Prem Sikka says the cronyism evident in numerous Covid-related contracts awarded by the Tories is nothing new to British capitalism
Anyone mapping trajectories of capitalism and the relationship between the state and corporations ought to look at how the UK government has handed out Covid-19-related contracts.
Cronyism and favours have been central to capitalism since its inception. Remember how the East India Company was sponsored by the state (Royal Charter) to plunder around the globe. The loot was shared by wealthy elites. The form may have changed but the symbiotic relationship between the UK state and corporations remains.
Despite questions in Parliament, the government has failed to provide a full list of contracts, the amounts and recipients. In November 2020, a National Audit Office (NAO) report titled “Investigation into government procurement during the COVID-19 pandemic” stated that by 31st July 2020 the UK government had signed some 8,600 contracts, worth £18bn. The contracts ranged in value from less than £100 to £410m. Personal protective equipment (PPE) accounted for 80% of the number of contracts (over 6,900 contracts) and 68% of the total value of contracts awarded (£12.3bn).
The flurry of contracts at the height of the pandemic also draws attention to the Conservative politics of austerity and neglect of the UK’s capacity to manage pandemics. In October 2016, an exercise codenamed Exercise Cygnus, involving the National Health Service, local government and emergency services, simulated the outbreak of a flu pandemic to test the resilience of the systems. The resulting report was not published in full, but copies leaked to the press stated that the “UK’s preparedness and response, in terms of its plans, policies and capability, is currently not sufficient to cope with the extreme demands of a severe pandemic”. In November 2020, the government released the final, redacted, report titled “Exercise Cygnus Report” – though most of the crucial documentation remains unpublished.
The full Exercise Cygnus documentation must have raised concerns about the large number of avoidable possible deaths and the shortage of PPE, an essential element in containing any pandemic. In the six years before the Covid-19 pandemic, the government, committed to austerity, ran down the emergency PPE stockpile by 40%. The funding cuts meant that the NHS was not in a position to handle the crisis. At the beginning of the pandemic, frontline health workers were wearing plastic bin bags and homemade face masks.
Amidst the public anger, the government began procuring PPE. Contracts should have been channelled through Supply Chain Coordination Limited (SCCL), a state owned company, specifically formed to co-ordinate purchases by the NHS. But SCCL was sidelined and the government handed out contracts to corporations. In panic buying, it paid £10bn over the odds.
Some £10.5bn worth of PPE contracts were awarded directly without a competitive tender process. The government defence is that to speedily secure supplies it suspended normal competitive tender process, but the process was not applied evenly. The NAO reported that in many cases no adequate documentation exists to justify the award of contracts or the performance expected. Due diligence checks were ignored. In some cases contracts had been backdated.
Numerous UK-based businesses offered to supply PPE, but did not even receive a reply from government departments. A large number of contracts were awarded to entities with no experience of PPE and close to Conservative politicians, often channelled through a VIP lane created for firms recommended by ministers and leading politicians.
A £252m contract was awarded to Ayanda Capital Limited, a company with £510,000 share capital and £44,509 of tangible assets. Former investment banker Timothy Horlick is on the company board and its main shareholder. The entity is controlled by Milo Investments registered in opaque tax haven Mauritius. The contract was brokered by Andrew Mills, an adviser to Ayanda’s board and Liz Truss, the Secretary of State for International Trade and President of the Board of Trade. There was no competitive tender. Ayanda seems to have acted as an intermediary to secure PPE from China. Around 50 million face masks it procured were not suitable for NHS use.
Since August 2015, Conservative MP Owen Paterson has been a consultant to Randox, receiving £8,333 a month for 16 hours’ work. A £347m Covid-19 testing contract has been given to Randox, whose testing kits were later recalled because of concerns about contamination.
PPE Medpro, a company incorporated on 12th May 2020, secured a £122m contract to supply millions of medical gowns. The company has a share capital of only £100. Until the day of its formation, its founder worked for Tory Baroness Michelle Mone. In 2015, she was appointed by Prime Minister David Cameron to conduct a review into entrepreneurship and small businesses, particularly focusing upon setting up small businesses in deprived areas. Within six weeks of its formation, PPE Medpro secured the lucrative PPE contract. There was no competitive tender. In December 2020, it was learnt that the medical gowns supplied by the company have not been used.
Contracts worth £148 million have been given to Meller Designs Limited – without any competitive tenders. The co-owner of the firm, David Meller, had donated nearly £60,000 to Conservative politicians and the party since 2009, including £3,250 to Michael Gove’s unsuccessful campaign for leadership of the Conservative party.
A £3m contract was given, without competitive tender, to a company called Topham Guerin. The company’s controllers appear to be friends of Dominic Cummings and Michael Gove, two leading powers in the Johnson administration.
Faculty, a data intelligence gathering firm, received a £400,000 contract to collect and analyse people’s tweets, as part of a coronavirus-related contract. The company was previously hired by Dominic Cummings during his campaign to secure Brexit.
The Good Law Project reported that SG Recruitment UK Limited, a staffing agency, secured two PPE contracts worth over £50m, despite auditors raising concerns about its solvency. Tory Peer Lord Chadlington sits on the Board of its parent company, Sumner Group Holdings Limited. P14 Medical Limited, controlled by former Conservative councillor Steve Dechan, who stood down in August this year, was awarded three contracts worth over £276m despite having negative £485,000 in net assets.
Big accountancy firms advise numerous government departments and also received Covid-19-related contracts even though they have no experience of dealing with viruses or test and trace facilities. The consultancy bonanza includes contracts worth £8m for Deloitte, £7.4m for PricewaterhouseCoopers, £5.4m for Ernst & Young, £3.8m for KPMG and £3.5m for Grant Thornton. Details of other contracts are not known.
The above list draws attention to irregular practices. It shows that crony capitalism is alive. Previously, Michael Gove, Chancellor of the Duchy of Lancaster, vowed to crush crony capitalism because it distorts free markets and enables a few to enrich themselves from political patronage. The reality is different. The government awarded Covid-19-related contracts without competitive tenders, and even without proper documentation, to businesses close to the Conservative Party. Some of the PPE was of poor quality or not capable of being used. Behind a wall of secrecy, a few selected individuals became rich. Taxpayers footed the bill for this huge transfer of wealth. There is little transparency and public accountability. The government has failed to publish a full list of contracts. An inquiry by the Public Accounts Committee is long overdue, but the government is unlikely to come clean.