Who's Spending Britain's Billions?

Our political leaders may have changed,

but the message remains the same.

He talks about austerity, I call it living within our means.

We're being told to tighten our belts,

but are our politicians practising what they preach?

Welcome to Whitehall, to the heart of government.

I'm Jacques Peretti, and I'm going to travel the length of Britain -

from Westminster to local town halls.

I'll be finding out where billions of pounds of taxpayers' cash

is really going and who is policing the spending.

30,000 to 50,000 and then another 100,000.

From vast projects...

It could end up costing as much as 12 billion.

..to what's happening on our streets.

It's just appalling! It really is.

I'll be uncovering the growing army of hired-in experts

making millions from the public purse.

How I felt was, "It's a racket!"

And revealing their tricks.

We want to take him to what we call the Valley of Death. Are you there?

Oh, my God.

I'll be uncovering secretive deals...

When we tried to challenge the council on it,

they hid behind this term "commercial confidentiality."

..involving our cash.

Do you think it's right that a company should make...?

Look, will you please get out of my room? The bloody lot of you.

I want to find out who's turning Britain's hardship

into a business opportunity,

and behind the scenes, who's really spending our billions.

I've come here, to the Firth of Forth, just outside Edinburgh.

I'm in search of a controversial project

that reveals just how government spends our money.

The place I'm driving to is very significant,

because it's the location of one of the most ambitious and expensive

defence projects in Britain's history.

It cost billions of pounds of public money,

but getting a closer look won't be easy,

because it's inside this heavily-guarded naval compound.

It doesn't take long to get an answer.

Well, I tried to visit and I was told

that it's not open to members of the public, and if I try to film it,

I'll be thrown off by the police.

So I think I'm going to have to try and find another way.

Even with heavy security,

it's hard to conceal one of Britain's biggest-spending cock-ups.

There it is, one of the two new huge aircraft carriers.

The largest warship ever built in the UK.

It's truly monumental.

To give you an idea of scale,

it is longer than the Houses of Parliament

and taller than the Niagara Falls.

When these two aircraft carriers got the go-ahead in 2008,

they were supposed to cost £3.6 billion,

but a series of delays and mistakes means it's now £6 billion,

and they are still not in service.

I'm going to meet local journalist, Ian Fraser,

who's been digging into what's happened.

So, Ian, where are we at now?

There are some experts who estimate it could end up costing

as much as 12 billion for the two carriers.

-Four times what it was supposed to cost?

-Nearly four times.

To save money, the MoD considered scrapping the second carrier,

until they realised it would cost even more.

Huge government projects like this often overspend,

but is there a tipping point after which they're impossible to stop?

What do you think this says about, you know,

the potential of governments of whatever political persuasion

to waste our money?

Well, I suppose it speaks volumes about our inability

to rein in government spending.

If even with a flagship project of this scale,

things can go so badly wrong and so much money can be wasted,

how many small projects actually end up costing four times as much

as they were originally supposed to cost

and no-one really bats an eyelid?

The overspend alone on these carriers

could have bought us dozens of new hospitals.

But I wonder how much more spending in Whitehall goes under the radar.

When Boris Johnson was mayor, he introduced these - Boris Bikes.

But he also bought three water cannons from the German police.

They were never used and they cost the taxpayer more than £300,000.

Here at the Department of Work and Pensions,

they blew 34 million on an IT project and it didn't even work.

The Department of Transport

took part of Richard Branson's train line off him.

He took them to court and the department lost,

and it cost us, the taxpayer, £50 million.

Beyond Whitehall lies local government,

and town halls are responsible for nearly a quarter of public spending.

Though budgets have been cut, they still spend nearly £60 billion

on everything from street cleaning to libraries.

So who's keeping an eye on how THEY spend their cash?

The answer might surprise you.

Up until last year, that building housed the Audit Commission,

the watchdog that kept a check on public spending by councils.

But the Government got rid of it to save money.

The idea was that a new group of people would step into the breach

to keep an eye on councils - armchair auditors.

Yep, that's you and me.

The Government released all this data so that we could keep a check

on their spending, but wading through all this stuff takes time,

which most of us don't have,

and so this army of armchair auditors never emerged

and this spending could now go unscrutinised.

Well, I'm going to take up the Government's kind offer

and become an armchair auditor myself

to see what councils are up to.

I'm going to begin by looking at some ingenious ways

they are finding of spending money in the name of saving it.

OK. That's reception, over there.

And I'm looking for registration and nationality,

which is over there.

Visitors to Brent Council's registration department

are greeted by Shanice, a virtual receptionist costing £15,000.

If you are here to attend a wedding ceremony,

please take a seat in the waiting room on my left.

Please remember...

I don't think I can interact with her.

Pressing this button...

It's kind of amazing.

Can I ask a question?

Do you get job satisfaction?

Maybe you are here to register a birth or death?

I'm here for none of those things.

I'm here to find out if you are worth spending £15,000 on?

She just waved goodbye to me!

What Shanice does is essentially the job of a sign,

and you would have a sign saying marriages this way,

births that way, deaths that way,

and that would sort of do the job and you'd do it in three seconds.

