Vol. 42 No. 21 · 5 November 2020

Cronyism and Clientelism

Peter Geoghegan on the Tories’ outsourcing of the pandemic response

4418 words

On the afternoon​ of Thursday, 19 March, four days before Boris Johnson went on TV to tell the British public ‘you must stay at home,’ Lee Cain, his belligerent head of communications, convened a virtual meeting to discuss Covid-19 messaging. (The Telegraph described the meeting under the headline ‘Anatomy of a Perfect Slogan’.) Until then Johnson had taken a laissez-faire approach: people should wash their hands thoroughly – in the time it takes to sing ‘Happy Birthday’ twice – but were otherwise free to go about their business. Now, as cases surged, the message needed to change. Alongside Cain on the Zoom call were a number of veterans of the Conservative general election campaign: Isaac Levido, the Australian spin doctor credited with coining the party’s 2019 slogan, ‘Get Brexit Done’; the former Vote Leave director of communications, Paul Stephenson; and Ben Guerin, one half of Topham Guerin, the political consultancy firm that rebranded the Conservatives’ official Twitter account as a fact-checking service during a pre-election debate.*

Johnson, the group agreed, needed a simple message that the public could get behind. Henry de Zoete, a former digital director at Vote Leave and successful Dragon’s Den contestant, suggested advising people to stay at home. Guerin, a New Zealander, noted that ‘stay home, save lives’ had worked well in other parts of the world. Cain proposed adding a line about the National Health Service. The following day Johnson gave his Downing Street press conference with ‘Stay Home. Protect the NHS. Save Lives’ pinned to the front of his lectern.

The message worked well (some said too well) and Johnson’s own satisfaction ratings rose sharply after he was admitted to hospital with Covid-19. In mid-April, two-thirds of respondents said they were confident the government would provide accurate information about the pandemic. But public trust soon declined. By the start of June, only half of those polled thought they were being told the truth. News of Dominic Cummings’s lockdown jaunt to Durham had been preceded by a chaotic change of message. (Levido and Guerin were reported to have drawn up the much mocked maxim ‘Stay alert, control the virus, and save lives.’ Topham Guerin worked on the social media.) But while civil servants in Whitehall were routinely blamed for failings in the UK’s response to the pandemic, the government’s messengers were richly rewarded. Michael Gove’s Cabinet Office gave Topham Guerin a £3 million contract for communications work. The contract – agreed without any competitive tendering – was signed in early May but, unusually, backdated to 17 March, two days before Lee Cain’s Zoom call. Paul Stephenson’s public relations firm, Hanbury Strategy, was given a series of contracts. Campaigners launched a legal action, accusing the Cabinet Office of apparent bias and favouritism in awarding Hanbury £580,000 to research ‘public attitudes and behaviours in relation to’ the pandemic without any tendering process.

Covid-19 has revealed the depth of cronyism and clientelism in British public life. More than almost any comparable state, Britain – or, more accurately, England – has outsourced swathes of its pandemic response, often to companies with strong links to Conservative politicians but little obvious relevant experience. A business, co-owned by a Conservative donor, which supplied beauty products to high street chains was given a £65 million contract to provide face masks to the NHS. A small, loss-making company that distributed medical devices, run by a Conservative councillor in Stroud, received contracts worth in excess of £270 million to supply personal protective equipment. Ayanda Capital, a family investment firm that specialises in ‘currency trading, offshore property, private equity and trade financing’, was handed a £252 million contract to provide face masks, fifty million of which were never used after concerns were raised about whether they provided ‘adequate fixing’ around the face. The deal was brokered by an adviser to the Board of Trade, which is chaired by Liz Truss, who just happened to be a senior board adviser at Ayanda. NHS data has been signed over not only to Amazon and Google but also to Palantir Technologies, the big data firm set up by the PayPal co-founder and Republican Party funder Peter Thiel, and Faculty, a small artificial intelligence company previously employed by Cummings’s Vote Leave campaign.

