Tuesday, 30 January 2018

Financial Engineering

Ever since the Carillion story broke, I've been meaning to have a look back at another high profile company collapse, that of care home provider Southern Cross in 2011. It cropped up on the blog:- 

It's All in the Timing

The timing was exquisite. Just as prime minister David Cameron was on his feet and extolling the virtues of privatising further swathes of public services, the nation was absorbing the news that the largest private provider of care homes in the UK was packing up. Southern Cross serves as an absolutely perfect example of what can happen if public services end up being treated as businesses or 'investment' opportunities.

I absolutely loved it when a spokesperson for the private care home sector had the audacity to say on the radio that "the problem was that fees paid by Local Authorities for looking after the elderly had not gone up." Err no, the problem is that 751 care homes that used to be owned by Southern Cross were sold off to asset strippers who pocketed the £1billion pounds and saddled the management with rent bills instead! According to him, the public sector should be paying the inflated rents due to property speculators.

We all know that publication of the Public Services White Paper has been delayed for months due to spirited opposition from Lib Dems inside the coalition government. It's a really confusing mix of trying to encourage 'localism', which many feel is no bad thing, with doctrinaire insistence on breaking up public services such as probation. This, despite Cameron saying that public services "are the backbone of the nation."

Well I think the public are going to take some persuading that the Southern Cross debacle is anything other than a stark warning of further disasters to come and that would be inherent in this sort of public service 'reform' plan. Pictures of the elderly and frail being moved out of their care homes as they inevitably close over the next few weeks will quite rightly further embarrass the government and should serve to nicely highlight the differences between public and private service.


Sorry, Jim, but that's an overreaction and scaremongering. Patients are highly unlikely to actually be turfed out of their beds. Nor is the 'problem' as simplistic as you would like it to be. I'm sure the "asset strippers" have their part to play, but if the business model relies upon increasing numbers of clients at increasing fees (basic costs of employing staff and other supplies are certainly going up), and these aren't happening, then you can't dismiss these - they are, too, part of the problem.


It's interesting to note that our old friend Blackstone played a significant role in the demise of Southern Cross as well as Carillion. This from the Guardian in 2011:- 

The rise and fall of Southern Cross

Southern Cross, the troubled care home operator, stands on the brink of collapse this week just fifteen years after it was created. The company was set up in 1996 by a businessman named John Moreton, who had made his first fortune in his twenties during the North Sea gas boom. Moreton developed his new venture during the last major shake-up in the care industry, around the turn of the millennium, when government funding cutbacks and tougher care standards forced many homes to close or be sold off cheaply.

New operators such as Southern Cross Healthcare benefited, and the company had become a significant operator by 2002, with 140 sites. At that point, venture capital firm WestLB stepped in and bought Southern Cross for £80m as part of a management buyout. At that time, the City was confident that the care home sector needed to consolidate.

Two years later, US private equity firm Blackstone swooped, paying £162m for the company, which by that stage had 162 care homes. Blackstone made its ambitions clear from the start, pledging to turn Southern Cross into "the leading company in the elderly care market". Blackstone went on to buy NHP, one of Southern Cross's largest landlords, in a £1.1bn deal which also increased Southern Cross's size by another 192 leased homes. Further acquisitions followed, turning Southern Cross into the largest operator in the sector. NHP was sold off in March 2006, followed by a flotation of Southern Cross itself on the London stock market that summer.

Southern Cross performed well during its early days as a quoted company, nearly doubling its share price during the first year. That proved good news for Blackstone, which sold its final stake in the company in March 2007. It also continued to expand as demand for care home places kept rising, due to increased lifespans and falling capacity across the sector. Then, in the summer of 2008, the tale turned desperately sour when Southern Cross's expansion strategy was derailed by the financial crisis.

The company had been buying properties then selling them on again, while keeping a long-term lease. In the heady days before the collapse of Lehman Brothers, Southern Cross suddenly found itself unable to meet a £43m loan repayment deadline, because it could not find buyers for its property assets. In another blow, it warned the City that disappointing occupancy levels meant its earnings would not meet expectations.

