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GROWING PAINS FOR CAPITA

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Capita recently announced record profits and record sales wins along with an increase in turnover of more than 50%,...
Capita recently announced record profits and record sales wins along with an increase in turnover of more than 50%, but some in local government are wary of improving public services going hand-in-hand with improving profits.

The firm's turnover has increased by nearly£240m since 2000, to£691m last year and Capita boasts it wins one out of every two bids it goes for. Operating profit for last year increased by 45%, to more than£77m, which is an increase of£20m on the previous year.

Having taken over PricewaterhouseCoopers executive resourcing team (LGC, 17 May), the company's fortunes look set to improve even further.

Capita was losing the battle for a share of the recruitment market until it bought PwC's recruitment team. More than 100 staff are moving to a newly created firm, called Veredus, which means 'swift hunter'.

PwC's recruitment team was previously the main competitor to Capita Recruitment and Assessment Services. Capita now controls around 45% of the public sector executive recruitment market. Add to this the company's interests in a massive range of local government services and it becomes clear Capita is a phenomenon in local government far beyond any traditional left/right debate over public services.

Its executive chair Rod Aldridge, not surprisingly, insists there is no conflict of interest between profits and public services and he faces little opposition except predictable, and seemingly futile, criticism from old Labour's old guard.

In a booklet, produced by the New Local Government Network, called Advancing a new public service ethos, Mr Aldridge and Manchester University professor Gerry Stoker conclude: 'The delivery of world-class public services requires the harnessing of operational capacity and innovation across the public, private and voluntary sectors. In turn this necessitates the breaking down of traditional barriers in recruitment and training practices between these sectors.'

The reference to recruitment practices was greeted with scepticism by some as

it accompanied Capita's announcement

that it was taking over PwC's recruitment role.

Unison's head of local government Malcolm Wing criticises the takeover. He says: 'This raises a lot of big issues. Executive recruitment companies offer big benefits packages and huge salaries. They are predatory, aggressive organisations. I do not think there is any evidence that this sort of aggressive recruitment delivers value for money for local communities.'

Despite regular censure of this sort, the firm continues to grow and keeps winning local government contracts.

Capita recently faced criticism from a House of Commons education and skills committee after the failure of a flagship government project, the Individual Learning Account, which experienced widespread fraud.

The committee's report concludes: 'We find it hard to credit that Capita, a major player in winning contracts for work contracted out to the private sector, should not have pointed out that, without a quality threshold for providers, the ILA was a disaster waiting to happen.' (LGC, 3 May).

But Capita must be doing something right. The FTSE 100 company spans local government, central government, education and the private sector and has around 15,000 staff working at more than 150 locations.

Employers' Organisation executive director Charles Nolda says: 'Local government is a huge market so it is not altogether surprising there is space for consultants. But there are many skilled personnel in local government who are perfectly capable.'

Local Government Information Unit director Dennis Reed suggests the firm's closeness to the local government community has helped it achieve the position it is in today.

He said: 'The initial secret was that Capita came from local government. There was experience about how local government works. It was thought to be part of the family and was clever in terms of working closely with the modernising agenda.'

Mr Aldridge worked in local government for 10 years, at East Sussex CC, West Sussex CC, Brighton BC and Crawley DC. He became managing director of CIPFA's Computer Services Ltd, before leading a management buy-out in 1987 and renaming the firm Capita.

It became a member of the FTSE 100 in March 2000 and works with 300 councils. The NLGN claims 'the work of Capita now touches the lives of 33 million people in the country'.

It could be the firm capitalised on the government's plan to improve public services without hitting the public purse too hard. Whatever the ideology, Capita enjoys an all-pervading influence on local government's relationship with the private sector.

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