The Privatisation-IT-Consultancy Complex

In a speech at the time he left office, President Eisenhower warned the USA about the power of the military-industrial complex. By this, he meant that US foreign and defence policy was increasingly driven by the needs of an informal coalition between the military and defence contractors. These groups came together because both benefited from an expansion of military expenditure, and were able to generate political support by exaggerating the external threats facing the USA. Since in Eisenhower’s time the main challengers to US dominance were communist states, this meant depicting any foreign leaders not aligned to the USA and any uprisings against foreign regimes as part of a single world ‘communist’ conspiracy. US foreign policy became driven by a kind of collective paranoia, with the USA involved in military interventions and murderous wars in an attempt to fight the incoming tide of this supposed conspiracy. Communism has declined, but the paranoia remains. Imaginary wars on drugs and ‘terror’ have involved real wars against the people of Iraq, Afghanistan and the frontier regions of Pakistan.

New technology is promoted with particular enthusiasm by the military-industrial complex, ostensibly because it offers the possibility of gaining an advantage over prospective enemies. But new technology is usually less reliable and more expensive than the equipment it replaces. The more unreliable the technology, the longer the contracts, which offers the prospect of greater profits since contracts for military equipment are awarded on a cost plus basis. And equipment failure and cost over-runs can always be explained to the public as an inevitable risk required for the effective defence of the state.

In British central government, domestic expenditure is far more important than spending on the military. Our own equivalent of the military-industrial complex therefore is built around on the vast sums spent on health and social care, public order, and transport. Public funding for these areas can be seen as a treacle pot from which members of the complex can feed, and there are three ways in which they can do so.

The first is through the privatisation of what were previously regarded as being government services. This has expanded vastly since a neo-Thatcherite government came to power in 1997, and has been rationalised as introducing competitiveness and the efficiencies of the private sector into public services. A key component of privatisation is the Public Finance Initiative (PFI), which involves public authorities paying contractors high fees to rent from them newly-built hospitals, schools and other public buildings (usually with additional payments for servicing the buildings). Besides PFI, there are contracts for transport, prisons, nursing and residential care, cleaning services in public buildings, employment services and so on. Needless to say, finance raised to pay for PFI and related schemes has involved large transfers of public funds to the banking sector.

The second way is through consultancy fees. These have expanded with the introduction of contractual relationships throughout government, usually following privatisation. One or more of the big four professional services firms (PWC, KPMG, Ernst & Young, and Deloitte Touche Tohmatsu) appear in every such transaction, and are even brought in by government to audit each others’ work, and report on each others’ failures. They have managed to sell a spurious technology of management expertise to politicians and the public, such that no major governmental decisions can be made without their engagement.

The third way is through major IT projects. These have involved the world’s most expensive database (the NHS Programme for IT) which will probably have a final cost of £20 billion, plus such projects as the database for identity cards (£12 to 18 billion), ContactPoint (the database recording all children, costing £1 billion), The Libra court management system (£341 million), and the C-NOMIS offender management system (£279 million). All of these systems have spectacular cost overruns, and have failed to deliver the benefits they initially promised. Very large parts of the NHS Programme for IT are hardly even used.

The complex can therefore be referred to as the ‘Privatisation-IT-Consultancy Complex’, or ‘PIC Complex’ for short. As with the military-industrial complex in the USA, the PIC Complex in Britain shapes government policy in its own favour. There is no public demand for identity cards, and security experts see them as having a negligible impact on public safety. The phenomenal cost of the scheme is seen as an argument against it. But the very cost of the scheme is the reason it exists - it will produce an endless stream of public funds from the treacle pot for IT companies, professional services firms, and the financial sector. Few if any experts in child care asked for a child database, but we have paid for one which will almost certainly not work, and will divert resources from services which do protect children. The diversion of resources from services which deal with people into IT schemes which enrich the PIC Complex has already happened with C-NOMIS.

How can this be allowed to happen? One reason is that the concentration of power in English government gives great leverage to the PIC Complex. Its members only need to convince a small number of senior politicians and civil servants to secure multi-million pound contracts. This saves all the bother of selling products to lots of local councils, hospitals schools etc, let alone having to convince the public who ultimately pay for them. This is a symbiotic relationship - privatisation and large centralised databases weaken rival local centres of power and hence maintain this leverage. Convincing small numbers of senior politicians and civil servants has proved easy because some are for sale. This is not traditional corruption in which a contractor pays money and then gets what they want, but a new time-displaced version in which the politician favours a contractor and is subsequently rewarded with a seat on the board, consultancies etc. I would not of course allege such a thing about Patricia Hewitt MP, the former Secretary of State for Health, who is currently earning £12,500/month from BT Group (a major contractor for the NHS Programme for IT), and £4,600/month from Alliance Boots (which is a major pharmaceutical distributor to the NHS and a contractor for privatised primary care services). October was a good month, when she also earned £15,000 from Cinven, which owns a chain of private hospitals which contract with the NHS.

Academics are also subsidiary players in the PIC Complex, providing essential legitimation services, using suitably high-minded and abstract terms like ‘contestability’ and ‘choice’. But more of that in a later posting.