The double whammy of profit warning and financing crisis sent its share price crashing from over £3 to just 130p in a single day. Chief executive Bill Colvin quit later that year, after Southern Cross began selling assets at a loss in an effort to repay its debts. Colvin was one of three senior directors who had received £36.6m after selling shares in Southern Cross in early 2008, when they were trading at 550p.

Southern Cross managed to renegotiate a new deal with its banks, and tried to ride out the storm. Then in May 2010, the crisis intensified again when Southern Cross revealed that local governments were sending fewer people into its homes, and pushing for lower fees.

In August, Southern Cross posted a profits warning, blaming the austerity cutbacks for a steady decline in occupation rates. These falling revenues rapidly left Southern Cross struggling to pay the leases on its properties. Hopes of a rescue takeover faded this year, prompting chief executive Jamie Buchan to warn that its rent bill was simply unsustainable. Many of its rents run for 25 years, and are subject to yearly upwards-only rent reviews.


Of course there is another large care home operator in trouble as a result of 'financial engineering'. This from the Guardian last December:-

A shocking way to fund UK care homes

Why is Four Seasons Health Care, the country’s largest care homes operator, in financial difficulty? Why is the regulator, the Care Quality Commission, having to prod and cajole creditors to agree a standstill on debt repayments to prevent the business falling into administration? Why is this crisis happening only six years after the failure of Southern Cross, which at the time was the biggest company in the industry?

One could point to forces that are well-known. Fees are under pressure because local authorities’ social care budgets have been squeezed; overheads have been forced up by increases in the national minimum wage; and, at the margin, Brexit complicates staffing requirements.

Those factors are real but let’s not lose sight of the ingredient at the centre of the Four Seasons affair. It’s debt – too much of it. Terra Firma, Guy Hands’ private equity firm, over-paid for the business in 2012 and loaded up with leverage. At heart, this is an old-fashioned tale of financial engineering gone wrong. Southern Cross came from the same unlovely stable – in that case, the financial error was addiction to fancy sale-and-leaseback property deals.


Four Seasons has arrived at a point where it is struggling to meet a £26m debt interest payment due on Friday. H/2 Capital Partners, the US hedge fund that has bought up majority positions in both classes of debt, holds the aces. It will probably clean up at the expense of Terra Firma since, with a gentler debt structure, Four Seasons is a good business. H/2 should still do the decent thing and get the financial restructuring underway as soon as possible. There is no need for an administration that could cause problems for the regulator and local authorities. Get on with it.

The rest of us, though, can only look at the current standoff and shake our heads. The UK is awash with long-term pension fund money that would happily build and own care homes for modest real returns. Instead, we have a high-stakes financial game in which players aim for fatter rewards. The result, in this case, is that control of the biggest care homes operator in the land will probably pass from a private equity outfit that made a rotten bet on financial leverage to an opportunistic US hedge fund that hunts for junk bonds to buy at a discount. It’s a shocking way to fund provision of care homes for the elderly.


All of which brings us back to Carillion, the theme of 'financial engineering' and on-going revelations. In addition to a vast hole being revealed in the pension fund, it's good to see attention at last moving to the role of accountants and exactly what they do for their large fees. 

This from the FT draws some other startling historical comparisons that pre-date the financial crisis of 2008 and in the process, admirably demonstrates our seeming inability to learn by earlier mistakes:-   

The ‘true and fair’ questions that dog Carillion

In the early 1990s, two American economists, George Akerlof and Paul Romer, wrote an academic paper with the eye-catching title: “Looting”. 
Its subject was the Savings & Loan crisis of the 1980s, which ended up costing the US taxpayer some $132bn in a string of bailouts. What intrigued the authors was the way some S&L owners ran their failing real estate lenders into the ground, wholly focused on value extraction and without a thought for the losses that they would leave behind. 

