Could Capita be the next Carillion? Why it matters to those working in Probation.
The value of Capita’s share price was slashed by 50% this week as investors, no longer confident that the UK government would bail out their contractors, started dumping shares and shifting their money elsewhere.
Until recently Capita were considered by the government to be a safe pair of hands. A good example of this confidence was demonstrated when G4S and Serco dropped the ball regarding the electronic monitoring of offenders (EM) in 2013 and it was Capita that was asked to pick up the baton and was then subsequently awarded this lucrative contract in England and Wales with largely the same infrastructure and staff employed albeit with stronger direct MoJ oversight and open book accounts.
G4S continued to manage the EM contract in both Northern Ireland and Scotland (subject to different contracts) and after paying a £109m bung in 2014 was again allowed to continue bidding for government contracts including EM. It should not be forgotten that the Serious Fraud Office investigation with regard to both Serco and G4S’s activities in respect of EM continues. Despite this it was to G4S that the government turned when they ran into severe equipment difficulties regarding the GPS EM programme initiated by Ken Clarke when he was Justice Secretary and it is a story worthy of a two hour documentary laying bare a tale of breathtaking commercial and contractual incompetence to the tune of at least £60m of taxpayer monies. The story of how they tried to fleece successful British health monitoring firm Buddi of its intellectual property is worth 30 minutes alone.
It is therefore easy to see that the government is nervous about the prospect of Capita’s collapse as this is perhaps the clearest indication of the collapse too of the governments failed neoliberal ideological mission (a mission close to Grayling et al stony heart) to contract out and outsource the state to private companies effectively creating a shadow state one step removed from an increasingly smaller and less powerful government. By doing this the result is democratically less accountable public services (no information as it is commercially sensitive) who by attempting to produce surplus/profit from contracts actually actually end up running down or distorting the services they are contracted to provide. Some try to convince themselves that if only they had more government money then they would not do this but when the money comes it does not find its way to the front end but rather in increasing the corporate centre concerned with chasing other contracts. These organisations are only interested in hitting targets to ensure payment rather than providing quality services and investing in the future eg training and investing in staff.
Capita apparently put a cheeky bid in for London CRC but according to my sources this was reluctantly rejected by the MoJ/NOMS as it apparently proposed a 50% cut in staff and premises from the outset rather than achieving this stealthily throughout the contract as proposed by most successful bidders. They were apparently asked to address this but apparently informed the MoJ this was the only way to turn a profit as it is nigh on impossible to turn a profit in London without continuous top ups from the government or a blank cheque book. When discussed informally with MoJ staff this has never been denied.
Returning to EM....
Industry experts are pretty sure that if Capita were to collapse then the government would probably have to consider ignoring the ongoing fraud investigation and return EM to G4S or Serco or even hand this contract to the French catering firm Sodexo with G4S supplying some of the equipment or even to one of their new US friends. In other words an utter mess that could have been and could be completely avoided if the government admitted some time ago that criminal justice services including prisons and probation and electronic monitoring should never have been outsourced, as this is clearly the direct responsibility of the state, and should now be taken back into public ownership as a matter of urgency and dealt with in a consistent cost effective way throughout England and Wales.
We can therefore only hope that if Capita collapses or survives by some miracle of behind the scenes deal making then this will remind the government how vulnerable they are in respect of their criminal justice policies and perhaps prompt them to formulate a strategy to explain to the public what they are actually trying to achieve other than profit for their corporate friends and already wealthy supporters.
David Raho
--oo00oo--
There's no doubt that the Carillion collapse has turbo-charged the whole debate regarding privatisation and outsourcing and the Tories find themselves on the back foot. I notice the arch protagonist in this regard, Francis Maude, was wheeled out yesterday on the BBC Daily Politics show and in trying to defend the cause, came out with that old hackneyed argument about the public sector never innovating. We know this is crap and strangely, only the day before I learnt of an example I was completely unaware of via this 'exciting' news from Open Reach (BT to you and me):-
Openreach launches ‘Fibre First’ programme to make Fibre to the Premises broadband available to three million UK homes and businesses by the end of 2020
Openreach, Britain’s national broadband infrastructure provider, today announced an acceleration of its Fibre to the Premises (FTTP) build programme to enhance Britain’s digital infrastructure and to reinforce the UK’s position as the leading digital economy in the G20. 1
Openreach is extending its current Fibre to the Premises (FTTP) build target by 50% to reach three million premises by the end of 2020 through its new ‘Fibre First’ programme2. Birmingham, Bristol, Cardiff, Edinburgh, Leeds, Liverpool, London and Manchester make up the first phase of the programme which will connect up to 40 UK towns, cities and boroughs with FTTP3 with build starting in 2018. Openreach will also continue to focus on delivering FTTP to rural areas, in partnership with the Government, to make sure some of the hardest to reach communities in the UK get access to future-proofed, FTTP networks.
