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Southwest One and IBM

Volume 474: debated on Wednesday 26 March 2008

It is a pleasure to serve under your chairmanship again, Mr. Jones. I am very grateful for the chance to bring the subject of this debate before the House. I shall raise extremely urgent matters that involve the public interest and may have grave implications way beyond the county of Somerset. I believe that public money is being misappropriated and I fear—I do not mince my words—corruption.

My concern relates to the creation of a new company designed to take over important responsibilities from local authorities and others without any proper scrutiny or accountability. The company is called Southwest One. People will not find it listed in the Somerset telephone directory. It has not yet submitted any company reports. It describes itself as a joint venture exercise between two councils and the multinational computer giant IBM. Its registered address is IBM’s UK base in Portsmouth.

A joint venture implies a partnership, but this partnership is far from equal. It is my clear understanding that IBM will continue to own 81 per cent. of the operation. There are nine members of the interim board, seven of whom are high-powered IBM executives. The company did not get where it is today through charity. Last year, IBM turned over $98 billion and made a $10 billion profit, so where is the democratic balance in the new joint venture?

Did the two Somerset councils bring their sharpest business brains into the fray? Did they heck. In fact, there are only two potential defenders of the public interest on the board, but I am afraid that they are woefully inexperienced and gullible Liberal Democrat councillors. Their forensic ability to tackle a global concern such as IBM is severely limited. One of them is nominally in charge of Taunton’s car parks. The other strums in a Yeovil jazz band and, I am reliably informed, can sometimes get a tune out of a didgeridoo. Half a million council tax payers are now represented by two rank amateurs. That is a joke. Both would be baffled by a balance sheet. They are the patsies of this bizarre outfit. It is tacky tokenism in the name of accountability.

When dealing with the delivery of local council services, top-class accountability is vital. The Government know that and we know it. Do not take my word for it: the Audit Commission has real concerns about shared service partnerships such as Southwest One. In January, it published an important report that stated:

“Councils should only deliver services through SSPs if they are prepared to manage them effectively.”

Effective management ought to mean an awful lot more than two well meaning volunteers on the board of the organisation.

The Liberal Democrats run Somerset county council and Taunton Deane borough council. Their leaders pay lavish lip service to working for the people, but if their words were worth a row of beans, they would have stopped this nonsense—this madness—in its tracks. Already Southwest One has taken over the employment of 800 staff formerly on the payroll of Somerset county council and Taunton Deane borough council. Interestingly, the payslips for those employees still come from the councils, but their long-term employment rights are now stunningly vague. They have been “guaranteed” that their jobs are secure, but the small print of the guarantee—believe it or not—is not available for inspection, even if they knew what was going on.

Southwest One is an outfit born in secrecy and reliant on secrecy. Trade unionists who ask responsible questions are branded traitors. Joe Stalin would have been proud of the company. Southwest One is destined to gobble up more than £400 million of public money providing just two councils with services over the next 10 years.

My hon. Friend has mentioned investment. Is he aware that the county council explanation of the scheme mentions Project Taunton, which is a regeneration project for that town? This is at a time when the county council is denying funding for much-needed improvement to the Somerset coast road, which serves the holiday industry north of Burnham-on-Sea up to Brean. Does my hon. Friend believe that there is a danger that the scheme will lead to more investment by the county council—based in Taunton—in Taunton, at the expense of the peripheral areas of Somerset? Does he believe that the county council is being open enough about its investment intentions following the project?

I thank my right hon. Friend for his intervention. He is, as usual, perceptive and to the point. Yes, I agree. The county council has always been Taunton-centric. His experience is greater than mine: he has been an MP for much longer. We all know that the council has stifled investment in other parts of Somerset. MPs such as me and many others, including, dare I say it, Liberal Democrats, have had concerns about that. My right hon. Friend is right. Why should the council be Taunton-centric? Surely Southwest One is part of the answer. They want to keep the money in the centre and not give it to the peripheries, such as Brean, Highbridge and Wells.

The creators promised that the scheme would save a lot of money—£200 million, which is the equivalent of a £20 million cut from existing budgets every year. Last night, I was bombarded with documents from Somerset county council hoping to convince me of the savings. I read them all. They all mentioned the magic word “guarantee”, but it is all aspiration; it is not an explanation of what is going on. Somerset people are being asked to believe in fairies, and we do not. Painless savings cannot be made unless there are real economies of scale, and they certainly cannot be guaranteed. In other words, many public authorities need to be on board to justify the cost, and even then some brutal job cutting will be needed as well.

