John Harris

Journalist & Author

Emma Harrison of A4e’s big mistake? Not keeping her head down | John Harris

Flamboyant opulence and welfare-to-work are not the easiest of fits, and the tension between public services and profit is building

When piecing through the story of Emma Harrison’s high-velocity fall, bear one thing in mind. Yes, she stepped down from two high-profile roles in as many days: first, her somewhat vague gig as David Cameron’s “families tsar”, and then her chairmanship of A4e. But she is not facing any reduction in her income and wealth, nor a curtain falling on her influence over the company she founded 21 years ago. She retains the 87% shareholding in A4e that recently led to a dividend of £8.6m, and the portfolio of work pushed the company’s way by the government is set to expand. Everything, of course, depends on the outcome of ongoing fraud investigations and whether there are more allegations of malpractice, but from where I’m sitting, Harrison may well be in line for a rather nice future: less heat and less work, but potentially even greater takings.

Still, even if her resignations have threatened to distract attention from the meat of the A4e story via symbolic manoeuvring, one question is still worth asking: in terms of the events of the last week, what was her big mistake?

Though A4e stands out in that it derives the entirety of its income from public contracts and is under investigation for fraud, it is just one of scores of companies who feed off the public purse and pay their high-ups amazing sums of money. Usually, however, these organisations are so faceless as to be all but invisible. Under Harrison’s reign, by contrast, A4e was different – and via TV shows, YouTube videos, an account with Max Clifford (who lists her as a past client) and PR pushes aimed at increasing her profile, she not only became too visible, but told us things about herself that fatally damaged her reputation. In the end, the Derbyshire mansion and claims of living in “utter luxury” were too easy to use as signifiers for the difficulties being experienced by her firm, and the dangers of government outsourcing – not to mention the contrast between her apparently endless good fortune and the lives of the people she claims to want to help. Flamboyant opulence and welfare-to-work, it’s fair to say, are not the easiest of fits.

As a contrasting example, consider Chris Hyman, a 49-year-old father of two with a passionate interest in motor racing. You may not have heard of him, but he’s the CEO of Serco, the ever-expanding outsourcing giant who see to – among other things – the Yarl’s Wood detention centre, electronic tagging schemes, four British prisons, the operation and maintenance of several RAF bases, “facilities management” at NHS hospitals, schools inspection in the Midlands, and more. A few people consider Serco notorious, but to most, the company remains anonymous. Everything about it, in fact, is a study in the art of keeping your head down.

But the money involved screams for attention. Sixty per cent of Serco’s business is rooted in the UK, and in March last year they announced profits of £214m. For 2010-11, Hyman’s pay package was put by the company at £1.86m, a figure that excluded “pensions and long-term incentives”, and £1.6m in share options exercised during the previous 12 months. In 2010, he captured his firm’s pitch to the cash-strapped state thus: “Many of our government and commercial customers are seeking to reduce costs, [and] we have the necessary skills to help them.” Though Serco claims to be an expert squeezer of public spending, between 2010 and 2011, Hyman’s package went up by 18%. Clever, that.

Such examples extend into the distance: thanks to an excellent report in Sunday’s Observer by Daniel Boffey, you can read about more of them here. We will see what happens in the coming months (watch the House Of Commons public accounts committee closely), but as happened with Harrison and A4e, more of these firms may yet fall victim to an aspect of austerity that, only a week ago, was still much overlooked: the fact that unease about high pay can easily turn into unbelieving outrage when people are making a good deal of their fortunes on the back of the state. The big question is simple enough: if we now demand belt-tightening from just about everyone in the public sector, hadn’t the same considerations better apply to the firms and individuals who wouldn’t be in business if it wasn’t for public contracts?

If that’s the case, two particular political factions probably ought to watch their backs. For decades now, the introduction of the profit motive into public services has been held to be synonymous with dynamism, innovation and increased responsiveness to the “customer”. There is, of course, plenty of evidence to the contrary, but the more zealous minds one associates with the rule of New Labour still believe it, and most Conservatives hold it as an article of faith.

Much of the latter’s focus is currently targeted on education – and in rightwing circles, corks were recently popped over a contract for the management of Breckland Free School in Suffolk being awarded to a Swedish profit-making firm called International English School. Its turnover in 2009-10 was put at around £60m, with profits estimated at £5m; its sole shareholder is Barbara Bergstrom. I spent a fruitless couple of hours trying to find details of her dividend payments, to no avail: for all I know, she may live in a wooden shed, and hand back any personal takings to be spent on books, sports equipment and teacher training. But you can see the problem here: even if some “providers” turn out to be saintly, others will use the profit motive as nature intended, and get as rich as the rules will allow.

In other words, once any residual queasiness within government about profit-making schools has been banished, we could soon be faced with educational Emma Harrisons. Certainly, if Andrew Lansley gets his way, the same could easily apply to the NHS. If you want a flavour of where the credo of choice and competition could take things, consider the example of Circle Healthcare: recently given a £1bn contract to run a hospital in Cambridgeshire, reportedly aiming at acquiring three more, backed by hedge funds, and commanded by an ex-Goldman Sachs banker called Ali Parsa (”Mr Parsa’s mission is to provide clinical services to the NHS – while turning a profit,” says the Economist). While we’re here, it’s also worth mentioning the recent £200m deal struck between the Lincolnshire Policy Authority and the multinational firm G4S to open Britain’s first outsourced police station. As ever, it’s presented as a matter of saving money, but if the idea spreads as cuts in police numbers kick in and G4S’s CEO takes home the obligatory millions (£1.42m last year), will anyone be convinced?

Do not rely on senior figures in the Labour party to make the running on this issue: after all, it built a huge share of the shadow state in which these people make their money. There again, if the progress of the Emma Harrison story – as with the recent controversy about workfare – is anything to go by, these things no longer need the involvement of front-rank politicians to build unstoppable momentum. One thing is certain: though long buried, the tension between public services and profit is back – and this story is only just starting.

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