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Documentary, Who's Spending Britain's Billions 2016
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LearningTranscript
00:00Our political leaders may have changed, but the message remains the same.
00:05He talks about austerity. I call it living within our means.
00:09We're being told to tighten our belts.
00:12But are our politicians practising what they preach?
00:15Welcome to Whitehall, to the heart of government.
00:21I'm Jacques Peretti and I'm going to travel the length of Britain,
00:25from Westminster to local town halls.
00:28I'll be finding out where billions of pounds of taxpayers' cash is really going
00:34and who's policing the spending.
00:3630,000 to 50,000, then another 100,000.
00:41From vast projects.
00:43Could end up costing as much as 12 billion.
00:45This is just effing obscene.
00:48To what's happening on our streets.
00:51It's just appalling. It really is.
00:54I'll be uncovering the growing army of hiding experts,
00:57making millions from the public purse.
01:00How I felt was, it's a racket.
01:02And revealing their tricks.
01:04We want to take them to what we call the valley of death.
01:06Are you there?
01:07Oh my God.
01:09I'll be uncovering secretive deals.
01:11When we tried to challenge the council on it,
01:13they hid behind this term commercial confidentiality.
01:16Involving our cash.
01:18You think it's right that a company should...
01:20Look, will you please get out to my room?
01:22The bloody lot to do.
01:23I want to find out who's turning Britain's hardship
01:26into a business opportunity.
01:28And behind the scenes, who's really spending our billions?
01:32I've come here to the Firth of Forth just outside Edinburgh.
01:47I'm in search of a controversial project that reveals just how government spends our money.
01:54The place I'm driving to is very significant.
01:57Because it's the location of one of the most ambitious and expensive defence projects in Britain's history.
02:05It costs billions of pounds of public money.
02:08But getting a closer look won't be easy.
02:10Because it's inside this heavily guarded naval compound.
02:14It doesn't take long to get an answer.
02:20Well, I tried to visit and I was told that it's not open to members of the public.
02:25And if I try to film it, I'll be thrown off by the police.
02:29So I think I'm going to have to try and find another way.
02:38Even with heavy security, it's hard to conceal one of Britain's biggest spending cock-ups.
02:43There it is. One of the two new huge aircraft carriers.
03:01The largest warship ever built in the UK.
03:04It's truly monumental.
03:06To give you an idea of scale, it is longer than the Houses of Parliament
03:10and taller than the Niagara Falls.
03:13When these two aircraft carriers got the go-ahead in 2008,
03:18they were supposed to cost £3.6 billion.
03:21But a series of delays and mistakes means it's now £6 billion.
03:26And they're still not in service.
03:29I'm going to meet local journalist Ian Fraser, who's been digging into what's happened.
03:36So Ian, where are we at now?
03:39There are some experts who estimate that it could end up costing as much as £12 billion for the two carriers.
03:46But we don't...
03:47Four times what it was supposed to cost.
03:49Nearly four times.
03:51To save money, the MOD considered scrapping the second carrier until they realised it would cost even more.
04:04Huge government projects like this often overspend.
04:08But is there a tipping point after which they're impossible to stop?
04:12What do you think this says about, you know, the potential of governments, you know,
04:17of whatever political persuasion, to waste our money?
04:20Well, I suppose it speaks volumes about our inability to rein in government spending.
04:27You know, it's sort of...
04:28If even with a flagship project of this scale, things can go so badly wrong
04:33and so much money can be wasted,
04:35how many small projects actually, you know, end up costing four times as much as they were originally supposed to cost?
04:41And it just...
04:42No-one really bats an eyelid.
04:45The overspend alone on these carriers could have bought us dozens of new hospitals.
04:51But I wonder how much more spending in Whitehall goes under the radar.
05:00When Boris Johnson was mayor, he introduced these Boris bikes.
05:04But he also bought three water cannons from the German police.
05:08They were never used and they cost the taxpayer more than £300,000.
05:16Here at the Department of Work and Pensions, they blew £34 million on an IT project.
05:20And it didn't even work.
05:25The Department of Transport took part of Richard Branson's train line off him.
05:28He took them to court and the department lost.
05:31And it cost us, the taxpayer, £50 million.
05:41Beyond Whitehall lies local government.
05:44And town halls are responsible for nearly a quarter of public spending.
05:49Though budgets have been cut, they still spend nearly £60 billion
05:53on everything from street cleaning to libraries.
05:57So who's keeping an eye on how they spend our cash?
06:00The answer might surprise you.
06:03Up until last year, that building housed the Audit Commission.
06:09The watchdog that kept a cheque on public spending by councils.
06:12But the government got rid of it to save money.
06:20The idea was that a new group of people would step into the breach
06:24to keep an eye on councils.
06:26Armchair auditors.
06:28Yup, that's you and me.
06:30The government released all this data so that we could keep a cheque on their spending.
06:36But wading through all this stuff takes time, which most of us don't have.
06:40And so this army of armchair auditors never emerged.
06:44And this spending could now go unscrutinised.
06:47Well, I'm going to take up the government's kind offer and become an armchair auditor myself
06:58to see what councils are up to.
07:01And I'm going to begin by looking at some ingenious ways they're finding
07:05of spending money in the name of saving it.
07:08OK, that's reception over there.
07:11And I'm looking for registration and nationality, which is over there.
07:14Visitors to Brent Council's Registration Department are greeted by Shanice,
07:20a virtual receptionist costing £15,000.
07:24If you are here to attend...
07:27Please take a seat in the waiting room on my left.
07:30Please remember...
07:32I don't think I can interact with her.
07:35Pressing this button.
07:39It's kind of amazing.
07:41Can I ask a question?
07:42Do you get job satisfaction?
07:45Maybe you are here to register a birth or death.
07:48I'm here for none of those things.
