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Why are Birmingham taxpayers subsidising Capita via Service Birmingham?

Posted by Roger Godsiff, MP for Birmingham, Hall Green, at 11:31, Mon 29 September 2014:

Roger has written to the CEO of Service Birmingham to express his outrage that Birmingham citizens are being forced to subsidise Capita via the SB contract.

Service Birmingham provides computing and other services to Birmingham City Council at a cost of £126 million per year (£345,000 per day) in 2012. In the same year, Service Birmingham made operating profits of £21 million (£60,000 per day), giving it a profit margin of nearly 17%. These profits are funds which come directly from the pockets of Birmingham taxpayers, many of whom are struggling to cope with austerity and cuts to local government funding.

In his correspondence with Roger, Service Birmingham’s CEO disputed these profit figures but failed to provide alternative numbers. CEO Stewart Wren wrote that “the profits for Service Birmingham contribute towards the Group overheads for Capita Plc”, and also commented that SB “contributes” to Capita Group Plc profits.

Roger replied: “I can see absolutely no justification for this. It is utterly outrageous that money from the pockets of Birmingham taxpayers—who are facing a massive cut in council staff and services—goes to subsidise the running costs and profits of Capita. This seems to me to be an egregious misuse of Birmingham citizens’ public funds, which should be spent on public services for the city and not on further fattening Capita’s shareholders. It is particularly unfair given the amount of correspondence I have received from distraught and seriously ill constituents who have been waiting months for Capita to bother to carry out an assessment for their claim for disability benefits, many of whom are now facing serious financial problems because of these delays.”

In his letter, Roger wrote: “Your refusal to provide such basic financial information, in which there is a legitimate public interest, shows an extremely worrying lack of openness and accountability. The people of Birmingham, including my constituents, are the ones funding Service Birmingham. They therefore have every right to know how much of their money is being spent on public services and how much is being gifted to Capita.”

Roger has therefore put in a Freedom of Information request with Service Birmingham to find out what Service Birmingham’s adjusted profit figures are for each year of the contract, and how much of the funds Service Birmingham receives from the council go towards funding either Service Birmingham or Capita’s corporate overheads, rather than services for Birmingham citizens. He also requested the figures for what amount of the millions made in profits by Service Birmingham has been reinvested in improved services for the city, and what amount has been paid out to shareholders as corporate dividends or invested back into Capita.