They displayed a “total disregard for even the most basic principles of lending”, failing to verify the most basic information about their borrowers or, in some cases, not even bothering even to ask for it. Why, the economists asked, had they behaved in so cavalier a way? One reason, they concluded, was the existence of a government backstop. The state stood behind deposits that the S&Ls had taken. 

But that was not the only thing encouraging the owners to loot their own operations. There was another big factor: poorly framed regulation. Easy-to-arbitrage rules and sloppy accounting standards kept S&Ls nominally afloat when in reality they were not viable. That created the circumstances in which owners could plunder dividends out of capital, as they either prayed for a miracle, or prepared to cast the depleted creditors into the taxpayers’ lap. 

Echoes of this unsavoury situation can be found in the case of Carillion, the British outsourcing and construction group that has just collapsed owing more than £2bn to its banks. Once again, the government bobs up on the periphery, in this case chucking out state-funded contracts like confetti that appeared to underwrite the group’s viability. Carillion’s board may not have looted, but it does seem to have practised what one might call “reckless abstraction”. It sucked out cash to placate stock market investors even as executives wrote the mountain of under-priced contracts that ultimately buried the business, triggering a £1.2bn writedown in the second half of last year.

In the five years to 2016, the directors recommended paying £357m of dividends to shareholders, despite generating just £159m of cash from operations. Over the same period, the bonuses for the two top executives climbed from nothing to more than £1m a year in 2016. 

Carillion is hardly the first listed business to base today’s juicy payouts on (inaccurate) estimates of tomorrow’s outcomes. One of the more notable features of pre-2008 banks was their enthusiasm for using mark-to-market accounting to write up unrealised profits on assets, thus conjuring large and imaginary surpluses out of complex securities. The swag was then packaged up and paid out largely in the form of debt-funded bankers’ bonuses. As for the later losses; well, of course, the taxpayer paid. 

Clearly, it is unhealthy for the state to backstop private corporations — although in Carillion’s case, the government’s involvement fell short of a fully-fledged bailout. But no less worrying are the signals sent by modern accounting standards, which continue to give great leeway to recognise unrealised gains. 

Under company law, it is a cardinal principle that limited companies should only make distributions out of distributable reserves, not capital, to protect investors’ cash. Yet in a world where anticipated revenues count towards today’s profits, it is hard to know precisely where that crucial line lies. The investor’s main defence is the auditor being required to call out imprudently recognised sums. 

In Carillion’s case, it is reasonable to ask whether this happened. We do not know yet how KPMG came to rubber stamp accounts supporting the payment of a £79m dividend last year, leaving distributable reserves of just £93m on the group’s balance sheet. What we do know is that Carillion wrote off £1.2bn just a few months later; a move that not only obliterated its reserves many times over, but also all of its profits over the previous eight years. 

If the rules permit excessive latitude, that raises questions not only about standards, but also about the auditor’s watchdog, the Financial Reporting Council. Other past scandals exhibit similar features, including the overstatement of supplier rebates by supermarket owner Tesco, and the implosion at Quindell, an insurance software group. 

Accounts are supposed to show a “true and fair” view of a company’s affairs. If they do not, it is pretty concerning. The S&L crisis highlights the peril of allowing directors to write their own figures. Faulty standards run the risk of meaning accounts cannot be relied upon. As a group of investors, activists and academics put it this week in a letter to the FT: that poses “devastating consequences for all stakeholders who depend on businesses remaining going concerns”.


  1. Doncha just Love this privatisation racket? It never fails to be divisive. Old folk, schools, probation, prisons, security in Kabul, housing for armed forces, affordable housing, community housing - wherever it rears its greedy head, a handful of exploitative shitheads make a massive profit whilst everyone else is exposed to tragedy, calamity & poverty.

  2. Wonder how much capita, atos et al have pocketed whilst refusing PIP payments, i.e. doing the bidding of their Tory paymasters, only to find its all been illegal & discriminatory?

    Oh, and the taxpayer can pick up the £4bn tab. Again.

    Where's the accountability for Ministers? Again.

    Its pure corruption. Again.

