Seven Magnificent Reasons “Why we are very afraid of Capita taking over our Council”


Take a look at what has been happening to Birmingham City Council since Capita came in. Remember we are told that privatisation will prevent cuts to frontline services, yet Birmingham Council are having to make huge cuts to public services whilst Capita sit there and make obscene profits from our taxpayer’s money.


It all started when the Coalition of Tories & Lib Dems running Birmingham City Council until 2012 agreed to let Capita in…….


1. Birmingham Council signs ‘unique’ deal


Birmingham hopes the Capita deal will find it £500m of savings, while creating 800 jobs and “improving the prosperity of the city”.

2. Profits soar at council-funded Service Birmingham 3 Oct 2013 07:18

Calls for contract to be scrapped after Capita-led company sees pre-tax profits pass £21 million

 Councillors and MPs have called for the city’s contract with outsourcing firm Service Birmingham to be scrapped after its profits soared by 52 per cent.

 The Capita-led company made £58,400-a-day pre-tax profits last year – despite the city council’s finances struggling under the weight of cuts.

 The firm saw pre-tax profits last year of £21.3 million – up from £14 million during the previous 12 months.

 Accounts filed with Companies House this week also showed a rise in income, dividends and a £54 million bill for goods and services bought from Capita.

 This has led to calls for the council to tear up the contract and offer the work, which includes IT, call centre and pay roll, to city firms.

 City MP Khalid Mahmood said the contract was “unjustifiable” amid hundreds of council jobs being axed in a £102 million two-year savings plan.

 The Post breaks the news on the same day it emerged that libraries and youth centres in the city are under threat from a council bid to cut its budget by a further £50 million.

 Mr Mahmood (Lab Perry Barr) said: “I don’t think it is acceptable, particularly in these days where a lot of people are having to make sacrifices and a lot of council employees are being made redundant.”


3. Sir Albert cutting an austere figure

 There is also increasing anxiety at the amount of money now being paid out to Capita’s Service Birmingham vehicle by the city council as the company’s latest accounts reveal.

 While other departments are cutting back the amounts being paid out, as well as profits for the IT and call centre operator, seem to be on the rise.

 It is a well trodden argument on these pages and both Service Birmingham and the council leadership will argue that they are taking steps to cut £20 million from the annual bill.

 But one additional point being raised is the lack of transparency around the contract – to which the council is tied until 2020. Despite spending vast sums of public money too much is bound by ‘corporate confidentiality’ while the Freedom of Information Act does not apply.”


4. Capita’s Service Birmingham profits bonanza (3 October 2013)

 Last year Birmingham City Council paid Capita on balance £126m for ICT, billing and ‘business transformation’ (the latter delivering low hanging fruit - hardly rocket science).

 I’ve been saying for some time that this over-bloated contract has been costing us £120m a year. I take no pleasure in saying, sadly, that I was spot on. Earlier forecasts anticipated annual costs of just £55million, the schools ICT service aside.

 And £55million is anyway far too much.

 Service Birmingham made £26m in gross profits last year. Remember those were anyway profits after a whole range of stuff had been purchased - with a big mark-up no doubt - from 15 Capita Group firms for £54m. They each will also be making a profit to feed back into Capita group. So the £26m gross profit is the tip of the value-extraction iceberg.

 And of the £8m dividend paid last year, nearly all of it went to Capita PLC anyway, again as I have stressed before.

 In fact over 98% goes to Capita. Ironically, there was never an expectation that any profits would be made at this stage of the contract.

 This shows what a hugely lucrative money-making machine this has become for Capita. And we’re all paying for it.

 But the key point is that Birmingham City Council is spending around 10% of its entire controllable budget on the contract with Capita. Is this really how our city should be allocating resources?”


 5. ‘Cash-strapped’ Birmingham City Council paid Capita £1 billion in just six years (2 October 2013)

 Private sector outsourcing firm Capita has pocketed £1 billion for running Birmingham City Council’s ICT services in the space of just six years, it has emerged.

 The figure – £126 million a year – is bound to reignite a bitter internal debate in the controlling Labour group over the best use of taxpayers’ money at a time when local government faces its gravest spending crisis.