07:49I'm here to find out if you're worth spending £15,000 on.
07:53I should just... I should just wave goodbye to me.
07:56Hello and welcome.
07:59You know, what Shanice does is essentially the job of a sign.
08:02And you would have a sign saying,
08:04marriage is this way, births that way, deaths that way.
08:06And that would sort of do the job and you'd do it in three seconds.
08:10But what you do do is you feel obliged to engage with her.
08:14And then you kind of weirdly get distracted by the fact she's got virtual from here up and kind of cardboard trousers that wear down.
08:21So it's kind of all a bit odd.
08:22I'm a little perplexed.
08:24But what do other people think?
08:26If you are here to attend a wedding ceremony, please take a seat in the wedding room on my left.
08:32Hi. You look a bit confused.
08:34Yeah, it just feels so weird.
08:36Like, is it a human being?
08:37Is it a human being? I keep looking at her arms saying...
08:40What do you think? Do you think she's a human being?
08:43She's so thin.
08:46You're a human being.
08:47Oh, you're jealous.
08:51So how does Mark Rimmer, the man responsible for Shanice, justify spending £15,000 when money is so tight?
09:00Why did you think you needed a hologram or something other than a real person to do that job?
09:05I think we actually did need a real person, I mean, but we couldn't afford a real person.
09:10If you just put a sign up, that would do the same job as the job Shanice is doing.
09:14You know, a piece of plastic would cost, you know, £2.50.
09:18The community we have in Brent is obviously very diverse.
09:21English is not their first language for the majority of people.
09:24They do respond to spoken English, so I think a person would have been the ideal.
09:29So therefore that was the interim with Shanice, the holographic virtual assistant.
09:32She's just great. I mean, she is one of my favourite employees.
09:40Cash-strap councils aren't just replacing people with holograms.
09:44Here in Staffordshire, they're raising money by cracking down on one of the great first world scourges of our time.
09:50But you have to wait until after dark to see it in action.
09:59Enforcement officers slapping fines on dog walkers who don't clear up their pet's poo.
10:05Spotted with the kind of night vision goggles usually used in a war zone.
10:08I decided to try them for myself.
10:15So I'm sitting in a bush in Staffordshire in the middle of the night to see if I can spot persistent dog fowlers.
10:26And I think I actually spotted someone.
10:33OK, I'm going to confront them.
10:36If I can get out of this bush.
10:38Armed with these goggles, the council can hand out £75 on the spot fines to anyone not clearing up their dog's mess.
10:46Good girl.
10:49Excuse me.
10:51I know this sounds a bit strange, but I've been watching you walking your dog through these night vision goggles.
10:56OK.
10:58OK, whatever.
11:00Are you walking a dog there?
11:02I am.
11:04Because I spotted you with these night vision goggles that I have here.
11:07How do you think most people, most dog walkers would respond if someone like me jumped out of the bushes with one of these on?
11:12I think you'd frighten them to death.
11:14The council only needs to issue five fines to pay for the goggles.
11:19But so far, they haven't handed out a single one.
11:23I mean, these things cost 200 quid at a time. Does that sound like a good use of money?
11:27I'm surprised they've gone that far, but hey-ho, if it works.
11:32Though there's been no fines, there has been a 62% reduction in dog poo.
11:38So maybe these strange glasses are not a waste of money after all.
11:41This thing.
11:44It seems to weirdly work.
11:46I mean, the place seems to have less dog shit and people seem genuinely to be fearful of a slightly creepy man jumping out from a bush and slapping them with a 75 pound fine.
12:01So even though it's collected no fines, it's sort of done the job of making the area a bit more hygienic.
12:10Maybe it works. Maybe it's a decent use of money.
12:12Budget cuts have forced councils to come up without their schemes like the Pooh Patrol for the track tabloid Roth and people like me.
12:23But the big money is being spent on something less visible to us armchair auditors.
12:28An army of professionals who've turned the cuts into a business opportunity.
12:33The management consultants.
12:34Morning, everybody.
12:36Morning.
12:38In this school near Plymouth, management consultant Shea McConnell is working the room.
12:43Performance is linked to high self-esteem, isn't that right?
12:46Shea makes his living re-energising council workers, teachers and other public servants with the power of magic.
12:56So it's like I've got one, two, three, four, five, six cards.
13:00If I throw away one, two, three, you wouldn't expect me to still have one, two, three, four, five, six cards.
13:06I want to find out if it works or if Shea is just conjuring an illusion.
13:13So in our relationships we invest.
13:17So I work late when I don't feel it working, I smile when I don't feel like smiling.
13:22And all of that investment can go for nothing.
13:26However, at a time maybe, when you most need it, at least expect it, guess what, it'll be there for you.
13:38Miracles happen every day.
13:41So Shea, you're a magician, but you're also a management consultant, so how would you describe yourself?
13:48Most of my work is in organisations, helping people to develop collaborative relationships
13:54and improves an organisation's efficiency, their productivity, their bottom line.
14:00You haven't come in with a whiteboard and said, sack everyone, you've come in with a magic wand.
14:05I said, let's be gentle with each other, let's look at this together, how can we move forward?
14:14Like all consultants, Shea has a clever business plan.
14:18Once he's magicked his way into the room, he makes more money
14:21selling his very own management programme.
14:27You're driving lovely, Jake, you've not done badly for yourself.
14:31For Shea, helping the browbeaten public sector has given him an executive lifestyle.
14:37The real fulfilment has come from being able to follow my passion.
14:41I do know it's actually making a difference to people's lives.
14:45And that's the primary driver.
14:46After a hard day's motivational magic, there's even time for a 1970s style management workout.
14:56Good return.
14:58Oh, yes.
15:03In these times, you know, these hard pressed times, the public sector is so squeezed.