  3. Stephen Hawkins has just been given the go ahead to take Jeremy Hunt to court over backdoor privatisation of the NHS.
    The Lawyers are taking the MoJ to court over legal aid cuts.
    The DWP have just lost a court case over PIP payments.
    The PM may become subject to judicial review by the end of the week for making two payments to the DUP on the Q.T without putting it to a vote before Parliament.
    It's all a total f****ng mess. Austerity continues, but the deficit remains because of continuing humongous financial cock ups by the Tories.
    Free market enterprise and no regulation only brings you privateer pirates that gorge themselves on the public purse, and you don't have to look far to find the devastation they've caused to the taxpayer either.
    This in several news articles today.



    1. The Ministry of Defence's privatisation of tens of thousands of military families’ homes has cost the taxpayer billions of pounds, according to the government spending watchdog.

      The National Audit Office said the policy of selling off more than 55,000 military homes to a private company and then leasing them back had cost up to £4.2bn, because the properties are now worth significantly more than when they were sold.

      The decision to sell the homes was made by John Major’s government in 1996. The private company, Annington Property Limited, paid £1.66bn for the properties, which are spread across 770 sites.

      The MoD continues to rent back most of the homes and is paying £178m a year to do so, according to the NAO.

      The watchdog said MoD assumptions in 1996 about the future value of the properties were “over-cautious”, although it accepted that the significant house price rise in recent years could not have been foreseen.

      When it sold off the properties, the MoD assumed house prices would increase by 1 per cent per year, excluding inflation. The actual figure has been 3.9 per cent.

      Sir Amyas Morse, head of the National Audit Office, said the sale and leaseback deal was "based upon pessimistic views of the future growth in property values".

      He said the MoD could have seen an even bigger return if it were not for the fact that “rents charged to the military families who lived there were restricted for the first 20 years".

      "This has cost the public sector a great deal in capital growth, and it has been a great deal for the landlord," Mr Morse said.

      "In 2021 the period of restricted rents is over. The question is now whether the landlord will get a very large rent increase on top of the very substantial capital gains they have already received."

      The NAO said the income Annington Property Limited has generated from the homes has been "significant".

      The MoD wants rents to fall when restrictions are lifted in 2021, but Annington is looking for a rise of £84m a year, the NAO said.

    2. From 2016, and the incredible thing is that the reasons given for the collapse and the £800m cost to the taxpayer is identical to the Carillion saga.


    3. A "catalogue of failures" resulted in the collapse of an £800 million NHS contract to outsource care of older and mentally ill people, the Commons spending watchdog warned.

      An influential committee of MPs concluded that the NHS lacked expertise in procurement and it was "worrying" that untested contracting arrangements could form part of the plans being drawn up for further changes to services across England.

      The Public Accounts Committee was scathing about the doomed deal between Cambridgeshire and Peterborough Clinical Commissioning Group (CCG) and UnitingCare Partnership, which collapsed after just eight months.

      The cash-strapped CCG awarded a five-year contract to UnitingCare, an NHS consortium of Cambridgeshire and Peterborough NHS Foundation Trust and Cambridge University Hospitals NHS Foundation Trust, but the deal was scrapped in December 2015 after it ran into difficulties.

      The MPs said: "The procurement exercise was undermined from the start by poor commercial expertise, a lack of realistic pricing, and weak oversight.

      "The CCG accepted the lowest bid on the table, without seeking proper assurance that the two trusts, which had combined to form the UnitingCare Partnership, could deliver for that price.

      "It was then grossly irresponsible of the trusts and the CCG to rush ahead with the contract without having resolved significant differences in their understanding of the contract price or indeed the scope of services that were included in that price."

      In a strongly-worded report the committee said the "astonishing array of errors" in the contract showed that the health sector was not "getting the commercial basics right".

      The committee called on NHS England and NHS Improvement to ensure that safeguards are put in place to avoid similar problems in the wave of changes currently being planned.