Fibre First reconfirms Openreach’s ambition to build a large-scale FTTP network in the UK and accelerates the next fundamental upgrade of critical UK infrastructure. With the largest FTTP footprint in the UK4, Openreach is best placed to deliver the infrastructure required, at scale, to maintain the UK’s position as a leading digital economy. An FTTP network has substantial and far-reaching benefits for UK citizens, businesses, society and the economy.The benefits include: better, more reliable service; fewer faults; and faster, more predictable and consistent speeds.The platform would be future-proof, supporting the speed requirements of customers for decades to come.
--oo00oo--
How Thatcher killed the UK's superfast broadband before it even existed
As you sit on the phone to your ISP's customer service line, listening to half-baked excuses for why you've only got 0.5Mbps upload speed and why you "need" to upgrade to "superfast" fibre optic, it may be little comfort to know that in an alternate reality you'd already have it as standard.
In 1990, a single decision by then-Prime Minister Margaret Thatcher had a devastating effect on the UK's broadband infrastructure for the next 20 years and for the foreseeable future. In a little known story about the UK's broadband history, Dr Peter Cochrane, former Chief Technology Officer at BT and all round tech guru, tells TechRadar how the UK lost the broadband race way back in the 90s.
The story actually begins in the 70s when Dr Cochrane was working as BT's Chief Technology Officer, a position he'd climbed up to from engineer some years earlier. Dr Cochrane knew that Britain's tired copper network was insufficient: "In 1974 it was patently obvious that copper wire was unsuitable for digital communication in any form, and it could not afford the capacity we needed for the future." He was asked to do a report on the UK's future of digital communication and what was needed to move forward.
"In 1979 I presented my results," he tells us, "and the conclusion was to forget about copper and get into fibre. So BT started a massive effort - that spanned in six years - involving thousands of people to both digitise the network and to put fibre everywhere. The country had more fibre per capita than any other nation. In 1986, I managed to get fibre to the home cheaper than copper and we started a programme where we built factories for manufacturing the system. By 1990, we had two factories, one in Ipswich and one in Birmingham, where were manufacturing components for systems to roll out to the local loop".
At that time, the UK, Japan and the United States were leading the way in fibre optic technology and roll-out. Indeed, the first wide area fibre optic network was set up in Hastings, UK. But, in 1990, then Prime Minister, Margaret Thatcher, decided that BT's rapid and extensive rollout of fibre optic broadband was anti-competitive and held a monopoly on a technology and service that no other telecom company could do.
"Unfortunately, the Thatcher government decided that it wanted the American cable companies providing the same service to increase competition. So the decision was made to close down the local loop roll out and in 1991 that roll out was stopped. The two factories that BT had built to build fibre related components were sold to Fujitsu and HP, the assets were stripped and the expertise was shipped out to South East Asia. Our colleagues in Korea and Japan, who were working with quite closely at the time, stood back and looked at what happened to us in amazement. What was pivotal was that they carried on with their respective fibre rollouts. And, well, the rest is history as they say.
"What is quite astonishing is that a very similar thing happened in the United States. The US, UK and Japan were leading the world. In the US, a judge was appointed by Congress to break up AT&T. And so AT&T became things like BellSouth and at that point, political decisions were made that crippled the roll out of optical fibre across the rest of the western world, because the rest of the countries just followed like sheep. This created a very stop-start roll-out which doesn't work with fibre optic - it needs to be done en masse. You needed economy of scale. You could not roll out fibre to the home for 1% of Europe and make it economic, you had to go whole hog. It's like everything else in the electronics world, if you make one laptop, it costs billions; if you make billions of laptops it costs a few quid".
Immediately after that decision by Thatcher's government, the UK fell far behind in broadband speeds and, to this day, has never properly recovered. When the current government came to power it pledged that the UK would have the best superfast broadband network in Europe by 2015 and 90% of homes will be connected to superfast broadband by 2017.
But, as Dr Cochrane explains, there are two things wrong with this. Firstly, the government's definition of superfast broadband is 24Mbps. Secondly, comparing against Europe is pointless. "Western nations blindly compare with each other. There's no point in saying 'we're better than the French, we're better than the Germans' - that's not the point. Are we better than the Japanese, the Koreans and other competing nations?"