15:08Is it really a good use of money, management consultants being brought in?
15:13We're all about getting people's needs met at work.
15:16And, of course, the consequence of that is higher levels of productivity.
15:20Whatever you think of Shea's shtick, he's just one of thousands of consultants being parachuted into the public sector.
15:28Together, they're being paid millions by councils struggling to cope with the cuts.
15:36I'm heading to Wales to meet a fellow armchair auditor who's become alarmed by how much is being spent on consultants in her area.
15:45Hi there. Hi.
15:50Is that Liz? I am. I'm Jack.
15:52Hello, Jack. Nice to meet you.
15:54Liz Haynes is an independent local counsellor who also runs her own catering business.
16:00How long have you had the burger man?
16:02We've been on site here now almost 23 years. And, of course, we're award-winning.
16:07Excellent.
16:09Recently, Liz discovered her local council had hired a firm of consultants.
16:13They were paid £30,000 to help them find internal savings.
16:19So you've got here some minutes from a meeting and it's headed here Strategic Operating Model Assessment.
16:25What does that mean?
16:27Well, it's a piece of work that the council have commissioned.
16:31My understanding is that it is a review on how to make savings in back office services.
16:40The report was written by consultants Price Waterhouse Coopers, known as PwC.
16:47Over the following months, Liz spotted something alarming.
16:51The council were asking for more money for PwC, from £30,000 to more than £100,000.
16:57This was a dramatic ramping up in how much they were going to get.
17:01Absolutely.
17:02And what did you think?
17:04Hiring consultants to do work in times of austerity just really sits uncomfortable with me.
17:12So very concerned.
17:13I want to find out what's really going on here, so I've arranged to meet the deputy leader of Torfine Council, Anthony Hunt.
17:27I want to know why, when they're told to make savings, they're hiring expensive consultants to tell them how to do it.
17:36One of the solutions that many councils are coming to is to bring in independent management consultants, and I believe you've done that here.
17:45Yeah, that's correct. I think it's good to get an external opinion in, to have a look at how you're doing things, if you can do things more efficiently.
17:53We've made a 25% saving in the cost of senior management in the last half a dozen years.
17:59That means we've got less capacity within the organisation to do some of this transformational stuff.
18:03And so every now and again, I think it's worth having an external view in, but only if you can demonstrate that gives taxpayers' value for money, I think.
18:12But they do come up with quite a lot of gobbledygook.
18:14One of the things they think you should do is, we will support and enable services to focus on delivery by providing an effective service.
18:21I mean, just so you know, it's like a classic.
18:24I mean, I certainly don't get fooled by gobbledygook and management speak.
18:27Although Torvine Council paid PwC £140,000 in total, they said it's led to significant efficiency savings.
18:42Could I have the press office? Hi, is that the press office? Jack Peretti here from the BBC.
18:48And it seems they're not the only local council to have paid for a PwC report.
18:53Hi, is that the press office?
18:54I was phoning to find out a bit about some work that's been done.
18:58Would you be able to tell me now how much this report cost?
19:01What's more, these reports have a familiar ring about them.
19:05It's called the Operating Model Assessment.
19:09Operating Model Assessment.
19:12Finally, I've made contact with someone who can tell me more.
19:16Great, yeah, great. Thank you. Take care. Bye-bye.
19:19Bye-bye.
19:24I'll see you next time.
19:27Councillor Jacob Williams has been single-handedly investigating PwC's activities here in Pembrokeshire.
19:34He's discovered the local council paid the company £70,000 to help them find savings.
19:41We received a report which was 180 pages long. I've got it here. It's gobbledygook, you could call it, corporate jargon.
19:52The report's called Operating Model Assessment. What does that mean?
19:55Well, it really, for me, sets the tone for the rest of the document. I suppose it's just looking at the council's way of operation, the way, the culture, I suppose.
20:06But the information within the report, really, some of it is so basic that you have to wonder why council officers couldn't identify this themselves.
20:15Give me an example of the sort of thing that they uncovered in their report.
20:19Well, some departments still fax an attachment after sending an email.
20:24Absolutely anyone could basically find that out.
20:28These sort of things, yes. I would suggest a lot of what's in here is just a blueprint where the companies would just copy and paste the name of the local authority into them.
20:37So why are all these councils paying firms of consultants hundreds of thousands of pounds for reports that all sound the same?
20:52Industry insider and former PWC consultant John Bennett has agreed to meet me to tell me why.
21:00So talk me through what's going on in Wales. We've got a number of reports here.
21:05And they all seem to have a similar title, which is the Operating Model Assessment. Could you tell me what that means?
21:15Well, essentially that means that you're going in to perform a diagnosis on the organisation, an overview.
21:22Very similar to if you take your car into the garage and you get a service from a mechanic.
21:28It's a standard approach, a short piece of work. It's what's called a repeatable proposition.
21:32So it's like a template. Absolutely like a template.
21:36And individuals in junior grades are trained in delivering a repeatable template.
21:41And so when they go into Pembrokeshire or they go into Cardiff, they'll all be working to a specific template that you can, in effect, just put...
21:48A different council's name on the front. Yeah, and the same methodology.
21:52I'm amazed that all the reports I've seen costing hundreds of thousands of pounds are based on a template.
22:03So how do these consultants manage to persuade all these councils to part with our cash?
22:08I'm going to meet someone who knows all the tricks of the trade.
22:14Former consultant David Craig has years of experience persuading clients to pay big money for his services.
22:23He's going to give me a masterclass.
22:25So David, once, as a management consultant, you've got your foot in the door of a government department.
22:31What do you do to get more business?
22:33The first week or two, you haven't a clue what's going on.
22:37So you're fumbling around the dark trying to find out what's happening.
22:40So to buy yourself time, you do a whole lot of general interviews all the way through the organisation.