      Health managers in 44 areas of England have been ordered to draw up sustainability and transformation plans (STPs), setting out how they will reduce costs, change services and improve care in the wake of a record £2.45 billion deficit.

      The MPs said that the "elaborate" UnitingCare deal "exposed gaps in regulatory and oversight arrangements" which could reoccur in local initiatives proposed as part of STPs.

      The committee has already warned the NHS that it needed to improve its commercial skills but the UnitingCare fiasco showed it "still lacks the expertise to ensure that patient services are procured effectively".

      "This is all the more worrying as local initiatives proposed in sustainability and transformation plans may still include CCGs using new or untested contracting arrangements.

      "With the NHS budget so stretched, innovative solutions are likely to be part of attempts to make the NHS financially sustainable.

      "NHS England and NHS Improvement must improve the oversight and supervision of contracting arrangements and avoid such catastrophic failures in future."

      The Public Accounts Committee found that the termination of the contract led to unfunded costs of least £16 million, which had to be shared between the two NHS trust partners and the CCG.

    4. The committee's Labour chairwoman Meg Hillier said: "It beggars belief that a contract of such vital importance to patients should be handled with such incompetence.

      "The deal went ahead without parties agreeing on what would be provided and at what price - a failure of business acumen that would embarrass a child in a sweet shop, and one with far more serious consequences.

      "Services for patients are likely to suffer and we will be expecting the clinical commissioning group to come clean about precisely how much damage has been done in terms of future service provision and finances."

      She said it was understandable that health chiefs were looking for new ways of providing services but "what is not acceptable is for services to be farmed out to the lowest bidder without due regard for the interests of patients and taxpayers in general".

    5. .... looking for new ways of providing services....


  4. One of the issues I have been very concerned about is how worker's pension funds are effectively being used as bank loans. The Plc claims cash flow problems and does not, claims it is not able to, meet the needs of the pension fund but promises to do so in better times. In the case of Carrillion they continued to pay sizeable share dividends and executive pay and bonuses whilst 'wriggling' out of their duties to the pension fund. Huge debts and pension fund deficits later and hey presto the job has gone bust with pensioners out of pocket and the taxpayer picking up the tab. The example is not isolated and others will surely follow. It's wrong, worse than wrong. Many of us were brought up on the values of working hard, abiding by the law, doing right by your fellow man with ultimately a settled and affordable retirement in our later years, health allowing. This fundamental is being eroded as we see the greedy, self serving and reckless antics of our executive elite continue unabated with no obvious attempts to stop them. A social system continues to function well based on trust, fidelity, integrity an appreciable sense of fairness. What's happening?!

    1. Carillion were borrowing heavily, not to feed its pension deficit, but to pay dividends to its shareholders and bonuses to its management team.

    2. ... and in the process repeatedly deferring their obligations to the pension fund which by my simple thinking means they were borrowing from the fund effectively.

    3. Borrowing? Is that what they call it now?

  5. http://www.parliamentlive.tv/Event/Index/039b795a-b5d4-46f6-bcf9-1c4aa0b04c5c

    Where has the money gone from the inquiry VT

    1. Napo Press Release:

      Napo tells Justice Committee: the Probation Service is in serious difficulty

      The leader of the largest trade union representing Probation staff in England and Wales (Napo) told the Justice Select Committee today, that the probation service is in serious difficulty and that taxpayers are continuing to fund systemic failure especially across the 21 outsourced Community Rehabilitation Companies (CRCs).

      General Secretary Ian Lawrence in an oral evidence session told the Committee that halfway through the initial 7-year contracts with the MoJ, reports by Dame Glenys Stacey, Chief Inspector for Probation, and the National Audit Office reveal that private probation providers are barely meeting one third of their performance targets and that despite hundreds of millions of pounds in Government funding, the Payment by Results mechanism (PbR) has resulted in only two out of 21 CRC’s qualifying for the scheme.

      Meanwhile, the National Probation Service (NPS) struggles with low staff morale and record staff shortages together with administrative chaos that has seen at least 2000 staff being incorrectly paid or not having their pension deductions correctly made throughout most of 2017.

