Posted Jan. 01, 2010
Chris Hyman: Can Serco take over the world?
Is there no end to the ambitions of the group that runs trains, schools and missile systems? Tim Webb finds the boss far too diplomatic to say
By Tim Webb
Chris Hyman would make a perfect Whitehall mandarin. As chief executive of Serco, the support services group, he presides over a company running everything from trains, hospitals and schools to prisons and missile defence systems, on behalf of governments around the world. Over three-quarters of its 40,000 staff (spread across 38 countries) are civil servants, inherited when their governments outsourced the work they were doing to Serco. Perhaps it's no coincidence, then, that Hyman has the sort of amiable, sensibly enthusiastic and distinctly uncontroversial air that would go down well in the corridors of power.
All around the world, governments are outsourcing public-sector services like health and education to the private sector. Voters are becoming less tolerant of high taxes, while still demanding better services. Contracting companies to carry out some of these functions allows governments to cut costs, spread the bill to the taxpayer over a longer period and avoid the need for large upfront payments.
It would not be diplomatic of Hyman – nor would it endear him to his customers – if he started telling governments how to run their countries. Asked if he thinks the trend for government outsourcing is permanent he replies: "I have no idea. I'm not a politician." Then he adds with false modesty: "If I was any brighter I'd say something else."
But isn't it a bit haphazard that, in the UK for example, some prisons are run by companies like Serco while most remain in the public sector? Why is that?
"That's a matter for individual governments," he replies, dodging the question. He then repeats the mantra used by Gordon Brown of the need for a "mixed economy" embracing the private and public sectors.
There are four big pressures facing governments globally, says Hyman: congestion, migration, terrorism and climate change. "One of the big areas for us is terrorism and if we can help make borders more secure then we'd love to do that." Serco is bidding as part of a consortium for the £1.2bn e-Borders programme, which will allow the UK government to screen people before they travel to Britain, preventing those deemed a security risk from entering the country. The company could also bid for the Government's identity card scheme, which has been mired in controversy and is still at the planning stage.
But how does society balance the need for security with the need to protect civil liberties? You can guess the answer that's coming. "Civil liberties – we don't have a view on that," says Hyman, looking a little pained. "That's a question for the government. What we can say is we have expertise in this."
Like any good civil servant, Hyman sees it as his job to do his masters' bidding, not try to tell governments what to do. "We take the policy and put it to work," he says. "All we do is implement." The nature of modern democracies, with frequent elections, means that governments focus more on policies, rather than on how to implement them. "When the political system is driven around an election every four years, people want to know what politicians' policies are," Hyman continues. "I don't hear any politician being asked about their delivery record – that's human nature. So you can't blame governments for focusing everything around 'What are my policies?'."
For Serco, the formula seems to be working. Last week, it announced a higher than expected 16 per cent rise in profits for the first half of this year to £62m. Hyman says the potential for growth – if the trend towards outsourcing continues – is huge. In the UK alone, the Government spent £600bn on public services last year, but only about one-tenth of this sum is outsourced to companies like Serco.
Hyman remembers that when Serco started out in the late Eighties, it was listed in the Financial Times companies page under the heading "Miscellaneous". Now support services is recognised as a sector in its own right.
The scope of such operations has since widened significantly, too. For example, when the first Private Finance Initiative (PFI) contracts were issued in the education sector in the early Nineties, companies like Serco would carry out only back office-type functions, running school receptionists' offices, IT systems or buses. Now they play a far more central role. In 2001, Serco took over the management of the local education authority in Walsall, where many schools were bumping along near the bottom of the league tables. The schools inspectorate Ofsted has acknowledged Walsall's improved performance since Serco came on board.
Hyman says the private sector can provide many such services efficiently, and without the bureaucracy of government. "Governments often only have one model for doing something. By nature, government is in silos because it is designed like that."
He rejects the idea that targets, while they may be useful in assessing the punctuality of rail services, for example, cannot be used for measuring the more intangible factors that determine whether a school is good or not. "You've just got to look a little harder."
But he refuses to be drawn on how far outsourcing can go and whether all services carried out by central and local government can ultimately be handed over to the private sector.
"That's another issue for government. How far it goes is not our call. We are so far away from anything near taking over civil servants' duties, it is too early to say." But you get the impression he thinks that the government services currently outsourced are only the tip of the iceberg.
The trend could even be extended to the charities sector as donors, particularly City philanthropists, demand greater accountability from the organisations they support. Benchmarks used in the City, for example return on investment, are now being applied to charitable donations, and this could result in more outsourcing. "How big that market is we don't know," Hyman admits.
He then drops his guard for a moment. Talking about how he watched the unveiling of Nelson Mandela's statue last week in Parliament Square – Hyman was born in South Africa – he says how much he enjoyed walking around the square, which had been closed to traffic for the occasion. So if cars are banished from large parts of London and other cities, you heard it here first – Serco's on the case.