But what you do do is you feel obliged to engage with her

and then you kind of weirdly get distracted by the fact

she's got virtual from here up and kind of cardboard trousers.

It's all a bit odd.

I'm a little perplexed, but what do other people think?

If you are here to attend a wedding ceremony,

please take a seat in the waiting room on my left.

-Hi.

-Hi.

-You look a bit confused.

-Yeah...

It just feels so weird.

Is it a human being...? I keep looking at her arms...

What do you think? Do you think she's a human being?

She's so thin.

LAUGHTER

-For a human being.

-Are you jealous?

So how does Mark Rimmer, the man responsible for Shanice,

justify spending 15 grand when money is so tight?

Why did you think you needed a hologram

or something other than a real person to do that job?

I think we actually did need a real person,

but we couldn't afford a real person.

If you just put a sign up,

that would do the same job as the job Shanice is doing.

You know, a piece of plastic will cost £2.50.

The community we have in Brent is obviously very diverse.

English is not their first language for the majority of people.

They do respond to spoken English,

so I think a person would have been the ideal,

so therefore the interim was Shanice,

the holographic virtual assistant.

She is just great. I mean, she is one of my favourite employees.

Cash-strapped councils aren't just replacing people with holograms.

Here in Staffordshire, they're raising money by cracking down

on one of the great First World scourges of our time.

But you have to wait until after dark to see it in action.

Enforcement officers slapping fines on dog walkers

who don't clear up their pet's poo,

spotted with the kind of night-vision goggles

usually used in a war zone.

I decided to try them for myself.

Oh, so I'm sitting in a bush in Staffordshire

in the middle of the night to see if I can spot persistent dog foulers.

And I think I've actually spotted someone.

OK, I'm going to confront them.

I can get out of this bush.

Armed with these goggles, the council can hand out

£75 on-the-spot fines to anyone not clearing up their dog's mess.

-Good girl!

-Excuse me.

I know this sounds a bit strange, but I've been watching you

walking your dog through these night-vision goggles.

OK. Whatever!

-Are you walking your dog there?

-I am.

Because I spotted you with these night-vision goggles that I have here.

How do you think most people, most dog walkers, would respond

if someone like me jumped out of the bushes with one of these on?

I think you'd frighten them to death!

The council only needs to issue five fines to pay for the goggles,

but so far, they haven't handed out a single one.

I mean, these things cost 200 quid a time.

Does that sound like a good use of money?

I'm surprised they've gone that far, but, hey-ho, if it works...

Though there's been no fines, there has been a 62% reduction in dog poo,

so maybe these strange glasses are not a waste of money after all.

This thing, it seems to weirdly work.

I mean, the place seems to have less dog shit

and people seem genuinely to be fearful

of a slightly creepy man jumping out from a bush

and slapping them with a £75 fine.

So even though it's collected no fines,

it's sort of done the job of making the area a bit more hygienic.

Maybe it works, maybe it's a decent use of money.

Budget cuts have forced councils to come up with out-there schemes

like the poo patrol that attract tabloid wrath and people like me,

but the big money is being spent on something less visible

to us armchair auditors -

an army of professionals who have turned the cuts

into a business opportunity.

The management consultants.

-Morning, everybody.

-ALL:

-Morning.

In this school near Plymouth,

management consultant Shay McConnon is working the room.

Performance is linked to high self-esteem, is that right?

Shay makes his living re-energising council workers,

teachers and other public servants

with the power of magic.

It's like I've got one, two, three, four, five, six cards.

If I throw away one, two, three, you wouldn't expect me

to still have one, two, three, four, five six cards.

I want to find out if it works or if Shay is just conjuring an illusion.

So, in our relationships, we invest.

So, I work late when I don't feel like working,

I smile when I don't feel like smiling.

And all of that investment can go for nothing.

However, at a time maybe when you most need it...

..and least expect it, guess what?

It'll be there for you.

Miracles happen every day.

So, Shay, you're a magician, but you're also a management consultant,

so how would you describe yourself?

Most of my work is in organisations helping people to develop

collaborative relationships,

and it improves an organisation's efficiency, their productivity,

their bottom line...

You see, you know, you haven't come in with a whiteboard

and said, "Sack everyone," you've come in with a magic wand!

-It's a different approach.

-Let's be gentle with each other.

-Yeah.

-Let's look at this together, and how we can move forward?

-Yeah.

Like all consultants, Shay has a clever business plan.

Once he's magicked his way into the room,

he makes more money selling his very own management programme.

You're driving a lovely Jaguar, you've not done badly for yourself!

For Shay, helping the browbeaten public sector

has given him an executive lifestyle.

The real fulfilment has come from being able to follow my passion.

I do know it's actually making a difference to people's lives.

And that's the primary driver.

After a hard day's motivational magic,

there's even time for a 1970s-style management workout.

Good return!

Oh-ho!

Oh, yes! 1-1.

In these times, you know, these hard-pressed times,

the public sector is so squeezed, is it really a good use of money,

management consultants being brought in?

