now is the tip of the iceberg in terms of insolvencies. Labour was all about outsourcing and very often the higher costs that go with it. It was in their interest to inject money (via schemes such as outsourcing and useless agency creation) across the country in order to get votes. The managers behind the private companies created/funded under Labour no doubt have made their money and now go and live a life of luxury. Now the next generation must pay and this is so very wrong.
5. drewster said...
letthemfall,
I generally have a lot of respect for Mark's wisdom. If he has evidence (and I expect he has) then I'd be interested in seeing it.
It's well-known that PFI schemes cost more in finance costs than public-funded schemes because the private sector has to pay higher interest rates. PFI was just an accounting trick to hide the growing public sector debt. However I haven't seen evidence that other outsourcing is bad - for example is there any advantage in having councils employ their own bin-men rather than have a private company do it?
6. Jessica Rabbit said...
Mark is right.
I used to work for a local council from 2000-2006. A lot of money was wasted with outsourcing then. Mainly on Highway Maintenance Contracts, Streetlighting and Traffic signal repairs etc, as the councils 'cut costs' by letting the qualified in-house staff go, to be replaced by call centre operators who simply notified a contractor of a repair needing doing.
Where this fell down was the contract procurement stage. The council were very careful to tick all the boxes with regards to meeting european tender regs etc but the problem was that they has made all the legal staff and experienced old 'Borough Engineers' redundant. this meant that when the tenders came in, there was no one qualified to read them and make sure the council weren't being grossly overcharged.
So whilst on the whole the Council chose to go with the 'cheapest' quote for the contract, it still wasn't value for money they just thought it was. The private contractors were wise to the fact that the staff who could pick up on this stuff had gone, so they also started to slip in all sorts of technical clauses regarding additional payments being due for certain construction, knowing no one had enough knowledge to pick it up. My experience was that a contract with an approximate value of £10M for Highway Maintenance in reality ended up costing the council double, and the staff time spent arguing over the discovery of the sneaky little clauses (when the bills started coming in) in itself took considerably more funds than the full time engineering staff had in the first place, as they had to get in contract (day rate) staff especially to deal with it.
Outsourcing was a disaster for local authorities. After a few years of running with it, the only people who thought it worked and was value for money, were the 'business analysts' they paid to review and make redundant all the perm staff in the first place....and guess what...they were all private contractors...funny that...
7. mark wadsworth said...
Drewster, I speak not of bin men - the entire cost of refuse collection in the whole country is in the order of £3 billion a year, and is money well spent. Public health is a core function of the state. Whether those bin men are employed by the council or by a contractor is neither here nor there. I've no reason to assume that we overpay massively for this.
I'm talking about stuff like PFI, Olympic cost overruns, all the useless equipment that the Ministry of Defence spend billions on; the "friendship visits" to twin towns, jollies by quangoes, a couple of billion on "public information advertising", schools paying thousands of pounds for photocopiers, billions on ID cards and consultancies to set up e.g. NHS spine computer system or HMRC PAYE checking system which don't work and never will and so on.
And these are just the bits that I can remember from the newspapers. Heck knows where it all goes.
8. letthemfall said...
I too would like to see the evidence - especially that for "all the useless equipment", "jollies by quangoes", etc etc. Mark's statements on public sector waste are so sweeping and so frequent it is impossible to tell whether there is any merit in any of them. The issue of cost and value is undoubtedly complex, and is hardly a subject for meaningful analysis on these brief blogs, which are mainly vehicles for hot air.
Still, I prefer mark w's hot air to some of the witless nonsense spouted on this site.