      Ian Lawrence said: “Several months on and the position is no better than when we were last here before the Committee. Since then we have had the Probation System Review, the precursor to the huge financial ‘bail out’ for the Community Rehabilitation Companies that featured at the recent hearing of the Committee for Public Accounts with no accountability or transparency being provided in terms of value for money for the taxpayer. It’s a situation not unlike that which caused the collapse of Carillion.”

      The JSC were also provided with first hand written testimonies from a number of probation practitioners detailing their experiences in coping with the myriad problems that have followed the implementation of the Transforming Rehabilitation reforms (TR) in the spring of 2015.

      In his evidence to the JSC Ian Lawrence also referenced the union’s serious concerns about the operational models that are being run by some CRC providers, citing an example where 19 trained Probation Officers have left the German owned Aurelius/Working Links organisation over the last nine months.

      Ian Lawrence also said: “Some of the independent reports into what is going on in Probation are among the worst I have ever seen, and bear out the views of our hard pressed and highly committed members that TR has been an unmitigated disaster. Napo believes that the Probation service must be fully restored into public ownership.”

      The Justice Committee are currently considering evidence from a number of contributors and are expected to report later this year.

    2. I watched it. I thought Ian Lawrence did very well.

  6. I am sorry but these 'the NHS/MOJ etc do not have the commissioning or procurement expertise' excuses do not wash with me. Where the Probation contracts were seen, almost every practitioner, every manager and every academic said this was not going to work because of a myriad of reasons that were apparent to everybody. In light of this, I fail to see how those tasked with making the process happen were 'inexperienced' or 'lacking in competence'. One of the earliest lessons we have in life is when to say 'I don't know how'. If someone said to me, 'can you fly this Boeing 747 to Amsterdam', I would respond 'no, for I am not trained to fly this aircraft' not 'oh go on, I'll give it a go'. If someone said, 'can you remove this life-threatening brain tumour', I would say 'in you head be it...'. The competence of the Ministries should have started with a little humility. When 750 of the 756 responses to the consultation read 'don't be bloody stupid', you cannot cry 'foul' when your collective incompetence is revealed

    1. The MoJ paid a couple of million, 18mths ago (noted on this blog) to train staff in procurement and contact skills.
      Money well spent??

  7. Lawrence & Priestley - chalk & cheese. I'm going to have to watch the JSC again to decide if Lawrence is role-playing (lounging casually, never answering a question directly, showboating, confronting the Chair) or if he actually had any idea of what was actually happening. It was the JSC gathering evidence, Ian, not a 1970's spat wiv mannagemunt!

    It might be unfair but on first viewing my impression was that the JSC listened to the thoughtful & measured Priestley (who graciously played lieutenant to his NAPO counterpart), but only after the white noise coming from Lawrence had stopped.

    I'll have a glass of something & give it another go later...

    1. Why you have rubbished a good performance from Ian Lawrence what do you want.

    2. In MY opinion I don't think it was a good performance, but I really, really wanted a blinder of a performance from the man; it was a great opportunity.

      I now think I realise what made me react so negatively - he's not someone I want to listen to; his style of presentation makes me switch off. I don't find it engaging. I've watched some of it again and I realised I hadn't taken in anything that he'd said. I tried hard, and he did make a few good points. I'd missed them. And I wonder if the JSC did too?

      But that's MY issue, and MY perception. I can't stand Michael McIntyre either. Or Jimmy Carr. They're funny for some but not for me.

      What do I want? Grayling's head on display at the city gates.

    3. Apologies then better understood your explanation. Nevertheless we did get to hear Ian move some critical flaws across the room. Sadly not near assertive enough about the abysmal working conditions and not clear on the demise of probation premises has broken the backs of our service delivery potentials. enough for many. It is not his fault if you don't like the message though I would like to know what have the other union leaders done to help him?