We're all about getting people's needs met who are at work,

and, of course, the consequence of that is higher levels of productivity.

Whatever you think of Shay's shtick,

he's just one of thousands of consultants

being parachuted into the public sector.

Together, they're being paid millions by councils

struggling to cope with the cuts.

I'm heading to Wales to meet a fellow armchair auditor

who's become alarmed by how much is being spent

on consultants in their area.

-Hi, there.

-Hi!

-Is that Liz?

-I am.

-I'm Jacques.

-Hello, Jacques, how are you?

-Nice to meet you.

-And you.

Liz Haynes is an independent local councillor

who also runs her own catering business.

How long have you had the burger van?

We've been on site here now almost 23 years,

and of course we're award-winning.

LAUGHING: Excellent!

Recently, Liz discovered her local council

had hired a firm of consultants.

They were paid £30,000 to help them find internal savings.

So you've got here some minutes from a meeting

and it's headed here "strategic operating model assessment".

What does that mean?

Well, it's a piece of work that the council have commissioned.

My understanding is that it is a review

on how to make savings in back office services.

The report was written by consultants PricewaterhouseCoopers,

known as PwC.

Over the following months, Liz spotted something alarming.

The council were asking for more money for PwC,

from £30,000 to more than £100,000.

This was a dramatic ramping up in how much they were going to get.

-Absolutely.

-What did you think?

Hiring in consultants to do work in times of austerity

just really sits uncomfortable with me.

So, very concerned.

I want to find out what's really going on here, so I've arranged

to meet the deputy leader of Torfaen Council, Anthony Hunt.

I want to know why, when they're told to make savings,

they are hiring expensive consultants

to tell them how to do it.

One of the solutions that many councils are coming to

is to bring in independent management consultants,

and I believe you've done that here.

Yeah, that's correct.

I think it's good to get an external opinion in,

to have a look at how you're doing things,

if you could do things more efficiently.

We've made a 25% saving in the cost of senior management

in the last half a dozen years.

That means we've got less capacity within the organisation

to do some of this transformational stuff, and so every now and again,

I think it's worth having an external view in,

but only if you can demonstrate that gives taxpayers value for money, I think.

They do come up with quite a lot of gobbledygook.

One of the things they think you should do is,

"We will support and enable services to focus on delivery

"by providing an effective service."

-Mm-hm.

-I mean...

-Yeah.

-It's like a classic.

I mean, I certainly don't get fooled

by gobbledygook and management-speak.

Although Torfaen Council paid PwC £140,000 in total,

they said it's led to significant efficiency savings.

DIALLING TONES

Could I have the press office...?

Hi, is that the press office...?

Jacques Peretti here from the BBC.

It seems they're not the only local council

to have paid for a PwC report.

Hi, is that the press office?

I was phoning to find out a bit about some work that's been done.

Would you be able to tell me now how much this report cost?

What's more, these reports have a familiar ring about them.

It's called the operating model assessment.

Operating model assessment...

Finally, I've made contact with someone who can tell me more.

Great, yeah, great. Thank you, take care, bye-bye.

Councillor Jacob Williams has been single-handedly investigating

PwC's activities here in Pembrokeshire.

He's discovered the local council paid the company £70,000

to help THEM find savings.

We've received a report which was 180 pages long.

I've got it here.

It's gobbledygook, you could call it. Corporate jargon.

The report's called Operating Model Assessment.

What does that mean?

Well, it really, for me, sets the tone for the rest of the document.

I suppose it's just looking at the council's way of operation,

the way... The culture, I suppose.

But the information within the report, really,

some of it is so basic that you'd have to wonder why

council officers couldn't identify this themselves.

Give me an example of the sort of thing that they uncovered

in their report.

Well, some departments still fax an attachment

after sending an e-mail.

Absolutely anyone could basically find that out.

These sort of things, yes.

I would suggest a lot of what's in here

is just a blueprint where the companies would just copy and paste

the name of the local authority into them.

So why are all these councils paying firms of consultants

hundreds of thousands of pounds for reports

that all sound the same?

Industry insider and former PwC consultant John Bennett

has agreed to meet me to tell me why.

So talk me through what's going on in Wales.

We've got a number of reports here

and they all seem to have a similar title,

which is the Operating Model Assessment.

Could you tell me what that means?

Well, essentially, that means that you're going in to

perform a diagnosis on the organisation. An overview.

Very similar to if you take your car into the garage

and you get a service from a mechanic.

It's a standard approach, short piece of work.

It's what's called a repeatable proposition, so...

So it's like a template?

Absolutely like a template, and individuals in junior grades

are trained in delivering a repeatable template.

And so when they go into Pembrokeshire or they go to Cardiff,

they'll all be working to a specific template that you can,

in effect, just put...

LAUGHING: A different council's name on the front?

Yeah, and the same methodology.

I'm amazed that all the reports I've seen,

costing hundreds of thousands of pounds,

are based on a template.

So how do these consultants manage to persuade all these councils

to part with our cash?

I'm going to meet someone who knows all the tricks of the trade.