During the summer, I was surprised to stumble across the name Public First in a spreadsheet of Cabinet Office spending data. Public First is a small PR firm with an address in Tufton Street, a row of Georgian townhouses close to Westminster favoured by lobbyists and pro-corporate think tanks that refuse to declare their donors. The company is run by James Frayne, a long-standing ally of Cummings, and Rachel Wolf, who co-wrote the 2019 Conservative manifesto. Having previously run focus groups for the Department for International Trade and the Cabinet Office, Public First has been given contracts worth more than £1 million for everything from running focus groups to ‘urgently’ managing communications around the disastrous, algorithm-determined A level results that culminated in a U-turn and the resignation of the head of the exams regulator (the education secretary, Gavin Williamson, remains in post).

Public First was not involved in procuring PPE for frontline workers or finding a Sars-CoV-2 vaccine, but all its contracts were still awarded using emergency provisions, without any competitive tendering. Across government, competitive tendering has effectively been suspended as departments have been given the green light to make ‘direct awards’ to firms; there is little, if any, accountability about the way these decisions are made. In late March, the Cabinet Office called in the accountants Deloitte to run a crisis unit to source PPE. The result was centralised chaos. Thousands of prospective suppliers emailed a hotline, but many never got more than an automated response. A clothing manufacturer in northern England, which had offered to make medical gowns, told one of my colleagues at openDemocracy that he couldn’t understand why Deloitte had been hired: ‘If there is a fire, you don’t call the auditor, you call the fire service.’ The Cabinet Office still hasn’t published the terms of its contract with Deloitte.

In Britain, the first response of many people in power to a difficult situation is to call on their corporate contacts. Lord Deighton, a former investment banker at Goldman Sachs and chief executive of the London 2012 Olympics, was appointed ‘PPE tsar’ in April. The Cabinet Office minister Chloe Smith was a Deloitte consultant before becoming MP for Norwich North at the age of 27. The owner of a small consultancy recently told me what happened when he went to Whitehall a few months before the pandemic to discuss a potential research project. A special adviser liked the idea but wanted to get an ‘expert’ take on it, too. ‘Within five minutes a guy from Deloitte was in the room,’ the consultant told me. ‘He clearly had a pass for the department.’ So far, the British government has handed out Covid-19 consultancy contracts worth more than £100 million. In September, the Guardian revealed that Deloitte – having been hired after the PPE debacle to help run the NHS Test and Trace programme – was selling contact tracing services directly to local health officials in England although there was a national shortage of testing. Deloitte has hired a thousand consultants to work on Test and Trace, including forty from Boston Consulting Group, some of whom are being paid at least £6250 a day.

The chancellor, Rishi Sunak, told Parliament that more than £12 billion had been provided for Test and Trace. Serco has been the biggest beneficiary, with a contract that could be worth as much as £410 million. Since the logistics giant has limited expertise in contact tracing, it has subcontracted the work. (The junior health minister Edward Argar, incidentally, is a former Serco lobbyist. The government says he wasn’t involved in the awarding of the contract.) Both Serco and the Department of Health and Social Care have refused to name the thirty or so subcontractors that employ 9000 of the 10,500 contact-tracing staff, most of them fielding phone calls. Many are on zero hours contracts and complain of poor training. One contact tracer – who worked for a travel agency hired by Serco – told me that, in April and May, she was ‘alone, working from home dealing with a pandemic none of us knew anything about’. Another said that he had answered only two calls in five months. Most mornings he logged onto the system and went to the gym. According to Sage, the government’s scientific advisory group, the spread of the virus can only be controlled if 80 per cent of an infected person’s contacts are reached within 48 hours. England’s Test and Trace system has consistently failed to do that, but the Department of Health didn’t include a penalty clause in Serco’s contract, so its profits won’t be affected by this failure. Even the test tubes have been faulty: a batch of 500,000 was apparently found to include leaking vials and contamination with hair and blood.