Assuming that the instigators of the scheme were not complete idiots, there had to be a viable plan to get several local authorities involved at once. There was: Somerset county council’s bid to become a giant unitary authority. Last year, the council appealed to the Government for permission to take over the responsibilities of five district councils. It was a half-baked and stupid idea. The sums had not been done. It was said that there could be a saving of £27 million and that only 65 jobs would be got rid of—lunacy. The plan would have left Somerset people democratically unrepresented at local level and created the most unwieldy local government monster.

The unitary plan was driven by one dangerous but very determined individual. His name is Alan Jones and he is the chief executive of Somerset county council. Rather like Joseph Stalin, he does not give a fig about democracy. He is, in his dreams at least, a ruthless business man—a pint-sized Alan Sugar. If his unitary plan had succeeded, the core business of Southwest One would have been ready made, and those involved would have been laughing all the way to the bank.

However, the Government’s civil servants took one look at Somerset’s proposals and rejected them out of hand. They made no sense economically or democratically. Suddenly, the rug was pulled from underneath and the new joint venture company was left struggling for clients and credibility. A desperate bid for extra business was launched. Devon county council was approached, and Cornwall too—let us spread our wings; let us march to the periphery. Both, as I understand it, gave Southwest One an instant, and correct, thumbs-down, goodbye, you are the weakest link.

We all knew that Southwest One could not survive, let alone prosper, with the work of a single county council and a tiddly little borough council. It needed richer, fatter clients and, what is more, it needed them fast. Last Thursday, Avon and Somerset police finally signed up to a contract to become the latest member of this strange secret society. Soon it will hand over to Southwest One much of the boring back-room work, such as financial services, human resources, information technology, facilities management, procurement and even inquiry offices.

The police do not like to be seen cracking open the Bollinger; it tends to give criminals the wrong idea. The thin blue line had fixed grins last Thursday, and no wonder. The forces of law and order had paid rock-bottom, bargain-basement prices to join Southwest One. Perhaps they were the sprat designed to catch the mackerel. It is said that IBM wanted to bag as much back-room police work as it could from all over the UK, but no one will get this “buy one, get one free” deal in the future. Somerset county council and Taunton Deane council will have to cough up £40 million a year to transfer 800 people to the Southwest One payroll. Avon and Somerset police has 600 back-room staff, but they are all coming in at half the price. The police contribution is so small that it amounts to a bribe. If the police were not already in it up to their necks, I would be demanding a police investigation.

How did it all start? We are assured that it was from the purest of motives. Somerset county council wanted to save money, so a few years back, it invented a project called “Improving services in Somerset” (ISIS). It was a lofty ideal that no one could disagree with. However, if one examined the small print, one would find that most of it was missing. ISIS appointed a project director on a two-year consultancy to help get things going. The appointment was made under what is known as the “urgency procedure”, so the individual was given the job without going through the council’s normal strict selection process. Only two people were involved, one of whom was the county council chief executive—Stalin himself—Mr. Alan “Sugar” Jones. “You are hired,” he said.

The new project director was Sue Barnes, who had excellent qualifications and substantial experience in local government. Sue Barnes is a constituent of mine, and she happens to be married to Mr. Colin Port, the chief constable of Avon and Somerset police. At best, that is an uncomfortable coincidence. Although Sue Barnes was not an officer in the council, she was given unusual delegated powers to conduct commercial negotiations.

According to Somerset county council’s auditors, Grant Thornton, there was no “conflict of interest” in the odd relationship. Let the phrase “conflict of interest” echo for a second or two, while I continue to be struck by the irony of Grant Thornton’s language. At the same time as auditing Somerset county council’s books, that well-known accountancy firm was also responsible for vetting the books of the Avon and Somerset police force. Furthermore, I think that Grant Thornton was working on behalf of the Audit Commission when Somerset county council was awarded its four stars. Do we think that is odd or what?

It is strange how times change. Grant Thornton is no longer hired by the Audit Commission. All current investigations into Somerset are being handled by the commission’s own experts. I am told that this time, they are going through the books of Somerset county with a fine-tooth comb. Yesterday’s four-star council could be presiding over a five-star scandal.

I received a letter today from the Secretary of State for Communities and Local Government in which she raises the connection with Southwest One partnership. She said:

“The arrangements that Somerset County Council and Taunton and Deane Borough Council have made in entering into the joint venture partnership are primarily a matter for them: you should certainly direct any concerns you may have about the procurement process followed to the councils concerned, or to the District Auditor.”

That sums it up. Even the Government see that something is not right. I do not blame the police authority for signing the deal with Southwest One. Given the deal that the police were offered, they would have been absolute twits to turn it down, but I remain deeply suspicious about Southwest One itself. For example, how did IBM become the preferred partner in the first place?