Former consultant, David Craig, has years of experience

persuading clients to pay big money for his services.

He's going to give me a masterclass.

So, David, once, as a management consultant,

you've got your foot in the door of a government department,

what do you do to get more business?

The first week or two, you haven't a clue what's going on,

so you're fumbling around in the dark,

trying to find out what's happening.

So to buy yourself time,

you do a whole load of general interviews,

all the way through the organisation.

Step two, pile on the pressure.

The interviews have given you an idea of where to look for the dirt.

So then you do studies in those areas.

What you're looking for is something that gives a big emotional shock.

We want to take him to what we call the Valley of Death.

The Valley of Death?

Yes, where he loses confidence in his people.

He says, "Well, how can this be happening?

"How could my salesmen not be selling?"

He has to feel his world has moved

and he really has to do something,

because if there's no pain, he's not going to buy.

So down into the Valley of Death we go.

-This is a dark place.

-Yes.

But, for you, as a management consultant,

-this is the boom. This is the moment.

-It's pure heaven.

-This is ka-ching.

-Yeah. So once we've taken them

into the Valley of Death, now it's time for salvation.

Now we go to the sunny uplands of,

"It's bad, it's really bad, but don't worry,

"together, working together, we can save the situation."

It'll only cost you two or three million,

or maybe you need to buy a big computer system

-for another 50 million. Who knows?

-Oh, my God!

It's unbelievable, it's unbelievable.

I mean, this wouldn't matter, in a way,

if it was just in the private sector,

but these companies are now operating in the public sector

-with public money.

-Yes.

I was at a conference of management consultants a few years ago,

and one of the directors of a leading management consultancy said,

"It's so easy to sell into the public sector

"because buyers are inexperienced, inconsistent

"and incompetent."

-Wow.

-This was from the head

of one of the largest consultancies that sells to the public sector.

-And everybody clapped and laughed.

-Incredible.

So far, I've discovered that consultants are being hired

to help councils find internal savings,

but it doesn't end there.

They're also advising on the services that affect us all.

Here in Powys, cuts mean the closure of schools are being considered.

So the council paid PwC to study the impact

this would have on pupils' travel time.

Local school governor John Millson has been studying their report.

-Yep, come in.

-Lovely. Thanks.

What did PwC conclude about travel time?

They do give an example when they say that if they close four schools

out of the 13 in the county,

then the increase in average travel time for pupils in the county

would be 33 seconds.

-33 seconds?!

-Yes.

So kids who go to school in Powys, how do they get to school?

The ones who can't walk to their local school,

the vast majority of them will travel by council-funded bus.

And this 33-second figure that PwC have come to,

added to their journey time,

is that based on bus journeys?

No, it's actually based on the time taken

by someone to drive from the student's home address

by private car to the school.

-By private car?

-By private car.

Right. But pupils in Powys, the majority travel to school by bus.

-Yes.

-So that's wrong, then?

Very wrong, yes!

BOTH CHAT

I want to put PwC's findings to the test.

Oliver Bowage has two children

due to attend the local secondary school.

By car, it's about a six-minute journey to the school gates.

But the school's threatened with closure,

which means his kids may have to travel a further 12 miles

to the next one.

So, Oliver, according to PwC,

if your kids' secondary school was to close down,

on average, the journey to the new school should take 33 seconds.

-Right, OK.

-Does that sound...? How does that sound?

You've basically got 33 seconds to get from here to Brecon.

Right, let's go!

OK, let's see how far we get. OK, go!

Remember, Brecon is, what, 15 miles?

Yeah, something like that.

OK, all right. Well, you're not doing bad. OK.

You should be about halfway there by now.

THEY LAUGH

You haven't got long. You've only got another six seconds

-to get to Brecon.

-So we'll go straight, but obviously...

No, no, you've got to stop now. No, sorry, you've got to stop.

So, you've got to stop now.

'Oh, dear. 12 miles still to go.

'Looks like Oliver's kids are going to be taught in the lay-by.'

So, Ollie, we've tried to put the PwC report into practice

and given what we've found out, what do you think about that report?

Well, I know consultants get paid lots of money

and they probably drive very fast cars,

but it's just completely unrealistic.

Even if you were in a Formula One car,

you couldn't get to Brecon in the time they're suggesting.

-33 seconds.

-33 seconds is just crazy, it's absurd.

PwC may claim that average journey times

will increase by only 33 seconds,

but the reality for many parents

will be a much longer school run than that.

But what about all the other reports that I've seen?

They cost hundreds of thousands of pounds

and could have much wider implications.

I mean, these reports are costing tens of thousands of pounds.

Is that good value for money?

They're actually seen by consulting firms almost as loss leaders,

because when you go into an organisation and do a diagnosis,

you're often lining up a larger piece of work

further down the line,

and so the expression that I heard many times

in large corporate consulting firms is, "You land and expand."

You start to uncover issues in an organisation

and therefore put them under pressure.

It's like a plumber coming in.

It's very, very similar to what you see people experiencing in trades.

In the car industry, you know, they open up the bonnet of your car

and suddenly they've found six things wrong with your car

when you only went in for a flat tyre.