22:45Step two, pile on the pressure.
22:47The interviews have given you an idea of where to look for the dirt.
22:52So then you do studies in those areas.
22:55But what you're looking for is something that gives a big emotional shock.
22:59We want to take them to what we call the valley of death.
23:02The valley of death? Yes.
23:03Where he loses confidence in his people.
23:05He says, well, how can this be happening? How can my salesman not be selling?
23:09He has to feel his world has moved and he really has to do something.
23:14Because if he's no pain, he's not going to buy.
23:18So down into the valley of death we go.
23:19This is a dark place.
23:21Yes.
23:22But for you as a management consultant, this is the boom.
23:25This is the moment.
23:26It's to heaven.
23:27This is ka-ching.
23:28Yeah. So once we've taken them into the valley of death, now it's time for salvation.
23:32Now we go to the sunny uplands.
23:34It's bad. It's really bad.
23:37But don't worry.
23:39Working together, we can save the situation.
23:41It'll only cost you two or three million.
23:43Or maybe you need to buy a big computer system for another 50 million.
23:45Who knows?
23:46Oh, my God.
23:47It's unbelievable.
23:48It's unbelievable.
23:49I mean, this wouldn't matter, in a way, if it was just in the private sector.
23:53But these companies are now operating in the public sector, with public money.
23:57Yes.
23:58I was at a conference of management consultants a few years ago, and one of the directors of
24:06a leading management consultancy said, it's so easy to sell into the public sector because
24:12buyers are inexperienced, inconsistent, and incompetent.
24:17Wow.
24:18And this was from the head of one of the largest consultancies at sales to the public sector.
24:25And everybody clapped and laughed.
24:27Incredible.
24:28So far, I've discovered that consultants are being hired to help councils find internal
24:37savings.
24:38But it doesn't end there.
24:41They're also advising on the services that affect us all.
24:49Here in Powis, cuts mean the closure of schools are being considered.
24:53So the council paid PwC to study the impact this would have on pupils' travel time.
25:05Local school governor John Milson has been studying their report.
25:10Yep, come in.
25:14What did PwC conclude about travel time?
25:18They do give an example of them.
25:19They say that if they close four schools out of the 13 in the county, then the increase
25:26in average travel time for pupils in the county would be 33 seconds.
25:3133 seconds?
25:32Yes.
25:33So kids who go to school in Paris, how do they get to school?
25:37Well, the ones who can't walk to their local school, the vast majority of them will travel
25:41by council-funded bus.
25:43And this 33-second figure that PwC have come to added to their journey time?
25:48Yes.
25:49Is that based on bus journeys?
25:51No, it's actually based on the time taken by someone to drive from the student's home
25:56address by private car to the school.
25:59By private car?
26:00By private car.
26:01Right.
26:02But pupils in Powis, the majority travel to school by bus.
26:06Yes.
26:07So that's wrong then?
26:09Very wrong.
26:10Yes.
26:12Is it the price?
26:13I want to put PwC's findings to the test.
26:17Oliver Balch has two children due to attend the local secondary school.
26:29By car, it's about a six-minute journey to the school gates.
26:33But the school's threatened with closure, which means his kids may have to travel a further
26:4012 miles to the next one.
26:45So, Oliver, according to PwC, if your kid's secondary school was to close down, on average,
26:50the journey to the new school should take 33 seconds.
26:54Right.
26:55OK.
26:56OK?
26:57How does that sound?
26:59You've basically got 33 seconds to get from here to Brecon.
27:03Right.
27:04Let's go.
27:05OK, let's see how far we get.
27:06OK, go.
27:07Remember, Brecon is, what, 15 miles?
27:12Yeah, something like that.
27:13OK, all right.
27:14Well, you're not doing bad.
27:16OK.
27:17You should be about halfway there by now.
27:21Yeah, you haven't got long.
27:22You've only got another, you've only got another, um, six seconds to get to Brecon.
27:26Six seconds.
27:27Yeah.
27:28Here we go.
27:29No, no, no.
27:30You've got to stop now.
27:31No, sorry.
27:32You've got to stop.
27:33So, you've got to stop now.
27:34Oh, dear.
27:35Twelve miles still to go.
27:37Looks like Oliver's kids are going to be taught in a lay-by.
27:40So, Ollie, we've tried to put the PwC report into practice, and given what we've found out,
27:45what do you think about that report?
27:46Well, I know consultants get paid lots of money, and they probably drive very fast cars,
27:51but it's just completely unrealistic.
27:53Even if you're in a Formula One car, you couldn't get to Brecon in the time they're suggesting.
27:5833 seconds.
27:5933 seconds is just crazy.
28:01It's absurd.
28:02Absolutely not.
28:03PWC may claim that average journey times will increase by only 33 seconds, but the reality
28:10for many parents will be a much longer school run than that.
28:14But what about all the other reports that I've seen?
28:17They cost hundreds of thousands of pounds and could have much wider implications.
28:22I mean, these reports are costing tens of thousands of pounds.
28:26You know, is that good value for money?
28:28They're actually seen by consulting firms almost as lost leaders.
28:31Because when you go into an organisation and do a diagnosis, you're often lining up a larger piece of work further down the line.
28:39And so the expression that I heard many times in large corporate consulting firms is you land and expand.
28:47You start to uncover issues in an organisation and therefore put them under pressure.
28:52It's like a plumber coming in.
28:54It's very, very similar to what you see in people experiencing trades.
28:59In the car industry, they, you know, open up the bonnet of your car and suddenly they found six things wrong with your car when you only went in for a flat tyre.
29:11It turns out land and expand is already happening in Wales.
29:16I've discovered three councils alone have paid PWC nearly five million pounds.
29:23But this upfront money isn't the only issue.
29:28Something far more profound is going on.
29:30A type of contract that the consultants call risk and reward.
