Shadow state – part 3

And now the Chartered Institute of Public Finance and Accounting agrees privatisation isn’t working. The National Audit Office and the Government’s own Public Accounts Committee have said the same.

Will this cause a change of policy – particularly in the NHS? Not a chance!

“The collapse of outsourcing giant Interserve will be “costly and disruptive” for the public sector, a public services commentator has told PF.

Interserve, one of Britain’s biggest government contractors, was due to file for administration this evening. This was after just under 60% of the company’s shareholders voted against a rescue plan earlier today.

The business holds thousands of public sector contracts, including for local government, cleaning schools and hospitals. It also runs catering and probation services as well as managing construction projects.

John Tizard told PF that public sector clients will need to “spring into action either to bring the services back into public management or to broker the contracts to other contractors”.

The firm’s collapse will likely be “costly and disruptive” for public services, he added. The ‘deleveraging plan’, proposed on Friday, would have seen creditors take control in a ‘debt-for-equity’ swap. It was rejected 59% to 41% by shareholders.

The rescue plan would have meant lenders being given the greater number of shares in the business with the shareholders’ stake being reduced to 5%, the BBC has reported. A US hedge fund Coltrane, which owns 27% of the company, voted to reject the proposals.

Tizard told PF: “It’s another question mark over the appropriateness of outsourcing particularly on this scale – to companies that have business models which are risky and fragile and where ownership changes.

“They are likely to go into administration because Coltrane has said they won’t vote for the deal, but can we really afford to have key public services decided by US hedge funds?” he queried.

Tizard said he had no doubt that contingency plans will have been drawn and added that it was now necessary for public sector clients to implement these.

Interserve employs 45,000 people in the UK. Its website also states that it provides probation services for 40,000 people on behalf of the Ministry of Justice.

A damning report from the National Audit Office recently highlighted the failings of prison reforms, which saw probation services transferred to the private sector.”

https://www.publicfinance.co.uk/news/2019/03/public-sector-likely-suffer-collapse-interserve