Originally, British Telecom and Capita produced detailed pictures. At least, they are home-grown companies. Capita has more hands-on experience of local government work than almost any other organisation. What was the competitive tendering process? We do not know the precise ifs and buts because of the extraordinary degree of confidentiality surrounding the whole affair, but we know that after any competitive tendering, there has to be an evaluation—the safeguard whereby local government officials can assure themselves that everything they have done is hunky-dory. I know that the Minister understands what I am talking about.

There is a specialist team in Government which does nothing else but evaluate councils. It is known as the “four Ps”, which stands for public-private partnership programmes. As the Government know, those guys are the experts and, more to the point, their service is free.

In the early stages of ISIS, the four Ps were called in, but when it came to vetting IBM, the Government boffins got an extremely cold shoulder; they were fired. Instead, the project director, Mrs. Colin Port—remember who she is?—recommended an entirely different evaluation process so, at an undisclosed cost to every taxpayer in Somerset, a private consultancy firm was hired. The consultancy company is called Maana, which is a Polynesian word that means “mature wisdom, with a hint of magic”—in other words, expensive eyewash.

The men from Maana previously worked for Suffolk county council. Guess what? Mrs. Port used to work there. It is always so much easier dealing with people we know, is it not? However, this time Maana was asked some searching questions about IBM’s business plans. The consultancy completed unedited reports that have never been made public, despite repeated requests made under the Freedom of Information Act 2000. Like so much of this appalling story, secrecy, underhandedness and deviousness rule.

However, there are some things that we know. We know that IBM was hired by the colleagues of the Secretary of State for Environment, Food and Rural Affairs to run the computer agency at the Rural Payments Agency. I know farmers who still have slight concerns about that. I know that the IT system used by the Rural Payments Agency is similar to the one that IBM wants to use at Southwest One. We also know that it is a hugely costly system with a track record of going wonky and not working. Are the vast consultancy bills a cock-up? Every time one asks, one is told something different. The system is embarrassingly German. There again, what is a few million Deutschmarks here and there? As a matter of fact, there is nothing wrong with the main IT system currently used by Somerset county council, and there never has been. It has been saving money. It could easily be expanded. More important, however, it is 100 per cent. British.

As of now, a team of geeks are working their hearts out to make the software work. The software was originally written to serve the city of Bradford. Now it is being converted to the functions of Somerset. We were promised that ISIS and Southwest One would provide an improved service and real jobs. The House will be interested to know that the important work of producing a new computer system for the two councils and one for the police authority is being undertaken, not in Taunton, Bridgwater or Wales, but in India. That is also a secret—like all the details of the contract that were signed at 5 o’clock on a weekend morning between Somerset county council, Taunton Deane and IBM. We are not allowed to see the small print, or even the big print.

We are obliged to take a few face-value promises and guarantees of savings. We are expected to believe the unbelievable, swallow the lies, and to turn a blind eye to the growing suspicion of dodgy dealing and underhanded deals. My purpose is to open up this issue so that the Government can do something before it is too late. We appear to be lumbered with an arrangement that ties the hands of politicians and people for 10 years, but the details are totally secret. That is inequitable. I do not think that any of us would disagree that the Minister and his officials have a duty to ensure absolute probity in the spending of public money.

The Minister could demand to see the detailed arrangements for all partners in Southwest One. Such partnerships are high-risk for the public purse unless there is a robust evaluation, monitoring and control system. Excessive secrecy inevitably erodes public confidence and inadequate democratic control washes it away altogether, which is why I want the Minister to consider this simple remedy: in future, such partnership arrangements should be subject to mandatory review by impartial organisations that represent, or report directly to, the Audit Commission and Parliament.

Southwest One is currently being investigated by the Audit Commission. I am respectfully seeking firm assurances that the recommendations of the audit will be fully implemented. The 10-year deal, which was pushed through by Stalinesque methods, is hazardous. The Lib Dems on the county council pathetically allowed it to happen—they did not even try to control the deal, and it could now tie the hands of all subsequent elected politicians regardless of their party.

I invite the Minister to investigate how one non-elected chief executive, Alan Jones, forced through such a mad, corrupt, barking scheme. Even Joseph Stalin did not go beyond five-year plans.

It is a pleasure to serve under your chairmanship, Mr. Jones. I should have said Mr. Martyn Jones—I am sure that you have nothing to do with the Alan Jones whom the hon. Member for Bridgwater (Mr. Liddell-Grainger) has mentioned. I congratulate the hon. Gentleman on securing the debate, and the right hon. Member for Wells (Mr. Heathcoat-Amory) on his contribution.