Covid-19 has, however, provided corporations with a golden opportunity: as Serco’s chief executive, Rupert Soames, told staff in a leaked email, the pandemic is going ‘a long way in cementing the position of the private sector companies in the public sector supply chain’. The trick is not to say this in public. Soames – a grandson of Winston Churchill and brother of the former Conservative minister Nicholas Soames – has cautioned his managers to ensure that staff behave in a way that would satisfy the ‘Daily Mail test’. (The same metric was adopted by the civil servants making funding decisions in Andrew Mitchell’s now defunct Department for International Development.) Serco was fined £19.2 million last year by the Serious Fraud Office for misconduct in its electronic tagging service for the Ministry of Justice. The wrongdoing is said to have included charging for offenders who were dead. Deloitte was fined £6.5 million for its role in the scandal (a sum later reduced to £4.2 million because the parties settled). In mid-October, Serco’s share value rose by almost a fifth after the company predicted a jump in underlying profit to roughly £165 million.

Failure is no barrier to advancement in Britain’s privatised public life. In 2017, Dido Harding, a Conservative peer, was made the chair of NHS Improvement, despite having presided over the loss of the financial and personal details of 150,000 customers when she was chief executive of TalkTalk. In May, she was put in charge of NHS Test and Trace: her telecoms experience apparently left her well placed to oversee the development of a ‘world-beating’ smartphone app that the prime minister promised would be ready by June. By the time the app was launched in September, Harding had been installed as the interim chief of the newly minted National Institute for Health Protection – again, without a competitive hiring process and bypassing civil service rules on appointments. (Coincidentally, her husband, the Tory MP John Penrose, is Johnson’s official ‘anti-corruption champion’.) The National Institute for Health Protection is a very Johnsonian creation: combining NHS Test and Trace with Public Health England, it was designed by the management consulting firm McKinsey and unveiled by the health secretary, Matt Hancock, during a speech at the think tank Policy Exchange. A leak to the Health Service Journal revealed that the new body’s senior management is filled with former executives from Travelex, Jaguar Land Rover, Waitrose and TalkTalk. Only one member of its executive committee has a background in public health.

In the five months to early September, the Department of Health and Social Care agreed private contracts worth £11 billion, mostly related to Covid-19. The contracts were published on average ten weeks after being signed, despite a legal duty to do so within thirty days. An estimated £3 billion worth of contracts have not been published at all. The grace and favours doled out to Conservative friends and allies have attracted official attention. The head of the National Audit Office, Gareth Davies, has said that the spending watchdog is investigating pandemic contracting, following ‘concern about the transparency of some of the procurement contracts around PPE and other areas’. It intends to produce a report later this year. ‘We’re doing a detailed piece of work,’ Davies said. That may well be so, but it is unlikely to cause major political ructions given the wider climate of cronyism around Downing Street.

‘They are so corrupt,’ a backbench Conservative MP said to me recently of his own party. ‘Which I almost wouldn’t mind if they weren’t so crap at it.’ Recent months have been pockmarked by ignominious episodes that the British press would immediately label as evidence of kleptocracy if they happened in another country. Robert Jenrick remains housing secretary despite admitting ‘apparent bias’ in overruling planning inspectors and the local council to approve Richard Desmond’s Westferry Printworks development – 24 hours before the introduction of hefty new levies that would have cost the Conservative donor an estimated £45 million. A few weeks earlier, Desmond, the former owner of the Express newspapers, had attended a Carlton Club fundraising dinner at the Savoy, during which he showed Jenrick a promotional video on his mobile phone of the proposed 1524-apartment development in the Isle of Dogs. (The minister insisted he was ‘inadvertently’ seated at a table of property developers.) After the event, which he paid £12,000 to attend, Desmond texted Jenrick repeatedly, stressing the need for swift action ahead of the deadline for Tower Hamlets Council’s new community infrastructure charge. ‘We appreciate the speed as we don’t want to give Marxists loads of doe [sic] for nothing!’ After the story broke, the business minister, Nadhim Zahawi, told the Today programme that if voters wanted to raise planning issues with their MPs, they too could pay to attend Conservative fundraisers.