It turns out land and expand is already happening in Wales.

I've discovered three councils alone have paid PwC nearly £5 million.

But this upfront money isn't the only issue.

Something far more profound is going on -

a type of contract that the consultants call risk and reward.

What a risk and reward contract means

is that the consultants take a percentage

from any savings they can find.

In other words, they make money from the budget cuts.

Profit out of austerity.

Here in West Wales, Ceredigion Council has signed

just such a contract with PwC,

and I want to ask council leader Ellen ap Gwynn about it.

One of the things you've done

is to bring in outside management consultants.

Is that correct?

Yes, well, that was after an open tender exercise.

PwC won that tender

and we've been working in partnership with them

for about 18 months.

They've been very helpful in that they've helped us to analyse

the basis of our budgetary processes.

So when you say they're analytical in the way they look at things,

what do they actually do when they come in?

How does it work?

They've held a succession of workshops

with different members of staff.

You know, they've been listening first,

and then come back and talked through

possible ways of improving...

Well, not improving necessarily, but changing and redesigning services.

Couldn't you do that yourself?

I mean, because you have a lot of highly paid staff here.

We've had a reduction in our highly-paid staff,

quite a substantial reduction,

and we've had a change of staff as well.

So you've got... So, just to get it straight, just so I understand

what's going on... So, basically, you've had to get rid

of a sort of whole level of administration,

and in order to replace that,

you've brought in PricewaterhouseCoopers

to do the job that those people did do?

For a short period of time.

It just seems, you know, in this time of extraordinary austerity,

unprecedented austerity, you know, your council spent nearly £1 million

on these people coming in.

Has that been value for money, you know, for you?

What do you think?

Well, I very much hope so.

When you compare that to 34 million that we've had to cut,

and to compare that, going forward, with the way that

we're having to restructure, I think it is.

I spoke to a PwC insider who told me about their strategy

for when they go into a council.

Well, if you speak to the ones that come here,

you'll find out quite soon that they haven't had an easy ride in here.

They've been challenged and challenged and challenged.

This is their strategy, right?

It's called land and expand. Have you ever heard of that?

No, but I can see through them when they come.

If I don't want something, I'm not having it.

Land and expand is, we get our foot in the door

and then, basically, we create a strategic partnership with them

and we expand the job once we're in.

No, they haven't, I'm afraid.

So have they land and expanded you, Ellen?

They've landed, but they've been contracted,

and, in that, I mean the opposite to expand, rather than the contract.

-So how long is the contract for?

-It's finished.

They're out, they're finished.

Could you tell me the nature of the contract that you had with them?

No, I'm sorry. That's commercial.

-I can't speak about it.

-It's commercial?

-It's commercial.

-You're a public body. This is public sector money.

-I'm sorry,

it's a commercial contract between the council and a private body.

OK. So there are cuts to public services, to the public,

and you cannot tell me, because it's commercial, the relationship?

-Indeed.

-Do you think the public don't have a right to know

what the relationship with this contract is?

That is the legal position we're in.

-You feel that you can't tell me?

-That's the legal position we are in.

OK. Could you tell me what a risk and reward contract is?

You need to look that up yourself. I'm not going any further on

-the contract.

-Have you heard of a risk and reward contract?

I have, but I'm not going any further on the contract, I'm sorry.

What if we don't talk about

your specific contract but just generally

-what a risk and reward contract is?

-No, I'm not going any further

on any contracts. You've had what you want from me.

I think we should perhaps finish this. I've got to go...

I've just got one more question. Just one more question, Ellen.

It's been said that PwC will receive 16% profit

on every cut that is made.

I'm not going to comment at all on the contract.

I've already told you that. That's the end of it.

-But the public hear...

-That's the end of the interview.

Sorry. You're going too far now.

Well... Ellen, it's literally knowing about the 16%.

-Is it right or is it not?

-I'm sorry, I'm not discussing the contract.

-I told you that.

-They make 16...

-I don't care.

-They make 16% profit

on the cuts that you make, so it's a company profiting from...

I'm not discussing anything about the contract.

Do you think it's right that a company should...?

Look, will you please get out of my room?

The bloody lot of you. I've had enough of it.

So, I've just been asked to leave the building.

The leader of the council has walked out

of the interview very, very angry, and the thing

that made her angry was me asking about the nature of

the contract with PwC. She called it commercially sensitive and said she

couldn't speak about it, but we're talking about huge amounts of money here

that are passing to a private company,

and it does seem extraordinary

that I'm not even allowed to ask the question.

Why is it so difficult to find out?

PwC wouldn't meet me, but they sent us this statement...

"We therefore work with clients

"to demonstrate the value and effectiveness of contracts."

I still need some answers, so I'm meeting the man who speaks for

the consultancy industry, Alan Leaman.

Could you explain to me what a risk and reward contract is?

There are more and more people in our industry

who are saying to clients, "What you really want to do

"is buy an outcome. You want to buy a result.

"And how are we going to do that?

"Well, we're going to share some risks.