"[In Southeast Asia] they roared ahead. The Japanese in particular formulated a plan. While we were faffing about with half an Mbps 'being sufficient' the Japanese were rolling out 10Mbps. When we got to 2Mbps they were rolling out 100Mbps. Hong Kong in 2012 already had a gigabit both ways. In 1999 Japan already had 50Mbps universally and South Korea was comfortably using 4G by 2006. In the UK there's no vision, mission or plan, we're engaged in a random walk into the future".
It all comes down to bandwidth
The UK's fibre rollout is mostly Fibre To The Cabinet (FTTC), rather than Fibre To The Home (FTTH). What's the difference? Well, FTTH is fibre optic cable directly to the home, whereas FTTC is fibre optic cable to your nearest cabinet, with copper wire taking the signal the last leg of the journey. The copper limits speeds to 80Mbps, compared with 1,000Mbps or more available in all-fibre networks.
Dr Cochrane explained: "Fibre To The Home gives you an infinity of bandwidth, both ways, that you can upgrade forever, and it's symmetric. If you go for Fibre To The Cabinet, you finish up with an asymmetric service. Now, this is really important. Why? How about the cloud, the cloud is not an asymmetric service, video conferencing is not an asymmetric service, so the whole ethos of the telecoms industry has been skewed by decision makers who think that the future of the internet is watching TV or movies, which it isn't".
"Businesses rely on symmetric bandwidth for cloud computing and video conferencing and this lack of bandwidth will put us slowly into a second world status. For example, I am sitting here, I work all over the world and say I want to upload a 350MB file. 350MB is not huge. With my old broadband, when I had less than 0.5Mbps upload you'd start in the morning and finish sometime in the middle of the night. Now I've got 32Mbps upload, I can actually watch it going. If I was in Hong Kong it would be instantaneous. Imagine having a discussion and putting a 10 second delay between each word, it wouldn't work."
It all sounds pretty good news and you'd be forgiven for thinking that, but in this era of 'fake news' and 'alternative facts', it's worth digging around a little. Have you ever wondered why your internet connection is so rubbish? Perhaps you're relying on good old-fashioned BT and a 'twisted pair' from the telegraph pole?
Living in a big city, I well remember getting very excited at the arrival of the 'digital super highway' in my street some 25 years ago, but could never understand why the cable company only hooked me up with coax cable and not the magic fibre optic stuff. Surely the future lay in glass, not copper? Well, it turns out we have Margaret Thatcher to thank for our crap internet connection and a key decision she made years ago for purely ideological reasons. It's an astonishing saga and as the UK heads for Brexit amid hopes for greater world markets, it makes for very sobering reading indeed. Here's the story from 2014 on the techradar website:-
How Thatcher killed the UK's superfast broadband before it even existed
As you sit on the phone to your ISP's customer service line, listening to half-baked excuses for why you've only got 0.5Mbps upload speed and why you "need" to upgrade to "superfast" fibre optic, it may be little comfort to know that in an alternate reality you'd already have it as standard.
In 1990, a single decision by then-Prime Minister Margaret Thatcher had a devastating effect on the UK's broadband infrastructure for the next 20 years and for the foreseeable future. In a little known story about the UK's broadband history, Dr Peter Cochrane, former Chief Technology Officer at BT and all round tech guru, tells TechRadar how the UK lost the broadband race way back in the 90s.
The story actually begins in the 70s when Dr Cochrane was working as BT's Chief Technology Officer, a position he'd climbed up to from engineer some years earlier. Dr Cochrane knew that Britain's tired copper network was insufficient: "In 1974 it was patently obvious that copper wire was unsuitable for digital communication in any form, and it could not afford the capacity we needed for the future." He was asked to do a report on the UK's future of digital communication and what was needed to move forward.
"In 1979 I presented my results," he tells us, "and the conclusion was to forget about copper and get into fibre. So BT started a massive effort - that spanned in six years - involving thousands of people to both digitise the network and to put fibre everywhere. The country had more fibre per capita than any other nation. In 1986, I managed to get fibre to the home cheaper than copper and we started a programme where we built factories for manufacturing the system. By 1990, we had two factories, one in Ipswich and one in Birmingham, where were manufacturing components for systems to roll out to the local loop".
At that time, the UK, Japan and the United States were leading the way in fibre optic technology and roll-out. Indeed, the first wide area fibre optic network was set up in Hastings, UK. But, in 1990, then Prime Minister, Margaret Thatcher, decided that BT's rapid and extensive rollout of fibre optic broadband was anti-competitive and held a monopoly on a technology and service that no other telecom company could do.