29:36What a risk and reward contract means is that the consultants take a percentage from any savings they can find.
29:43In other words, they make money from the budget cuts.
29:48Profit out of austerity.
29:53Here in West Wales, Keradigian Council has signed just such a contract with PWC.
30:00And I want to ask council leader Elenap Gwynn about it.
30:05One of the things you've done is to bring in outside management consultants.
30:10Is that correct?
30:11Yeah, well that was after an open tender exercise.
30:15PWC won that tender.
30:17And we've been working, we worked in partnership with them for about 18 months.
30:21They've been very helpful in that they've helped us to analyse the basis of our budgetary processes.
30:30So when you say they're analytical in the way they look at things, what do they actually do when they come in?
30:36How does it work?
30:37They've held a succession of workshops with different members of staff.
30:42You know, they've been listening first and then come back and talk through possible ways of improving, not improving necessarily, but changing and redesigning services.
30:53Couldn't you do that yourself?
30:54I mean, because you have a lot of highly paid staff here.
30:57We've had a reduction in our highly paid staff, quite substantial reduction, and we've had a change of staff as well.
31:04So you've got, so just to get it straight, so just so I understand what's going on, so basically you've had to get rid of a sort of whole level of administration.
31:12And in order to replace that you've brought in PricewaterhouseCoopers to do the job that those people did do.
31:19For a short period of time, yes.
31:21It just seems, you know, in this time of extraordinary austerity, unprecedented austerity, you know, your council spent nearly a million quid on these people coming in.
31:31And so has that been value for money, you know, for you, what do you think?
31:35Well, I very much hope so.
31:37That is, I mean, when you compare that to 34 million that we've had to cut, and to compare that going forward with the way that we're having to restructure, I think it is.
31:49I spoke to a PWC insider who told me about their strategy for when they go into a council.
31:56Well, if you speak to the wells that come here, you'll find out quite soon that they haven't had an easy ride in here.
32:02They've been challenged, and challenged, and challenged.
32:05This is their strategy, right? It's called land and expand. Have you ever heard of that?
32:10No, but I can see through them when they come. If I don't want something, I don't have it.
32:14Land and expand is we get our foot in the door, and then basically we create a strategic partnership with them, and we expand the job once a week.
32:22No, they haven't, I'm afraid.
32:24So have they land and expanded you?
32:26They've landed, but they've been contracted, and in that I mean opposite to expand rather than the contract.
32:33So how long is the contract for?
32:35It's finished. They're out, they're finished.
32:37Could you tell me the nature of the contract that you had with them?
32:40No, I'm sorry, that's commercial.
32:43It's commercial.
32:45It's commercial.
32:46It's commercial.
32:47You're a public body, this is public sector money.
32:48Yes, but it's a commercial, I'm sorry, it's a commercial contract between council and a private body.
32:53Okay, so there are cuts to public services to the public, and you cannot tell me because it's commercial, the relationship with them.
33:02Indeed.
33:03So do you think the public don't have a right to know what the relationship with this contract is?
33:06That is the legal position we are in.
33:09You feel that you can't tell me?
33:11That's the legal position we are in.
33:13Okay.
33:14Could you tell me what a risk and reward contract is?
33:16You need to look that up yourself. I'm not going any further on the contract.
33:20Have you heard of a risk and reward contract?
33:22I have, but I'm not going any further on the contract, I'm sorry.
33:25Well, just if we don't talk about your specific contract, but just generally what a risk and reward contract is.
33:30No, I'm not going any further on any contracts.
33:32That's it.
33:33You've had what you want from me. I think we should perhaps finish this.
33:37Well, I've just got one more question. Just one more question, Ellen.
33:41It's been said that PwC will receive 16% profit on every cut.
33:47I'm not going to comment at all on the contract. I've already told you that.
33:52That's the end of the interview.
33:53But the public here...
33:54It's the end of the interview. Sorry. You're going too far now.
33:58Well, Ellen, it's literally knowing about the 16%. Is it right or is it not?
34:03I'm sorry, I'm not discussing the contract. I told you that.
34:06They make 16% profit on the cuts that you make.
34:10Is a company profiting from the cuts?
34:12I'm not discussing anything about the contract.
34:15Do you think it's right that a company should make...
34:17Will you please get out of my room? The bloody lot of you. I've had enough of it.
34:23So I've just been asked to leave the building.
34:26The leader of the council has walked out of the interview very, very angry.
34:30And the thing that made her angry was me asking about the nature of the contract with PwC.
34:35She called it commercially sensitive and said she couldn't speak about it.
34:39But we're talking about huge amounts of money here that are passing to a private company.
34:44And it does seem extraordinary that I'm not even allowed to ask the question.
34:48Why is it so difficult to find out?
34:50PwC wouldn't meet me, but they sent us this statement.
34:56We are often engaged by local authorities to help them improve their services and reduce costs in the face of continued financial pressure.
35:03It is important that our work delivers a tangible return on taxpayers' investment.
35:08We therefore work with clients to demonstrate the value and effectiveness of contracts.
35:13Our fees are often and increasingly dependent on the performance of our services, whereby we are only paid in full if we deliver the full benefits agreed at the outset.
35:22I still need some answers, so I'm meeting the man who speaks for the consultancy industry, Alan Lehman.
35:41Could you explain to me what a risk and reward contract is?
35:45There are more and more people in our industry who are saying to clients, what you really want to do is buy an outcome.
35:50You want to buy a result. And how are we going to do that? Well, we're going to share some risks.
35:56So, okay, we might take a basic fee, but on top of that, we'll be paid by the results we deliver for you.
36:05We were in Keredigian in Wales, and they had a risk and reward contract there, which basically delivered 16% return to the management consultants there on all the public service cuts that were being made.