 Between 2006 and 2012, Capita and 28 of its associated companies received net payments totalling £994 million from Service Birmingham, a joint venture company between Capita and the council.

 The total is comfortably more than the £825 million the council says it must save by 2017 to meet Government grant cuts and address increased demand for social services.

 Capita Business Services received £36 million in dividends from Service Birmingham during the period 2006-20012. Service Birmingham also made £21 million in charitable gifts.

 The council, while owning 32 per cent of the A-share capital, does not receive any dividend money that could be used to deliver services.

 Almost £20 million in corporation tax has been paid by the council in respect of Service Birmingham since 2006.”


 6. Service Birmingham contract with City Council faces a fresh review (April 2013)

 New checks will be carried out on Service Birmingham’s accounts amid complaints that councillors had “little idea” of how much the arrangement was costing.

 Coun John Clancy (Lab) said Birmingham City Council members were being “deterred from getting a grip” on the nuts and bolts of the “complex” deal because the facts were unclear.

 Nowhere is there a clear, total figure for what we are paying and what we should be paying,” he told a scrutiny meeting.

 The biggest issue is transparency, we have little idea of what is going on.”

 Now a new sub-committee has been set up to probe Service Birmingham’s accounts to ensure they can be easily understood by backbench councillors and taxpayers.

 The venture, run by the council and private sector contractor Capita, operates the authority’s call centre, IT infrastructure, Library of Birmingham IT and support and the collection of debts and council tax until 2020.

 The arrangement was formed in 2005 with £55 million-a-year running costs.

 But costs were thought to have spiralled to about £120 million-a-year following a renegotiation in 2011 and the addition of extra services, including council tax collection.”


 7. Service Birmingham chairman trashes his own company (December 2012)

 He added that Service Birmingham could not be blamed for taking advantage of a contract that had been “poorly drawn “by the council. Cllr Henley said: “We are not being scammed here. This is how the contract works.”

 Cllr Henley’s paper gained enthusiastic backing from backbench Labour councillors who routinely report complaints from constituents about poor performance at the call centre.

 But the document, and the resulting publicity, will have alarmed council leaders who are intent on patching up the relationship with Capita and seeing through the remaining nine years of the Service Birmingham contract.

 Claims made in the document include:

  • The council should have been paying £68 million a year by 2012 to reflect all of the work carried out by Service Birmingham. The figure, according to Cllr Henley, is £120 million.

  • Software and systems development that would originally have been carried out by council staff is undertaken by highly paid consultants, with a 17 per cent mark-up applied by Service Birmingham.

  • Service Birmingham’s contract includes inflation-proofed fees increases, enabling the company to boost profits at a time when the council faces tough public spending cuts.

  • The creation of a new council trading company, Acivico, is running six months late, the software has not yet been provided even though the company began trading on April 1.”



Join us to protest about selling our Council to Capita outside Hendon Town Hall on Tuesday 5 November at 6pm





  • Marie S

    Oct 07, 2013


    this is truly revealing. let everyone kow the truth and the consequences they are facing if they allow this to happen to Barnet and elsewhere.

  • ARW

    Nov 18, 2013


    Great article, and please do not let Capita in. While I do like to write I will keep this relatively short; look at Birmingham City Council's website, £2.8million was the cost...and for that we get a web of difficult to access information and a myriad of errors and bugs.....local web developers stay unemployed. Look at Capita's care in the community; any council owed debts (Council tax etc) were dealt with by Service Birmingham (Capita), they were quickly passed to Equita, the Council Bailiffs (owned by Capita) which in turn means they cannot be easily passed back to Service Birmingham for payment plans. Equita even subcontract these contracts to private Equita registered bailiffs, meaning a likelihood of extra charges being accrued. Capita make a load of money and control how that money is made. The people get in more and more debt, especially if they are tired of fighting or lack the information to counter. Recently the Council changed this and is taking responsibility for this service; and as far as can be seen they are recouping money at a steady but community focussed manner. Capita will find every way possible to make money and consequently investment potential will be drained, please Barnet, for your stakeholders sake and your own sanity; leave Capita alone.

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