Plenty of developers seem to have heeded Zahawi’s advice. The Conservatives received more than £11 million from donors in the property and construction industry in Johnson’s first year in office, and, in August, the government published a white paper on planning that the prime minister promised would ‘tear down’ the existing system. The proposals would see affordable housing rules scrapped. Developers would be granted ‘automatic’ permission to build on sites marked for growth. The plans – warmly welcomed by builders – bear more than a passing resemblance to the recommendations in a Policy Exchange report published in January. (The author, Jack Airey, joined Number 10 as a special adviser on housing the following month.)

Donations to British political parties have risen sharply in recent years. In 2019, Britain’s fifty richest donors gave a record-breaking £35.5 million. Money does not always buy success: Lord Sainsbury’s £8 million handout did little to revive the Liberal Democrats’ anaemic general election campaign. But most of the money has gone to the current party of government. (Anwar Pervez was the only person in the top fifty of the 2020 Sunday Times Rich List to donate to Labour. The cash-and-carry tycoon hedged his bets: he also gave to the Tories.) And while financial transparency has come a long way since the 1980s, when the late Lord McAlpine is said to have turned up in the City with a large sack asking for bundles of cash to fill Tory party coffers, there are still plenty of loopholes making it possible to give money to politicians anonymously through secretive clubs and offshore companies: a recent National Crime Agency investigation into Arron Banks, who made donations to the Brexit campaign through a company based in the Isle of Man, found no evidence of law-breaking. For £50,000 a year, donors get to meet the prime minister and other members of the cabinet at the quarterly Leaders’ Group dinners. These informal, off-the-record discussions provide the perfect opportunity for a ‘quiet word’ about donors’ pet projects and interests. (Labour is courting donors too: Keir Starmer has written personalised letters to potential funders, and the party recently launched a ‘Chair Circle’ membership for those ‘who give at the highest level’. Incentives include ‘brunch ahead of the leader’s speech’ at party conference and ‘invite-only strategy updates’.)

Unlike in the United States, political influence in Britain comes quite cheap. In late September, the former planning minister Bob Neill was found by a parliamentary committee to have breached its rules by failing to declare that he was being paid £1000 a month for ‘strategic consultancy services’ by a company that was handling planning permission for a luxury hotel development he had lobbied for in his Bromley and Chislehurst constituency. A couple of months earlier, another Conservative MP, David Morris, apologised for lobbying on behalf of an energy firm that had given him £10,000. Morris had urged the energy minister, Kwasi Kwarteng, to lobby Ofgem to change regulations in ways that could benefit Aquind Limited, which is seeking to build an undersea electricity interconnector between Britain and France worth more than £1 billion. The business secretary, Alok Sharma, also received £10,000 from Aquind. The company – and its public face, the former Yukos executive Alexander Temerko – frequently appears on lists of donors to backbench Conservative MPs. Temerko, who has boasted of ‘plotting’ late into the night over a bottle of wine on the balcony of ‘Sasha’ Johnson’s office in Westminster when Johnson was foreign secretary, has personally given more than £1 million.

Johnson has seldom shown much interest in upholding standards of conduct in public life. In 2019, Parliament’s Committee on Standards found that he had demonstrated ‘an over-casual attitude towards obeying the rules of the House’ after failing to declare a property interest. A few months earlier he had breached the rules on declaring book royalties. Before that, he had not sought permission before signing a £275,000 contract as a Telegraph columnist three days after resigning as foreign secretary. When Johnson was mayor of London, the mayor’s promotional agency, London & Partners, awarded thousands of pounds of public money to Jennifer Arcuri, an American businesswoman who recently admitted to the Daily Mail that she had an affair with him (‘I think that goes without saying … It’s pretty much out there’). He has carried this insouciant approach into government, presiding over an administration that has both strengthened executive power and unabashedly used the public purse to pursue partisan interests: ahead of last year’s general election, Robert Jenrick and his junior minister Jake Berry approved payments to towns in each other’s constituencies from a government fund earmarked for deprived areas. In all, sixty of the 101 towns awarded £25 million each were in Conservative-held seats or Tory targets.