    4. The worry is that for £70k a year Lawrence should be nailing this, not leaving people unsure, unmoved & unimpressed. He had one shot from six yards at an open goal with the JSC and he kicked it over the bar. The JSC won't be watching it again on youtube or internet tv. This is his job. He's the GS of THE union & professional organisation for Probation staff, he should be leading the fight. Face it. He's just not very good at it, hence NAPO is pisspoor and we get crap T&Cs for staff transfer, the non-existent EVR, the lack of a pay rise, the lengthy silences, etc.

    5. It was a justice select committee. If you wanted a slanging match your on the wrong channel. The unions could only deliver what the protocols would expect. All in wrestling is not one of them.

    6. "It was the JSC gathering evidence, Ian, not a 1970's spat wiv mannagemunt!"

      Exactly so, 20:06 + 11:14. No need for cameos from Mick McManus or Kendo Nagasaki, just answer the nice MPs' questions with the damning evidence at your fingertips. On more than one occasion Mr Unison bailed Mr NAPO out of a self-constructed cul-de-sac-of-shite.

    7. I see your point he has not been hard enough. Or in your parlance ard nuff for ya guvnor shaat tit up you toffs ere ere listen up my crew right , right oi right facking fed up this privates crap wen we gettin back in then or do we have to get millwall den in sort you lot att know what I mean.

  8. Going off topic but important to mention the latest from the RRP carpet baggers intent upon asset stripping and dumbimg down our profession to maximise their profits for share holders.
    East Midlands Branch & SWM Branch
    Joint Statement to Members
    Dear Members

    It is with some regret that we are notifying you all that both local branches representing members employed by both CRCs who are part of the Reducing Re-offending Partnership, namely DLNR and SWM CRCs, have formally registered a dispute at the recent JNCC.
    A copy of this notification is attached.
    Both branches are in agreement, along with our National Officials, that the recent restructuring exercise by RRP, and their parent company Ingeus, resulting in a further round of redundancies, have not been open and transparent, despite assurances made by the Employer during the consultation period. During our last two meetings at Centre City, Birmingham, we have been informed of an intention by RRP to make a blanket change the Job Description of the PDM role (formerly known as Senior Probation Officer), thereby amending the historically accepted professionally recognised qualification requirement (CQSW, DipSW, or Diploma in Probation Services), by adding the phrase: ‘or other relevant qualification’.
    This is not acceptable in the view of Napo, since we regard this as representing a direction of travel towards de-professionalisation of probation work and the potential dilution of important appropriate safeguards currently in place for managerial oversight of risk management, recalls, SFOs, and of continuous professional line management support for all practitioner grades.
    Local Napo representatives challenged this proposal, but were met with an intransigent refusal to negotiate any acceptable alternative.
    We will keep you informed of the passage of this dispute as we proceed.
    Should you have any further questions or concerns as members, then please contact your respective branch officials as below.

    Best regards
    Debra Williams – Vice Chair, Napo SWM Branch
    Steve Bradley – Co Chair, Napo East Midlands Branch

    1. Thanks very much for updating us on this - it's only by sharing information that we can know what's going on and hope to try and collectively do something about it. It's also a useful avenue to inform those in influential positions because we know the blog is read widely.

    2. Good grief. Why are other areas not protesting, it is happening elsewhere I am told (or at least qualification gained then immediate fast track).

    3. It's already happened in Cheshire and greater Manchester CRC - we have interchange managers ( SPO's in old money ) who are not Probation officer qualified / trained and who have had no case management experience.

    4. Under the Trusts, the SPO role was gradually disconnected from practice. The managerialism model converted SPO into managers. Yes, there were some managers who had strong practice roots who saw their first duty as supporting frontline staff and who had a wealth of experience. But these managers were not so popular with their own bosses, as they were viewed as old-fashioned. We saw a new crop emerge who, no sooner qualified, were agitating to become managers, more for the status and money then because of any commitment to motivating and leading a team. These new managers had minimal practice experience, but they were popular with their superiors because they could be relied upon to follow corporate orders. These managers had no difficulty following the party line by aggressively implementing disciplinary and sickness management policies. So you could see the changes to job descriptions as merely the theory catching up with the practice. In the old days a good SPO would stand up for their team and argue the toss with senior management, but then they became errand boys and girls. I just wonder what exactly is being lost, that is not already lost.