36:22The more cuts that were made, the more money they made. Is that correct?
36:26We all understand that savings are being looked for and we need to improve efficiency in the public sector.
36:34And that's one of the areas where really skilled management consultancies can make a difference.
36:40You haven't answered my question. I asked whether the management consultancy firm were actually making a profit on the austerity cuts being made there because of this risk and reward contract.
36:49Is that correct or not? Well, it means what you're doing is you're giving the consulting firm every possible incentive to deliver savings for the taxpayer.
36:59And that's, to my mind, a real benefit for the country.
37:04How widespread are risk and reward contracts within the public sector in Britain?
37:08It's limited, but there's a desire certainly at the top of government, because we've spoken about this, to see more being done.
37:15Do you think it's moral that a management consultancy firm are making money out of the cuts that are being made to public services in this way?
37:22Right. I think it's moral if the objectives of the project are moral, and if they are, I think it's absolutely right that they should be rewarded for achieving what the public sector wants to achieve.
37:34Consultants are profiting to the tune of millions advising on public service cuts, but their involvement doesn't end there.
37:43To make the public sector a gift that keeps giving, they've got another trick up their sleeve.
37:49And it's all down to that ultimate consultant buzzword, transformation.
37:56If you go into any company or any council or hospital, you'll probably find they're running a so-called transformation program with expensive, completely uneducated, unqualified management consultants helping them.
38:10And, of course, everybody can improve, but you do not need to transform.
38:16Any organization stupid enough to buy a transformation program would employ an army of consultants for a century and cause endless disruption.
38:24Because transformation equals starting again. It means spending more money.
38:29It means change everything. And you never need to change everything.
38:33You need to improve those things that need to be improved, and you need to guard and protect the things that are working okay.
38:42When it comes to transformation projects, they don't come much bigger than the top-to-bottom reorganization of the NHS in England, conceived here in Whitehall six years ago.
38:55This ambitious reorganization of the NHS promised to be the most radical shake-up in its history.
39:07As the government put its plans for the NHS into action, one firm of consultants were involved in meetings with officials, McKinsey.
39:16It advises governments and private companies across the world.
39:25What people at McKinsey have in common is a desire to see things improve, whether you work in the private sector, the public sector.
39:33Tamazin Cave has been investigating McKinsey's role during the time of the NHS reorganization, and she's built up a dossier of revealing correspondence.
39:43What are these conversations about? What's going on?
39:47These are fragments of conversations.
39:50In the correspondence, you see McKinsey firing off an email to all the top of the Department of Health, all the senior officials, saying,
39:56Right, we're ready to start work with you. We're ready to dive in. I hope we can help.
40:01You see McKinsey being involved in discussions around the new structures for the NHS.
40:06You even get them sitting in on board meetings, even to the extent where board meetings are being held in McKinsey's office.
40:13One man who recalls the presence of McKinsey is Dr. Lawrence Buckman, who represented GPs during the NHS reorganization.
40:28Wherever you went to a meeting, somebody from McKinsey's was there who had written a report that appeared to be a fait accompli, and those of us who thought that we were actually going to have a say in how this was going to happen were continuously sidelined or we were told, well, this is how it's going to be. It was always the same experience.
40:50As the NHS was overhauled, McKinsey was employed across the organization, and their services didn't come cheap.
40:59Tamsin, do you have specific figures about the amount of money that McKinsey are taking from the NHS?
41:04We know it's many millions. And then after that, you look to spending data, you can see there's 800,000 here, another half a million there.
41:13Similarly, you can go to NHS England, they will have spending, and they have, I mean, they've spent hundreds of thousands, probably now totalling millions, and it's described as NHS England running costs, but that's going to McKinsey.
41:25We asked McKinsey about their work in the NHS, and they said, like other consultancies, McKinsey and Company has provided advice to different parts of the NHS, improving patient care and the management of resources.
41:38Our work is the result of competitive public sector procurement processes.
41:44McKinsey aren't the only consultants being paid by the NHS.
41:48David Oliver is a doctor who's uncovered how much has been spent on management consultants across the NHS.
42:02In 2013, I put a Freedom of Information request into the Department of Health, asking them how much management consultancy spend had increased during the time of the coalition government.
42:13What the Freedom of Information request showed is that consultancy spend had doubled within the first three years of the coalition government, nearly doubled to £607 million, and I dare say it's increased beyond that since that time.
42:26I mean, if that was money spent within the NHS, what could that do?
42:30Well, £600 million would run a couple of medium-sized hospitals for a year, for instance. It would increase the funding for out-of-hours care by about 30%.
42:40When you found out what you found out, how did you feel?
42:43Well, I wasn't surprised. I could see with my own eyes what was going on around the place, and I'm afraid how I felt was it's a racket. And it's still how I feel now, really.
42:58The management consultants may have cashed in from the NHS reorganisation, but has it helped deliver a better service?
43:05So we've had years of upheaval, billions spent on reforms, management consultants have earned a fortune from it. Have we ended up with a better system?
43:15No. We've ended up with a system that is more fragmented, more rushed, under much greater pressure, is unattractive for people to work in, and that patients are getting a less good deal than they were before the reform started.
43:32Dr Buckman's just one of many experts critical of the NHS reorganisation, while the government says they're putting patient care at the heart of the NHS.
43:42But with management consultants now working right across our town halls and hospitals, just how far has their influence spread?
43:51Welcome to Whitehall, to the heart of government, where they decide how to spend your money.
44:01Most of the money that pays for our public services ends up here, where it's divvied up among government departments.
44:07On your right is 10 Downing Street, where the Prime Minister lives, and right next door, the Cabinet Office, who handle around 2.8 billion every year on things like MI5 and MI6.
44:19On your right, the Foreign Office, who spend 1.9 billion of our money on diplomats and embassies.