"So, OK, we might take a basic fee, but on top of that

"we'll be paid by the results we deliver for you."

We were in Ceredigion in Wales, and they had a risk and reward contract

there, which basically delivered 16% return to the management consultants

-there on all the public service cuts that were being made.

-Mm-hm.

The more cuts that were made, the more money they make.

Is that correct?

We all understand that savings are being looked for, and we need to

improve efficiency in the public sector, and that's one of the areas

where really skilled management consultancies can make a difference.

Yeah, but you haven't answered my question. I asked whether

the management consultancy firm were actually making a profit on

the austerity cuts being made there

because of this risk and reward contract. Is that correct or not?

Well, it means what you're doing is

you're giving the consulting firm every possible incentive

to deliver savings for the taxpayer, and that's, to my mind,

a real benefit for the country.

How widespread are risk and reward contracts within

-the public sector in Britain?

-It's limited, but there's a desire,

certainly at the top of government, because we've spoken to them

about this, to see more being done.

Do you think it's moral that a management consultancy firm

are making money out of the cuts that are being made

-to public services in this way?

-I think it's moral if the objectives

of the project are moral, and if they are, I think it's

absolutely right that they should be rewarded

for achieving what the public sector wants to achieve.

Consultants are profiting to the tune of millions advising on

public service cuts, but their involvement doesn't end there.

To make the public sector a gift that keeps giving, they've got

another trick up their sleeves, and it's all down to that

ultimate consultant buzzword - "transformation".

If you go into any company or any council or hospital,

you'll probably find they're running

a so-called "transformation" programme

with expensive, completely unqualified management consultants

helping them. And of course everybody can improve,

but you do not need to transform.

Any organisation stupid enough to buy

a transformation programme would employ an army of consultants

for a century and cause endless disruption.

Because transformation equals starting again.

-It means spending more money.

-Well, it means change everything,

and you never need to change everything.

You need to improve those things

that need to be improved and you need to guard and protect the things

that are working OK.

When it comes to transformation projects, they don't come

much bigger than the top-to-bottom reorganisation of the NHS

in England, conceived here in Whitehall six years ago.

This ambitious reorganisation of the NHS promised to be

the most radical shake-up in its history.

As the Government put its plans for the NHS into action,

one firm of consultants were involved in meetings

with officials - McKinsey.

It advises governments and private companies across the world.

What people like McKinsey have in common is a desire

to see things improve,

whether you work in the private sector, the public sector.

Tamasin Cave has been investigating McKinsey's role during the time

of the NHS reorganisation, and she's built up a dossier

of revealing correspondence.

What are these conversations about? What's going on?

These are fragments of conversations.

In the correspondence, you see McKinsey

firing off an e-mail to all the top of the Department of Health,

all the senior officials, saying,

"Right, we're ready to start work with you,

"we're ready to dive in. Hope we can help."

You see McKinsey being involved in discussions

around the new structures for the NHS.

You even get them sitting in on board meetings, even to the extent

where board meetings are being held in McKinsey's office.

One man who recalls the presence of McKinsey is Dr Laurence Buckman,

who represented GPs during the NHS reorganisation.

Wherever you went to a meeting, somebody from McKinsey's was there

who had written a report that appeared to be a fait accompli,

and those of us who thought that we were actually going to have a say

in how this was going to happen were continuously sidelined,

or we were told, "Well, this is how it's going to be."

It was always the same experience.

As the NHS was overhauled, McKinsey was employed across

the organisation, and their services didn't come cheap.

Tamasin, do you have specific figures about the amount of money

that McKinsey are taking from the NHS?

We know it's many millions, and then, after that, you look to

spending data, you can see there's 800,000 here, another 500,000 there.

Similarly, you can go to NHS England. They will have spending,

and they have... I mean, they've spent hundreds of thousands,

probably now totalling millions, and it's described as NHS England

running costs, but that's going to McKinsey.

We asked McKinsey about their work in the NHS, and they said...

David Oliver is a doctor who's uncovered how much has been spent

on management consultants across the NHS.

In 2013, I put a Freedom of Information request in

to the Department of Health, asking them

how much management consultancy spend had increased

during the time of the coalition government.

What the Freedom of Information request showed is that

consultancy spend had doubled within the first three years

of the coalition government, nearly doubled to £607 million,

and I dare say it's increased beyond that since that time.

I mean, if that was money spent within the NHS, what could that do?

Well, £600 million would run a couple of medium-sized hospitals

for a year, for instance.

It would increase the funding

-for out-of-hours care by about 30%.

-When you found out what

-you found out, how did you feel?

-Well, I wasn't surprised.

I could see with my own eyes what was going on around the place

and I'm afraid how I felt was - it's a racket!

And it's still how I feel now, really.

The management consultants may have cashed in from

the NHS reorganisation, but has it helped deliver a better service?

So, we've had years of upheaval, billions spent on reforms,

management consultants have earned a fortune from it. Have we ended up

-with a better system?

-No. We've ended up with a system

that is more fragmented, more rushed, under much greater pressure,

is unattractive for people to work in and that patients are getting

a less good deal than they were before the reforms started.