    5. So sad but Oh so true

    6. Oh 0838 how true and as 855 pointed out so very sad as an they seem to be about is chasing targets and impressing or Interserve overlords - no compassion or duty of care for staff - tis really shit !!!!

    7. "These new managers had minimal practice experience, but they were popular with their superiors because they could be relied upon to follow corporate orders."

      I think that is not specifically a probation problem, but a problem that will be echoed across the board in all public services.
      Accelerated programmes were introduced to the police, prisons and NHS, and as netnipper points out, it allowed those in Whitehall to push whatever service in whatever direction they wanted without very little resistance.


  9. Crapita following in the footsteps of Carillion...

    1. They're going to need some financial engineers to repair a 40% overnight drop in share price.


    2. From the Times.

      Police have been forced into a multimillion-pound bailout of a private forensics company whose collapse jeopardised thousands of cases that include rape and murder, The Times has learnt.

      Key Forensic Services (KFS), which folded on Friday in the latest in a string of privatisation scandals, was carrying out work in 2,000 cases for 30 forces including the Metropolitan Police.

      The company, which handles everything from DNA testing to firearms examination and drug testing, went into receivership weeks after the collapse of Carillion, the construction company.

      The development will raise questions over the government’s decision to close the state-run Forensic Science Service (FSS) in 2012, thus outsourcing policing work to private companies. It comes alongside an ongoing investigation into alleged manipulation of data at Randox, a…

    3. Capita underlined the challenges facing the wider outsourcing sector on Wednesday, issuing a profit warning for 2018 as its new chief executive declared the group “too complex”, “driven by a short-term focus” and “lacking operational discipline and financial flexibility”.

      Shares in the group fell more than 32 per cent in early trading to 235p. They had already shed more than 30 per cent over the past 12 months before the latest announcement.

      Jonathan Lewis, who took the helm at Capita at the start of December, announced an overhaul of the group’s finances. The dividend has been suspended until the company is “generating sustainable free cash flow”, the group will embark on a programme of asset sales of non-core businesses, and has secured underwriting for a £700m capital raise through a rights issue planned for later this year.

      While 2017 trading was as in-line, underlying pre-tax profits before new contracts and restructuring costs would be between £270m and £300m in 2018, Capita said — well below the profits Capita expected to generate in the last financial year.

      Mr Lewis said:

      We are now too widely spread across multiple markets and services, making it more challenging to maintain a competitive advantage in every business.

      Cost savings and non-core disposals alone will not be enough. We have also taken the significant decision to suspend the dividend and seek equity.

      Things had also got worse since the last trading update in November, Capita said, citing more delays in decision making and weakness in new sales:

      The divisional plans indicate that there is likely to be a significant negative impact upon profits from contract and volume attrition, the dropping out of one-off items including contract and supplier-related profits which were reported in 2017 and increases in some cost items, including depreciation and adoption of the General Data Protection Regulation. These headwinds are particularly expected to impact upon the financial performance of the Private Sector Partnerships, in both Insurance Services and Customer Management, Public Services Partnerships and IT Services divisions.

      We do not expect to offset the above headwinds through the full year benefit of last year’s cost actions and new business. A more fundamental approach to cost competitiveness is required.

      Looking forward, we expect a free cash outflow this year, which will be impacted by a number of known non-underlying payments and working capital items.

  10. A book well worth a read is "Shadow State: Inside the Secret Companies that Run Britain" by Alan White. It is all about outsourcing and how the government are using it to save money. It covers the market failures, the lack of transparency and the lack of accountability that is almost always found in such contracts. Probation gets plenty of mentions. There are few surprises, unfortunately. Whether it is outsourcing in security, social care, justice or immigration, the problems are familiar and recurring.