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The dark side of the Big Society

24 February 2012

8:56 AM

24 February 2012

8:56 AM

The A4e scandal is getting worse. Emma Harrison has quit as David Cameron’s
back-to-work tsar, the police are still investigating a case discovered last year and there’s a suggestion their investigation is widening. This is, for David Cameron, the dark side of the
Big Society. In my Daily Telegraph column today, I explain

‘The Big Society’ is a silly name for a good idea: that lots of companies, charities, etc will help provide government services. They are given freedom to innovate, to create —
and the freedom to get things badly wrong. This is the freedom which A4e seems to have availed itself of. It grew like crazy, perhaps too fast. Its internal audit procedure found four staff who had
been falsely claiming to get people back in work. It fessed up to the DWP, and presented the findings to the Thames Valley police.

It doesn’t really matter that the fraud was committed under the Labour years, under contracts signed by the Labour government, on a paper-based system which A4e itself warned was wide open to
fraud. What matters is that Margaret Hodge, former head of Islington Council now chair of the Public Accounts Committee, is on a campaign against the concept of private companies working on
government contracts. This is her line of attack: using the A4e debacle to portray the whole subcontracting (or Big Society) idea as corrupt.

So far, at least, it seems we’re dealing with a few rotten apples — not a diseased crop. The welfare-to-work programme is no more riddled with corruption than the House of Commons is a
hotbed of head-butters. It won’t seem that way, especially if more A4e claims emerge. But it’s important for Cameron to emphasize that this is not a disaster. Fraud is simply detected
far more often by the audit procedures of private companies that it is in the state sector. PricewaterhouseCoopers conducted research into this at the time, and found a dismal difference between
the two. It noted that most fraud in the public sector is discovered by accident (14 per cent) or by a tip-off (45 per cent) — ie, not because the company was looking for it with any success.
Most (61 per cent) government agencies have internal fraud risk management procedures, but these uncover just 5 per cent of fraud — in the private sector, such checks are three times as
effective. Government just isn’t very good at it.

I am not saying ‘private good, public bad’ — I suspect both have their sinners and their saints. I’m just saying that, if you have systems open to abuse, people will abuse
them — whether they work in the private sector or not. For example, did you hear about the civil servant in charge of payments in a government department who invented eight invoices, then
credited his own account with £246,000? He’d have gotten away with it, too, had his bank manager not smelled a rat and called up the government to ask about the provenance of this large
bonus. If this happened in A4e, you can imagine Hodge saying she’s never know such venality: such theft of taxpayers’ money. As it happened in a government department, it wasn’t
even reported: just an everyday story of state-sector waste. (Detalils on p11 of this National Fraud Authority report).

In America, there’s a saying: that the greatest threat to Charter Schools is bad Charter Schools. That a whole project can be contaminated by a few cases that go spectacularly badly. So I
don’t underestimate the potential of the A4e revelations to rebound on Cameron, but he ought to make a gritty point in return. If you set schools free, and have scores of new providers, there
will be some rotten ones. If you move welfare-to-work provision into the private sector, where inquiries are twice as likely to pick up wrongdoing, then you’ll get more bad headlines.
It’s a horrible thought, but if the Big Society is going to progress then these scandals will keep coming. And this is not the best time to stick your head in the stand. The task for the
Prime Minister is to argue that his liberalization programme will bring its problems — but they are heavily outweighed by the successes.

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