As hon. Members are aware, the issue concerns effective partnership working to deliver services in Somerset, as the hon. Member for Bridgwater has made clear. He has not minced his words in the debate—he is well known for saying what he thinks, and he has certainly done so today. He agrees—it is important to stress this from the start—that local authorities are independent bodies that are accountable first and foremost to their local communities and residents. They must ensure that they act in a professional and responsible manner. In particular, they are responsible for the proper administration of their financial affairs within the framework set by legislation, which includes the duty of best value and public procurement law, and codes of practice that are issued by professional bodies such as the Chartered Institute of Public Finance and Accountancy.

The hon. Gentleman has raised concerns about governance, employment rights, resources, money—he has mentioned a sum of £400 million—savings, his local constabulary and its involvement in the project, and the process of tendering. He has managed to fit quite a lot into a short Adjournment debate. Central Government cannot be involved in every action that councils undertake, and nor should they be. Rightly, Ministers and officials have not been involved in the development of the Southwest One partnership that has caused the hon. Gentleman so much concern. Therefore, the specific matters that he has mentioned can be answered only by Southwest One, Somerset county council and Taunton Deane borough council. If he has specific evidence—he has alluded to it—of financial irregularities or of a failure to follow due process in the development of the Southwest One partnership, he would be well within his rights to present it to the district auditor, as I am sure that he will. The district auditor is the right person to investigate such matters.

Central Government can and do facilitate the sharing of information and good practice about shared services, so that councils can make the most of the opportunities through partnerships with the private or third sectors, or other parts of the public sector. The Government believe that there are opportunities to be exploited from partnership working, and the hon. Gentleman agrees. A good, well run partnership can deliver a combination of the following: increase councils’ capacity to bring about transformational and radical improvements in service; enable a stronger focus on the needs of service users; secure valuable efficiency gains, including through economies of scale; help to break down cultural and organisational barriers to improvement; combine the skills and expertise of different partners; provide the means for innovation and flexibility, which would enable services to be delivered in a way that would not be possible for councils working on their own; and lever in new capital resources. However, I am sure that hon. Members have heard the concerns expressed by the hon. Gentleman and other local Members of Parliament about what is happening in their locality.

Councils also understand the benefits that can be enjoyed through partnerships that work. More than half of all councils say that they are engaged in, or are considering entering, a service partnership and that they expect to obtain savings of up to around 15 per cent. as a result. Pendle borough council is one such example. In 2005, it formed a partnership with Liberata Ltd to cover customer services, revenue and benefits, property services, information and communications technology, and human resources. Having listened to the hon. Gentleman’s contribution, he has a problem not with the principle, but with what has happened in his local area and the process by which it has happened. Pendle generated savings of around 12 per cent. of costs on the services that were transferred, improved service delivery through, for example, better council tax and national non-domestic rate collection and assisted in regenerating Nelson town centre through the construction of a business centre on a derelict site. That is one example of what can be done when local authorities get such partnerships right.

Of course, a partnership approach to service delivery might not be the best solution for improving value for money in every circumstance. Certainly, whether partnership working is the most appropriate means of improving the efficiency and effectiveness of a service depends on a number of factors, principally relating to the capacity and capability of a local authority. The recent Audit Commission report, “For better, for worse”, identifies a number of the factors that local authorities need to address to form a successful partnership. The report looked at partnerships that have lasted 10 or 15 years for delivering services such as council tax collection, information technology and property management. It examines why some partnerships have, and why others have not, generated all the expected benefits of partnerships with the private sector, which include greater flexibility, economies of scale, innovation, and risk and profit sharing. However, I heard what the hon. Gentleman said about the take-up of the partnership in his locality—he feels that two local authorities is a small level of take-up.

The capacity and capability issues that the report identifies include inadequate management of contracts, inappropriate risk allocation and a lack of proper incentives for partners to pursue shared goals. The report also makes clear the importance of flexibility in partnerships, so that they can adapt effectively to meet changing circumstances. I should like to add a caveat as a local Member of Parliament who is also a Minister. It is helpful, and in the interests of local authorities, to work with, and to give as much information as possible to, local Members of Parliament—I have always found that that is very helpful.

The hon. Gentleman has certainly put his views strongly in the debate. It is a matter for Southwest One and the local authorities, although I hear and understand what he has said. As he has outlined, he has also received a response from my right hon. Friend the Secretary of State. I shall watch to see how the matter progresses in the coming weeks and months ahead.

Sitting suspended until half-past Two o’clock.