Dr Buckman's just one of many experts critical of

the NHS reorganisation, while the Government

says they are putting patient care at the heart of the NHS.

But with management consultants now working right across our town halls

and hospitals, just how far has their influence spread?

Welcome to Whitehall, to the heart of government,

where they decide how to spend your money!

'Most of the money that pays for our public services ends up here,

'where it's divvied up among government departments.'

On your right is 10 Downing Street, where the Prime Minister lives,

and right next door, the Cabinet Office, who handle around

2.8 billion every year on things like MI5 and MI6.

On your right, the Foreign Office, who spend 1.9 billion of our money

on diplomats and embassies.

'But billions of pounds of taxpayers' money is also paid

'to private companies. Some of them began as consultants,

'but now they've gone from advising our public services

'to actually RUNNING them.'

If you could turn to your left, ladies and gentlemen,

that anonymous building is 71 Victoria Street,

the offices of Capita.

'Capita runs lots of public IT and admin contracts.

'In return, it receives more than £1 billion a year of our money.'

We're just passing the offices of G4S. They run everything

from prisons to detention centres.

Tucked just up here, between these two buildings at the top

of Victoria Street, are the offices of Serco.

'In return for running everything from Boris Bikes to RAF bases,

'Serco is paid 1.8 billion.

'In total, these three outsourcing giants

'receive £3.5 billion of public money.

'Considering how much we give them,

'it's strange we know so little about them.'

-Who is this person?

-That's Queen Elizabeth.

-That is the Queen.

-That's Her Royal Majesty the Queen.

How much money do you think you and I give her per year, per person?

-£2 per person.

-£200.

-Whoa!

-£1 per person.

-£1 per person?

-Yeah.

-£2, £1?

-Yeah.

-Nought point something pence?

-Oh, wow, OK.

It's actually 56p.

-Oh!

-I was close...

-That's pretty good.

-It's a bargain.

-You think that's good value for money?

Do you know who these two men are? Have you ever seen them before?

'These are the bosses of Serco and Capita.'

-No.

-Have you ever seen them before?

-I haven't, no.

-OK.

'I want to see if anyone can guess how much of our money goes to

'the companies they run.'

I'm guessing it's going to be a bit more.

I assume, like, 30p.

-I'm going to go £5 here.

-£5. It's closer to £50.

-Really?

Is it actually, yeah?

-Shall I tell you?

-Is it up to £1?

It can't be up to £1.

-It's nearly £50.

-What?!

What do they do? Why do they get that money?

We pay the Queen, as you said, 50p, which doesn't seem that bad because

we all love her and everything but, like,

£50, that's like a weekly shop.

Since 2010, the number of our services run by private firms

has doubled.

That means one in every £6

of taxpayers' money goes to these companies.

In return, we expect efficient, well-run services,

but to local people, the results can often seem bizarre.

SAW BUZZES

This is the first time I've seen...

..urban arboreal vandalism in action.

This is just terrible. Absolutely...

Yeah.

Flipping great work(!)

It's 6am and I'm in Sheffield,

outside a depot belonging to a company called Amey.

Four years ago, they were given

a £2 billion contract to improve the city's roads,

including looking after the 30,000 trees lining the streets.

Amey have since felled more than 3,000 trees they say

are dead, diseased or dangerous.

But protesters think otherwise.

Basically, Dave and Helen and the other protesters are staking out

the chipping company who are going to be felling the trees

this morning, and they've been doing this for a number of weeks now.

And, basically, it's a kind of game of cat and mouse.

They are waiting to see when they leave, which gate they leave from,

and then they're going to follow them to the road where

they are going to cut down the trees and try and prevent it happening.

Let's go and have a quick recce then, Chris,

and find out what's happening the other end.

-So, Dave, what's going on?

-We are going to go up to Bannerdale Road...

-Yeah.

..because there is only one person guarding the tree

we think they'll come for next.

The protesters have been tipped off that felling crews

are planning a dawn raid on a nearby street.

Now, this is where we were yesterday.

The tree that was taken down is behind this barrier here.

-You will see the stump that's left.

-Wow.

-Perfectly healthy tree.

One gone here yesterday.

I was standing by that tree and they carried on cutting it down.

Many locals woke up to see their trees gone.

It just breaks my heart.

How can it be right to fell a beautiful, healthy tree?

It's just...appalling! It really is dreadful.

This time, the protesters are one step ahead of the felling crews.

Now, this is the tree in question.

'The tree they are guarding is due to be removed because Amey say

'it's causing structural damage, but Dave disagrees.'

-The kerb edge, straight.

-Yeah.

There's no damage to the boundary wall.

-There's really minimal damage to the pavement.

-Yeah.

'Sheffield Council say residents are consulted before

'a tree is removed, but protesters say it's cheaper to chop

'the trees down than have to work around them.

'In other words, fewer trees equals more money.'

It makes absolutely no sense

to be chopping down highway trees at the rate they're doing.

It's absolutely unsustainable. It has to stop.

Amey wouldn't meet me, but said in a statement...

