Thursday 1 February 2018

How will the Capita costcutting program affect the services Barnet taxpayers

There is one aspect of the latest and still unfolding Capita story which no one has mentioned so far. Capita have announced a huge restructuring, cost cutting and redundancy program. There are several aspects of this that  demonstrate the huge risk Barnet Council has loaded onto Barnet Taxpayers. Not least, how will already dodgy services be affected by the Capita costcutting, over which they have no control. We can summarise the main problems with the relationship as follows.

1. Barnet Council has no control over the way its outsourced services are managed or run.
2. Barnet Taxpayers can do nothing to influence the policy decision taken as to how those running our services are made.
3. Barnet Council can only challenge Capita over poor service when it has actually occurred.
4. If Capita provides bad services to Barnet Council, then if the fines are less than the savings, they may make a commercial decision to accept the fines and give bad service.

The stark truth is that there will be less people working for Capita. This restructuring will not mean a better quality of service to the Barnet Taxpayer. This blog has already seen examples of failing Capita services. We've seen IT failures from decrepit Capita systems affecting the function of Barnet Council operations. We've seen highly contentious planning applications passed as Capita haven't processed them. No one can argue that the One Barnet Outsourcing project has delivered better services. Over the last couple of weeks, Mr Reasonable has detailed how Barnet Taxpayers are actually paying Capita huge amounts of money for savings they've identified. What this means is that if Capita say "If you shut down this Library you will save £100,000"  to Barnet Council and the Council do it, Capita get paid up to £33,000. Despite all of this easy money, Capita are in finacial trouble.

The logic for handing over council services to the private sector was, according to the Barnet Tories, that the Private sector had better financial discipline. This myth has been cruelly exposed by Carillion and Capita. The markets don't lie and the Capita Share price (as I am writing this) has dropped nearly five percent today.

Capita are in big trouble. I used to invest in the company. I bought shares in the company in 2002 when they were £1.72. I bought £2,000 worth. I thought that they were a good bet with contracts such as the Congestion charge zone with The London Mayor. In 2011, I sold them them for £7.11. The reason? I did not want charges of hypocrisy given my objections to One Barnet. My investment gave me an over £6,000 profit on a £2,000 investment.

It is interesting to note that the share price today is £1.73. It is right back where it started. If I'd sold them at their peak in 2015, I'd have made nearly £11,000. I invested in Capita long before they were in involved in Barnet. After I divested, I kept a close eye on the share price. I had realised all along that the One Barnet deal was likely to be lucrative for Capita shareholders. What I didn't really appreciate was that Capita was in fact a very badly run company, that was simply lining its pockets on easy money from mugs like the Barnet Taxpayer. As it has become more clear that they've bitten off more than they can chew and more public sector organisations have had problems with contracts, the easy money has dried up.

The CEO of Capita has realised that if he doesn't do something drastic, then the company will fail. His solution has been to cancel dividends and seek more cash from the shareholders to sort the mess out. He is going to sell key parts of the business to finance "core functions". Had I not sold up and had bought a new kitchen with the dosh, I'd be looking at an investment that had made no money at all and a request for cash from a company that admits it is badly run. I fell for that one with RBS shares. I would not fall for it again.

As a major customer of Capita, Barnet Council faces the prospect of less people at Capita providing services that are already bad. Does that sound like a clever plan for the Barnet Taxpayer? It sounds like a recipe for disaster to me. It also appears that some of the services may not even be supplied by Capita in the future. It could well be that they hive off services provided to Barnet to other companies. Why would another company want to buy a bit of business from a failing company like Capita? The answer is obvious. They would buy it because it is a cash cow. And we, the taxpayer are the people who are being milked.

In short, the Barnet Taxpayer is caught between a rock and a hard place.

How have the Barnet Tories reacted? Now this is very interesting. The Deputy Leader of the Barnet Council, Dan Thtomas is a big fan of Donald Trump.

Mr Thomas has clearly studied President Trump and his tactics for dealing with difficult questions about the poor decisions he's made rather well. Whilst the Barnet Conservatives were reeling from the news that their "cunning planw" AKA One Barnet was unrevalling before their eyes, he launched a classic diversionary attack, in true Trump style with an offensive tweet. This was clearly done to distract everyone from the pending implosion of his outsourcing schemes.

And you know what? To my eternal shame I fell for his cunning plan yesterday. When we should all have been trying to hold the Thomas to account for being a Capita champion, I got suckered into writing a blog about his awful tweeting.  It could not be clearer that Thomas does not want to discuss the problems of Capita. I don't blame him. The contract is his baby and it has grown into a monster that is about to devour his administration.

The difficult truth, which no amount of Trumpesque tweeting by Councillor Thomas can hide, is that Barnet Council now has a major risk on its risk register as a result of his policies. There can be nop doubt that the Capita restructuring will impact the operations of Barnet Council and the quality of services delivered to Barnet Taxpayers, which we've already noted are not great.

Back in 2012, I produced a film called "Barnet - The Billion Pound Gamble" which tried to warn residents of the fact that the One Barnet outsourcing project was a huge risk to Barnet. The trailer we made, has the Leader of the Council, Richard Cornelius admitting that the Council only has reserves of £15 million on a £1billion business. If Capita goes the way of Carillion, then it is clear what will happen. Barnet Taxpayers will be crucified financially. Don't say you weren't warned.

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