Party supporters have also been rewarded with the trappings of political office. A tenth of leading Conservative donors have received knighthoods or peerages in the last decade. According to newspaper reports in May, Tory donors were unhappy that Johnson had yet to deliver on promised peerages. In July, his dissolution honours list created 36 new life peers. Among those elevated were senior party donors, Johnson’s editor at the Telegraph, Charles Moore, his confidant Evgeny Lebedev, and his brother. How much – or how little – has changed in the 26 years since a Conservative prime minister established a framework to promote ethics in British political life.

In October​ 1994, John Major’s government was dogged by allegations of sleaze. Against the backdrop of the cash-for-questions affair, the prime minister announced the establishment of a Committee on Standards in Public Life. ‘This country has an international reputation for the integrity and honour of its public institutions,’ Major said. ‘That reputation must be maintained and be seen to be maintained.’ He appointed the Appeal Court judge Lord Nolan to head up the new body. The ‘Seven Principles of Public Life’ laid down in the committee’s first report – said to have been scribbled down in the back of a taxi by Anthony King – have become the rhetorical kitemark of ethical standards: integrity, objectivity, accountability, honesty, openness, selflessness and leadership.

The Nolan Principles didn’t stop almost two hundred former ministers and senior civil servants taking up roles advising and lobbying in 2018. Andrew Pulford, the former air chief marshal, went to work for the defence contractors BAE Systems, one of whose chief markets is Saudi Arabia. Ministers are nominally prohibited from lobbying government for two years after leaving office, but the system of compliance is notoriously weak. The Advisory Committee on Business Appointments (Acoba) – currently led by David Cameron’s anti-corruption tsar, Eric Pickles – seldom, if ever, stands in the way of plum private sector jobs. Conflicts of interest abound. In July 2019, Priti Patel didn’t notify Acoba that she had been working as a consultant for the US company Viasat until a month after becoming home secretary. By the time she received the body’s guidance, Patel had already earned £10,000 (for ten hours’ work). It subsequently emerged that Viasat was planning to bid for a highly lucrative defence contract. That isn’t an isolated incident. Within six months of resigning as Brexit secretary, David Davis was earning £3000 an hour as an ‘external adviser’ to JCB – itself a major donor to the Conservative Party. Nick Clegg now works for Facebook. Sajid Javid became an adviser to J.P. Morgan barely six months after leaving Number 11. Theresa May earned more than her annual salary as prime minister from two cancelled speeches she was to give to J.P. Morgan this year. Such stories only serve to feed voters’ growing mistrust of politics. Will politicians be willing to anger Silicon Valley or big banks if the same firms are likely to feather their nests almost as soon as they step away from the cabinet table? Is the implicit message that acquiescence in office will be rewarded with a well-remunerated sinecure?

Westminster is intensely relaxed about the perception of impropriety. In Washington, powerful congressional committees investigated some of Donald Trump’s most trusted lieutenants. But British politicians have little to fear beyond reprimands from toothless watchdogs or lurid tabloid headlines. Electoral law is outdated and inadequate: the Electoral Commission’s maximum fine is £20,000. Like avoiding tax, flouting the rules is not something to worry about. Cummings – whose Vote Leave campaign broke the law by overspending – was found in contempt of Parliament for refusing to appear before a select committee inquiry into ‘fake news’. That didn’t stop him being appointed Johnson’s all-powerful special adviser. Even when they have been caught out, MPs often try to undermine parliamentary watchdogs. During her investigation into David Morris’s lobbying for Aquind, the standards commissioner, Kathryn Stone, noted that he ‘repeatedly questioned the commissioner’s remit’. (Morris later apologised, admitting his tone had been ‘legalistic, argumentative and … combative’.)