"..while ensuring the safety of highway users and properties."

Across the country and the political spectrum,

the value of outsourcing is being questioned.

Nowhere is that more true than Birmingham,

where the council signed an unusually large deal with Capita.

Birmingham is Europe's largest council and the outsourcing deal

it agreed with Capita is one of the biggest in the UK,

involving over £1 billion of public money.

The council agreed to let Capita handle

its IT and back-office operations

through a joint venture called Service Birmingham.

But the deal was shrouded in secrecy.

'Professor David Bailey, another pesky armchair auditor,

'has been trying to uncover the truth.'

This joint venture, which Capita was providing all these services,

how much was it supposed to be costing?

The initial view, talking to people that were around at the time,

was that they were expecting it to be

of the order of £50 million to £60 million a year.

It's difficult in the sense that over time more elements

were added to the contract, so the costs inevitably went up.

But at its peak, it was costing something like £140 million a year.

So it's still over £100 million a year for the last figures we have,

of which Capita has been making a profit

of over 20 million in total.

So it's a very lucrative business for them still.

I looked into this a bit myself and it seems as though £338,000

a DAY in Birmingham was being spent

on simply "backroom" administration and IT.

Per day!

The spend on IT through Service Birmingham by the city council

ran at over 10% of the entire controllable budget

of the organisation. That's a huge amount.

If you look at most organisations around the world,

and what they spend on IT, it might be 5%.

This is over 10%.

Given that this is public money that's being spent,

why has it been so difficult for you to get answers?

That has been one of the major issues for me. This is very opaque.

And whenever we tried to challenge the council on it, they hid

behind this term "commercial confidentiality".

Whenever pertinent questions are actually asked,

commercial confidentiality is the phrase

that is always brought up to protect it, and that, in a way,

demonstrates how utterly murky

the relationship between these companies and councils is.

It is totally impossible to work out what is really going on.

If we can't see how 10% of the council's budget is being spent

because it is covered by a contract we can't see,

how are we able to judge whether or not

public money is being spent well?

So there's a fundamental conflict between commercial confidentiality

and the right for public to actually scrutinise public expenditure.

We asked Capita about its role in Service Birmingham.

They told us...

"..while delivering high quality services."

With question marks growing over the benefits of outsourcing,

it's no wonder some authorities are searching for different solutions.

I'm heading to Liverpool, where they think they've found one.

-TANNOY:

-'Please make sure that you have

'all of your personal belongings with you at all times.'

Until recently, Amey, who I encountered in Sheffield,

ran the city's street cleaning.

But the council were unhappy with their performance

and ended the contract.

One of the people behind the decision was Councillor Steve Munby.

Steve, what was the public's experience with outsourcing?

Did they like it? Did they find they got a good service?

They didn't bring bunches of flowers

to thank me or the company. No, it was dreadful.

Particularly with some of our core street services,

there was a complete outcry.

After their experiences with outsourcing,

the council now runs the services themselves and they believe

the taxpayer is getting better value for their money.

And this isn't a loony left Liverpool Council idea,

this is a non-ideological thing, you've got Conservative councils

as well across the country, going back to insourcing because

it is simply more efficient, better for the customer and better for you.

Absolutely, in fact, the ideologues are the people who are arguing that

privatisation is going to be cheaper.

If you look at it, the figures don't add up.

Even if you did nothing else, by taking stuff back in,

you eliminate a management fee.

So that can be a million or two a year on a contract.

By running the street cleaning themselves,

the council say they've already saved £1 million.

-About 48 grand.

-About 48 grand.

THEY CHUCKLE

By consulting the workers, they say productivity has risen by 50%.

So what do THEY think about the change?

-How long have you worked for the street cleaning?

-Nearly 28 years.

How does it compare now to what it was like before?

If you're working with a private firm,

their aims aren't the same as what the council wants.

They could want something totally different.

What were their aims?

I could imagine their aims is to make as much money as they could.

Is there a sense that you're listened to

as opposed to just being told what to do?

-Yeah. Nowadays, yeah. Especially with it being the council.

-Yeah.

-Because they're looking for efficiencies, as we are ourselves, you know what I mean?

-Yeah.

-In reality, we're all shareholders.

-Yes, exactly.

We asked Amey about its street cleaning contract in Liverpool.

They told us...

"..after both sides had raised concerns about the sustainability

"of the contract."

Liverpool isn't the only council taking back control of its services.

From Cumbria to Essex, many others,

Tory, Labour and Lib Dem are following suit.

Being here in Liverpool today, I've realised that the model

of efficiency that we've been following for years, of outsourcing,

has been seen to fail and they are following a new model,

which is based around trusting the people who do the job on the ground.

The people who do the job are the ones that should be trusted

to deliver efficiency, rather than just parachuting someone in.

As Britain tightened its belt,

billions of pounds of our money has been handed over to

management consultants and outsourcing companies.

They say they can deliver efficiency,

but when we ask questions,

we are told it is not our business to know.

If we're going to truly change our public services,

we need to find out the truth.

Not just who's spending our money, but how they're doing it.