Alarm bells

The coronavirus pandemic has exposed government incompetence and crony capitalism, says Prem Sikka

The UK’s Conservative government’s handling of the coronavirus pandemic has been poor. The lack of personal protective equipment (PPE) at hospitals and care homes, delayed lockdowns, delayed quarantining of foreign arrivals, the lack of an effective test-and-trace facility, and many other failures have contributed to one of highest death rates in the world.

Avoidable deaths are not the only thing that the government is responsible for. Within the first year in office, Prime Minister Boris Johnson has squandered over £57bn on contracts that have delivered little value and pose serious questions. A comprehensive analysis is beyond the scope of this article, but here are some extracts which should get some alarm bells ringing.

Fattening Corporate Coffers

After a decade of cuts, the National Health Service was in poor shape to deal with the coronavirus crisis. The obsession with outsourcing, part-privatisation and competing health trusts made it difficult to develop a co-ordinated response to the crisis. Faced with high infection rates, negative press coverage and plummeting popularity ratings, the government hurriedly commissioned seven temporary hospital facilities (known as the Nightingale Hospitals) at a cost of £346m. Only 54 patients were treated before the hospitals were closed. The government gave an impression of being in control and selected contractors made large profits.

The government claims to have spent £15 bn on PPE, but the contracts did not necessarily go to companies with a track record of manufacturing or delivering PPE to keep hospital and other frontline workers safe.

An £18.48m contract to supply PPE was given to Aventis Solutions Ltd, a small company which files rudimentary information at Companies House. Its accounts for the year to 30 June 2019 show that the company had a share capital of £12, tangible assets of £1,718 and three employees. It was awarded the contract without inviting any other competitive bid.

A £93.24m contract for PPE was handed out to Clandeboye Agencies Ltd, a small company incorporated in 2013 whose main trade is “wholesale of sugar and chocolate and sugar confectionery”. The rudimentary information filed at Companies House shows that its issued share capital at 31 March 2019 was £4 and, on 14 January 2020, another £96 was injected to bring the issued share capital total to £100. It had 14 employees, net assets of £291,026 and most recently made a loss. It was awarded the contract without any competitive bid.

Two contracts worth £108.6m and £32.436m were awarded to Crisp Websites Limited trading as PestFix, a supplier and distributor of pest control products. Its rudimentary accounts for the year to November 2019 show that the company had issued share capital of £901, net assets of £18,047 and 16 employees. It was the only bidder for the contract. Despite the public evidence, the government subsequently claimed that there was only one contract worth £32million. However, it acknowledges that there were also a number of other contracts whose value and details are not released

The government awarded a £252m contract for PPE to Ayanda Capital Limited. The information filed at Companies House shows that the company was incorporated in October 2017. The firm qualifies as a small company and therefore files rudimentary unaudited accounts. The financial statements at 31 December 2019 show that the company had five employees, £510,000 share capital and £44,509 of tangible assets. Former investment banker Timothy Horlick is on the company’s board and is its main shareholder. The entity is ultimately controlled by Milo Investments registered in Mauritius, a tax haven. The £252m PPE contract was brokered by Andrew Mills, an adviser to Ayanda’s board, who is also an adviser to Liz Truss, the Secretary of State for International Trade and President of the Board of Trade. The company appears to have no prior experience of delivering PPE and the contract was handed out without securing any competitive bid. Ayanda seems to have acted as an intermediary to secure PPE from China. In early August 2020, it was reported that around 50 million face masks were not suitable for use in the NHS. Any action taken by the government to penalise Ayanda is not known.

Faculty, a data intelligence gathering firm, received a £400,000 contract to collect and analyse tweets as part of a coronavirus-related contract. The company was previously hired by Dominic Cummings, chief adviser to Prime Minister Boris Johnson, during his campaign to secure Brexit.

So what are we to make of the above? The revelations could be dismissed as examples of the usual pattern of government incompetence and negligence in managing the pandemic. However, there is more to it. The long held government policy of securing competitive tenders has been abandoned without any prior announcement. Numerous companies with expertise in delivering were unsuccessful in securing government contracts. Instead, the contracts went to companies with little or no experience of manufacturing or procuring PPE, and some uncomfortably close to the Conservative administration. Some of the PPE supplied has been found to be unusable though full details are not known. There is plenty for parliamentary committees and the National Audit Office to get their teeth into, though the government is likely to frustrate inquiries by hiding behind the cloak of commercial confidentiality.

The use of untested companies to supply crucial PPE shows that the government is using the pandemic to further privatise NHS procurement. Apparently, any company will do. The evidence also shows that neoliberals have restructured the state to guarantee corporate profits even when corporations fail to deliver value.

Crony Capitalism

Some commentators have attached the term ‘crony capitalism’ to the above and related revelations as ministers have awarded contracts to friendly organisations without seeking competitive tenders. However, crony capitalism is not a new phenomenon. It is in the very nature of capitalism as corporate elites enrol the state to advance their business interests. Remember how early capitalists like the East India Company were sponsored by the state (Royal Charter) to loot, murder and plunder around the globe. The loot was shared by wealthy elites and the state. The form may have changed but the symbiotic relationship between the UK state and corporations remains. Here are two examples.

In 2012, HSBC, headquartered in London, paid a fine of $1.9bn to US authorities for facilitating money laundering by drug traffickers and governments on sanctions lists. The US Department of Justice stated that the bank “accepted responsibility for its criminal conduct and that of its employees”. It faced a possible prosecution and withdrawal of its licence to operate in the US, which would effectively have ended its global operations. The UK did not follow up with its own investigation, but the then Chancellor George Osborne secretly wrote to the US urging them not to prosecute the bank.

The fraud-ridden Bank of Credit and Commerce International (BCCI) was forcibly closed down by the Bank of England in July 1991. It was the biggest banking fraud of the twentieth century. However, to this day there has been no independent investigation. A five-and-a-half-year litigation brought one hitherto secret document to public attention and it shows that the UK state was far more interested in shielding wrongdoers than reforming banking regulation or protecting citizens from malpractices. The government went to enormous lengths to protect the identity of prominent Middle East families, in case the revelations jeopardised the sale of weapons.

The neoliberal response to crony capitalism is to call for the abolition of regulations and a minimal state. However, none of that would help to make capitalism ethical as markets and capitalists pay little attention to social consequences. Indeed, regulations emerged in response to the failures of markets and capitalists to have some regard to the interests of broader society.

Capitalism is incapable of being ethical as by-hook-or-crook corporations seek to increase their sales, profits, executive rewards and become masters of the universe. The only long term cure is to get rid of capitalism. However, that is not on the agenda of any major political party. Therefore, the pragmatic approach is to check predatory practices through systems of regulation and public accountability. The way forward would be to make all government contracts and related documents publicly available so that it can’t hide behind the veil of ‘confidentiality’. The National Audit Office should be empowered to follow the money to private companies. Last year, a report submitted to the Labour leadership called for a system of regulation which is independent of government departments, so that ministers cannot stymie investigations.

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