"Unfortunately, the Thatcher government decided that it wanted the American cable companies providing the same service to increase competition. So the decision was made to close down the local loop roll out and in 1991 that roll out was stopped. The two factories that BT had built to build fibre related components were sold to Fujitsu and HP, the assets were stripped and the expertise was shipped out to South East Asia. Our colleagues in Korea and Japan, who were working with quite closely at the time, stood back and looked at what happened to us in amazement. What was pivotal was that they carried on with their respective fibre rollouts. And, well, the rest is history as they say.
"What is quite astonishing is that a very similar thing happened in the United States. The US, UK and Japan were leading the world. In the US, a judge was appointed by Congress to break up AT&T. And so AT&T became things like BellSouth and at that point, political decisions were made that crippled the roll out of optical fibre across the rest of the western world, because the rest of the countries just followed like sheep. This created a very stop-start roll-out which doesn't work with fibre optic - it needs to be done en masse. You needed economy of scale. You could not roll out fibre to the home for 1% of Europe and make it economic, you had to go whole hog. It's like everything else in the electronics world, if you make one laptop, it costs billions; if you make billions of laptops it costs a few quid".
Immediately after that decision by Thatcher's government, the UK fell far behind in broadband speeds and, to this day, has never properly recovered. When the current government came to power it pledged that the UK would have the best superfast broadband network in Europe by 2015 and 90% of homes will be connected to superfast broadband by 2017.
But, as Dr Cochrane explains, there are two things wrong with this. Firstly, the government's definition of superfast broadband is 24Mbps. Secondly, comparing against Europe is pointless. "Western nations blindly compare with each other. There's no point in saying 'we're better than the French, we're better than the Germans' - that's not the point. Are we better than the Japanese, the Koreans and other competing nations?"
"[In Southeast Asia] they roared ahead. The Japanese in particular formulated a plan. While we were faffing about with half an Mbps 'being sufficient' the Japanese were rolling out 10Mbps. When we got to 2Mbps they were rolling out 100Mbps. Hong Kong in 2012 already had a gigabit both ways. In 1999 Japan already had 50Mbps universally and South Korea was comfortably using 4G by 2006. In the UK there's no vision, mission or plan, we're engaged in a random walk into the future".
It all comes down to bandwidth
The UK's fibre rollout is mostly Fibre To The Cabinet (FTTC), rather than Fibre To The Home (FTTH). What's the difference? Well, FTTH is fibre optic cable directly to the home, whereas FTTC is fibre optic cable to your nearest cabinet, with copper wire taking the signal the last leg of the journey. The copper limits speeds to 80Mbps, compared with 1,000Mbps or more available in all-fibre networks.
Dr Cochrane explained: "Fibre To The Home gives you an infinity of bandwidth, both ways, that you can upgrade forever, and it's symmetric. If you go for Fibre To The Cabinet, you finish up with an asymmetric service. Now, this is really important. Why? How about the cloud, the cloud is not an asymmetric service, video conferencing is not an asymmetric service, so the whole ethos of the telecoms industry has been skewed by decision makers who think that the future of the internet is watching TV or movies, which it isn't".
"Businesses rely on symmetric bandwidth for cloud computing and video conferencing and this lack of bandwidth will put us slowly into a second world status. For example, I am sitting here, I work all over the world and say I want to upload a 350MB file. 350MB is not huge. With my old broadband, when I had less than 0.5Mbps upload you'd start in the morning and finish sometime in the middle of the night. Now I've got 32Mbps upload, I can actually watch it going. If I was in Hong Kong it would be instantaneous. Imagine having a discussion and putting a 10 second delay between each word, it wouldn't work."
New technologies, too, are hampered by low bandwidth, which has a direct effect on our ability to embrace revolutionary concepts. IBM's Watson, the learning super-computer that functions through the cloud and is able to give evidence-based medical diagnoses, will fail in the UK because a lack of bandwidth, according to Dr Cochrane.
"If you look at the story of IBM Watson, it's moving into the medical industry in the United States and you will be able soon to have an app with which you can configure Watson for your industry. It's going to change everything, from investment banking to the legal industry. That sort of service, being able to get remote diagnostics, can only occur if you've got bandwidth".
The future isn't so bright for the UK when it comes to broadband, and that's largely owing to an administration taking the wrong path 24 years ago. Unless there's massive investment in broadband infrastructure and a complete rethink at the highest levels of government, the UK will only fall further behind.
"The UK will be frozen out of cloud computing because we don't have bandwidth, worst of all we don't have symmetric bandwidth. And the UK network cannot support the population in the cloud. It will be OK if you're in a hotspot for bandwidth, and there are some hotspots of bandwidth in the UK, but for the most part the population will be frozen out. Ergo, this will hit the bottom line - it all comes down to GDP. If businesses can't operate, the UK won't generate money".