44:27For billions of pounds of taxpayers' money is also paid to private companies.
44:36Some of them began as consultants, but now they've gone from advising our public services to actually running them.
44:44If you could turn to your left, ladies and gentlemen, that anonymous building is 71 Victoria Street, the offices of Capita.
44:53Capita runs lots of public IT and admin contracts. In return, it receives more than a billion pounds a year of our money.
45:02We're just passing the offices of G4S. They run everything from prisons to detention centres.
45:09Tuck just up here, between these two buildings at the top of Victoria Street, are the offices of Serco.
45:17In return for running everything from Boris Bikes to RAF Bases, Serco is paid 1.8 billion.
45:24In total, these three outsourcing giants receive three and a half billion pounds of public money.
45:30Considering how much we give them, it's strange we know so little about them.
45:36Who is this person?
45:38That's Queen Elizabeth.
45:40That is the Queen.
45:41That's Her Royal Majesty the Queen.
45:43How much money do you think you and I give her per year, per person?
45:47£2 per person.
45:48£200.
45:49Whoa!
45:50£1 per person.
45:51£1 per person.
45:52£2 per person.
45:53£0.00, £1 per person.
45:55Oh, wow.
45:56OK, that's...
45:57It's actually 56p.
45:59Oh!
46:0056p, that's pretty good.
46:02You think that's good value for money?
46:04Do you know who these two men are?
46:05Have you ever seen them before?
46:06These are the bosses of Serco and Capita.
46:09No.
46:10Have you ever seen them before?
46:11I haven't, no.
46:12OK.
46:13I want to see if anyone can guess how much of our money goes to the companies they run.
46:17I'm guessing it's going to be a bit more.
46:20I'll assume like 30p.
46:21Go £5, yeah?
46:22£5.00.
46:23Closer to £50.
46:24Really?
46:25Shall I tell you?
46:26Is it up to a pound?
46:28It can't be up to a pound.
46:30It's nearly £50.
46:31It's nearly £50.
46:32What?
46:33What do they do?
46:34Why do they get that money?
46:36We pay the Queen, as you said, 50p, which doesn't seem that bad.
46:41Because we all love her and everything, but like £50, that's like a weekly charge.
46:46Since 2010, the number of our services run by private firms has doubled.
46:56That means one in every £6 of taxpayers' money goes to these companies.
47:01In return, we expect efficient, well-run services, but to local people, the results can often seem bizarre.
47:11This is the first time I've seen urban arboreal vandalism in action.
47:19This is just terrible.
47:22Absolutely terrible.
47:31Yeah.
47:34Flipping great work.
47:41It's 6am, and I'm in Sheffield, outside a depot belonging to a company called Amy.
47:50Four years ago, they were given a £2 billion contract to improve the city's roads,
47:55including looking after the 30,000 trees lining the streets.
48:01Amy have since felled more than 3,000 trees they say are dead, diseased or dangerous.
48:09But protesters think otherwise.
48:13Basically, Dave and Helen and the other protesters are staking out the chipping company
48:19who are going to be felling the trees this morning,
48:22and they've been doing this for a number of weeks now.
48:25And basically, it's a kind of game of cat and mouse.
48:27They're waiting to see when they leave, which gate they leave from,
48:31and then they're going to follow them to the road where they're going to cut down the trees
48:34and try and prevent it happening.
48:38Let's go and have a quick wrecker then, Chris, and find out what's happening at the other end.
48:42So, Dave, what's going on?
48:43We've got to go up to Bonadale Road.
48:45Yeah.
48:46Because there is only one person guarding the tree we think they'll come for next.
49:00The protesters have been tipped off that felling crews are planning a dawn raid on a nearby street.
49:05Now, this is where we were yesterday.
49:13The tree was taken down, is behind this barrier here.
49:17You'll see the stump that's left.
49:19Wow.
49:20Perfectly healthy tree.
49:22One gone here yesterday.
49:24I was standing by that tree and they carried on cutting it down.
49:27Many locals woke up to see their trees gone.
49:38It just breaks my heart.
49:40How can it be right to fell a beautiful, healthy tree?
49:43It's just appalling.
49:45It really is dreadful.
49:48This time, the protesters are one step ahead of the felling crews.
49:51Now, this is a tree in question.
49:54The tree they're guarding is due to be removed,
49:56because Amy say it's causing structural damage.
49:59But Dave disagrees.
50:01The curb edge?
50:03Straight.
50:04Yeah.
50:05There's no damage to the boundary wall.
50:08There's really minimal damage to the pavement.
50:12Yeah.
50:13Sheffield Council say residents are consulted before a tree is removed.
50:18But protesters say it's cheaper to chop the trees down than have to work around them.
50:24In other words, fewer trees equals more money.
50:30It makes absolutely no sense to be chopping down highway trees at the rate they're doing.
50:35It's absolutely unsustainable.
50:37It has to stop.
50:38Amy wouldn't meet me, but said in a statement,
50:41Our aim is to create a sustainable legacy of healthy, diverse trees, while ensuring the safety of highway users and properties.
50:51In May, the High Court found in favour of the council, reinforcing its legal duty to keep the highway in good repair.
50:59Across the country and the political spectrum, the value of outsourcing is being questioned.
51:09Nowhere is that more true than Birmingham, where the council signed an unusually large deal with Capita.
51:17Birmingham is Europe's largest council, and the outsourcing deal, it agreed with Capita, is one of the biggest in the UK, involving over £1 billion of public money.
51:34The council agreed to let Capita handle its IT and back office operations through a joint venture called Service Birmingham.
51:42But the deal was shrouded in secrecy.
51:45Professor David Bailey, another pesky armchair auditor, has been trying to uncover the truth.
51:51This joint venture, which Capita was providing all these services, how much was it supposed to be costing?