The release of the long-delayed Russia report in July prompted a brief bout of media soul-searching about the extent of Kremlin interference, but its most striking line was about the impoverished state of British democracy in general. Government agencies charged with ensuring the integrity of the electoral system are not, the Intelligence and Security Committee said, in a position to ‘tackle a major hostile state threat to our democracy’. Responsibility for protecting the UK’s democratic processes is ‘something of a “hot potato”, with no one organisation recognising itself as having an overall lead’. The Department for Digital, Culture, Media and Sport – whose remit includes tackling disinformation online – ‘is a small Whitehall policy department’. The Electoral Commission is an ‘arm’s length body’, embattled and under-resourced. Johnson’s administration has shown no sign of paying any attention at all to this warning. On the morning the Russia report was published, the Cabinet Office minister Chloe Smith took a break from overseeing PPE procurement to tell Parliament that consolidating Britain’s labyrinthine electoral law was ‘not a legislative priority’ for her department. The prime minister dismissed the imbroglio as a plot by ‘Islington Remainers’.

The chances of meaningful reform seem negligible. There are rarely incentives for the party in power to fix a system that delivered it victory. The Conservatives, however, seem intent on weakening the few ineffective safeguards that currently exist. The Public Administration and Constitutional Affairs Committee recently called for evidence to aid its investigation into the work of the Electoral Commission. Rather than giving the watchdog new powers, the co-chair of the Conservative Party, Amanda Milling, has said the body should become ‘more targeted’ – or be abolished. (Milling has also suggested that its policy, guidance and evaluation functions could be transferred to Michael Gove’s Cabinet Office.) The increasingly vocal libertarian wing of the party dreams of a fully fledged bonfire of the quangos, which are at arm’s length for good reason. Most likely, however, nothing will be done. An ineffectual Electoral Commission will be left more or less untouched, and the governing party’s cheerleaders will hail its moderation. Elsewhere, the Committee on Standards in Public Life has launched a review of standards (‘Standards Matter 2’) and one examining electoral regulation – but the latter’s remit does not include party funding, despite growing evidence of oligarchs and vested interests buying access to British politics. Johnson has refused to comment on the reason Lubov Chernukhin has paid £205,000 to play tennis with him in recent years (she has donated £1.7 million in all to the Tories). But we do know, thanks to the recent FinCEN leaks, that Chernukhin’s husband received $8 million from an oligarch close to Putin’s inner circle shortly before the 2016 referendum. Brexit was not bought by the Kremlin, but the ease with which potentially dirty money can flow into British politics should be a national security concern.

Kleptocracies are bad places to live. People die poorer, younger. The trains do not run on time. In Britain, a culture of cronyism has contributed to one of the worst Covid-19 outbreaks in the world, from the failures of outsourced Test and Trace to the increasingly confused messaging provided by party political appointees. Decisions that were once the preserve of secretaries of state are now made by gauche special advisers with little experience beyond a stint at Vote Leave or a Tufton Street think tank. When Moody’s downgraded the UK’s credit rating on 16 October, it cited ‘the weakening in the UK’s institutions and governance’.

Not everyone on the right of British politics is content with the venal status quo. In the middle of the summer, an angry opinion column about sleaze and corruption appeared in the Telegraph. The piece lambasted ‘the deep complacency and self-serving nature of the British establishment’ and railed against the way ‘donors end up with peerages in the House of Lords’. The conclusion was damning. ‘Our problem is not really about individual politicians, nor even political parties. The problem is our political system and culture.’ The author? Nick Timothy CBE.

23 October

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Vol. 42 No. 22 · 19 November 2020

In his article on cronyism and clientelism in British public life, Peter Geoghegan wrote that the PR firm Public First had not done any work for Whitehall before the contracts it was awarded this year (LRB, 5 November). This was incorrect. Public First had previously worked for the Cabinet Office, Ofsted and the Department for International Trade.

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