51:57I think the initial view, talking to people that were kind of around at the time, was they were expecting it to be of the order of £50 to £60 million a year.
52:06Now, it's difficult in the sense that over time, more elements were added to the contract, so the costs inevitably went up.
52:14But at its peak, it was costing something like £140 million a year, so it's still over £100 million a year for the last figures that we have,
52:23of which Capita has been making a profit of over, I think, £20 million in total.
52:31So it's a very lucrative business for them still.
52:34I looked into this a bit myself, and it seems as though £338,000 a day in Birmingham,
52:41it was being spent on simply backroom administration and IT per day.
52:47The spend on IT through Service Birmingham by the City Council ran at over 10% of the entire controllable budget of the organisation.
52:57Now, that's a huge amount. You look at most organisations around the world and what they spend on IT, it might be 5%.
53:03This is over 10%.
53:05Given that this is public money that's being spent, why has it been so difficult for you to get answers?
53:10I think that's been one of the major issues for me. This is very, very opaque.
53:14And whenever we tried to challenge the council on it, they hid behind this term commercial confidentiality.
53:19I mean, whenever pertinent questions are actually asked, commercial confidentiality is the phrase that's always brought up to kind of protect it.
53:26And that, in a way, demonstrates how utterly murky the relationship between these companies and councils is.
53:33I mean, it's totally, totally impossible to work out what's really going on.
53:37If we can't see how 10% of the council's budget is being spent because it's covered by a contract we can't see,
53:45how are we able to judge whether or not public money is being spent well?
53:49So there's a fundamental conflict, I think, between commercial confidentiality and the right for public to actually scrutinise public expenditure.
53:58We asked Capita about its role in Service Birmingham. They told us.
54:03Service Birmingham has generated savings of well over £1 billion for the people of Birmingham while delivering high quality services.
54:12The council's annual spend with Service Birmingham has now reduced to £80 million by 2015-16.
54:19The council shares in the success of the business, allowing it to reinvest in protecting frontline services.
54:30With question marks growing over the benefits of outsourcing, it's no wonder some authorities are searching for different solutions.
54:38I'm heading to Liverpool, where they think they've found one.
54:42Please make sure that you have all of your personal belongings with you at all times.
54:47Until recently, Amy, who I encountered in Sheffield, ran the city's street cleaning.
54:53But the council were unhappy with their performance and ended the contract.
54:58One of the people behind the decision was councillor Steve Mumby.
55:03Steve, what was the public's experience with outsourcing? Did they like it?
55:07Did they find they got a good service?
55:09They didn't bring bunches of flowers to thank me or the company, no.
55:12It was dreadful, particularly with some of our core street services.
55:15There was a complete outcry.
55:17After their experiences with outsourcing, the council now runs the services themselves.
55:22And they believe the taxpayer is getting better value for their money.
55:26And this isn't a kind of loony-left Liverpool council idea.
55:29This is a non-ideological thing.
55:31You've got conservative councils as well across the country going back to insourcing.
55:36Because it's just simply, as you say, more efficient, better for the customer and better for you.
55:41Absolutely. In fact, the ideologues are the people who are arguing that privatisation is going to be cheaper.
55:48If you look at it, the figures don't add up.
55:50Even if you did nothing else, by taking stuff back in, you eliminate a management fee.
55:54So that can be a million or two a year on a contract.
55:59By running the street cleaning themselves, the council say they've already saved £1 million.
56:05Probably about £48,000.
56:08Probably £48,000, man.
56:10And by consulting the workers, they say productivity has risen by 50%.
56:17So what do they think about the change?
56:21How long have you worked for the street cleaning?
56:24Nearly 28 years.
56:25And how does it compare now to what it was like before?
56:28Well, if you're working with a private firm, their aims aren't the same as what the council wants.
56:32You know what I mean? They could want something totally different.
56:35What were their aims, do you think?
56:37Well, I've got to imagine their aims is to make as much money as they could.
56:41Is there a sense that you're listening to as opposed to just being told what to do?
56:44Well, now it is, yeah.
56:46Especially to be in the council, like.
56:48Yeah.
56:49Because they're looking for deficiencies as we are ourselves, you know what I mean?
56:52Yeah.
56:53So in reality, we're all shareholders.
56:55Yeah, exactly.
56:56We asked Amy about its street cleaning contract in Liverpool.
57:00They told us,
57:01Amy came to a mutual decision with Liverpool City Council to end the street cleaning contract early
57:07after both sides had raised concerns about the sustainability of the contract.
57:11We are proud of the work we continue to deliver,
57:14including maintaining the city's highways infrastructure.
57:19Liverpool isn't the only council taking back control of its services.
57:24From Cumbria to Essex, many others, Tory, Labour and Lib Dem are following suit.
57:31Being here in Liverpool today, I've realised that the model of efficiency that we've been following for years,
57:37of outsourcing, has been seen to fail.
57:40And they're following a new model which is based around trusting the people who do the job on the ground.
57:46You know, the people who do the job are the ones that should be trusted to deliver efficiency,
57:50rather than just parachuting someone in.
57:53As Britain tightened its belt, billions of pounds of our money has been handed over to management consultants
58:05and outsourcing companies.
58:07They say they can deliver efficiency, but when we ask questions, we're told it's not our business to know.
58:16If we're going to truly change our public services, we need to find out the truth.
58:22Not just who's spending our money, but how they're doing it.
58:26And tomorrow, The Listening Project brings you snapshots of the nation's conversation in the aftermath of the Brexit vote.
58:36That's at 12 noon on Radio 4.
58:39On BBC iPlayer, Panorama's Tax Havens of the Rich and Powerful Exposed is available to watch now,
58:45whilst BBC Two heads to the Baltic in a city they call the Manchester of Finland.
58:50A Great Continental Railway journey, next.
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