MOST public sector workers have endured frozen pay, and thus real terms pay cuts, in recent years. But one lucky bunch at the heart of government have seen their incomes and wealth balloon after a suspiciously cosy privatisation.
The last Eye reported how in February last year the Cabinet Office’s groovy Behavioural Insights team, aka the “nudge unit”, was handed to a new company, Behavioural Insights Ltd. The Cabinet Office kept 35 percent of the company while 22.5 percent went to an employee trust, 30 percent to charity NESTA and 12.5 percent to bosses David Halpern and Owain Service.
The new owners paid only nominal sums for their stakes even though, when the government was seeking a joint venture partner (which became NESTA), it valued the arrangement at up to £50m. This wasn’t surprising since the new company was immediately given a £5m consultancy contract with the Cabinet Office without any competition.
Embarrassing rate card
When the Eye asked for details of this deal, the Cabinet Office blacked out specifics of how much the Behavioural Insights team, now operating as consultants rather than civil servants, charged for their services. But the Eye has now obtained a clue, in the shape of the “rate card” used by the company for an unrelated client – and the fees explain the embarrassment.
Chief executive David Halpern comes at £3,800 per day, which would generate £875,000 for a year of 230 working days – or seven times his salary of £120,000 to £125,000 as a civil servant immediately before. His No 2, Owain Service, also straight off the civil service books, gets out of bed for £2,250 a day, while a “principal” is charged out at £1,900. Doing the grunt work, a “senior adviser” is £1,600 and a plain adviser £1,200 (all before VAT). This appears to repeat the typical management consultancy business model under which the bosses make their real money charging out juniors at far more than they pay them.
Handy NESTA egg
Halpern, Service and staff have been handed a goose laying the most golden of eggs. Not only did they not pay for their stakes in the new company, but part-owner NESTA funded its £1.4m start-up expenses free of charge. This is quite a gift from a taxpayer-subsidised charity that was itself part of government (set up in 1998 with a £250m endowment of lottery funds to promote science and the arts) until it acquired its new status in the coalition’s supposed “bonfire of the quangos”.
NESTA’s accounts for the year ended 31 March 2014, covering two months’ worth of its 30 percent ownership of Behavioural Insights Ltd, show that the new company’s turnover in the period was around £410,000 and its profits about £175,000, equivalent to annual figures of £2.5m and £1m – after staff and bosses have taken their salaries, of course. While the shareholders are forbidden from taking dividends until February 2017, future paydays will be impressive.
Nudged into a dodgy deal?
Most gallingly Behavioural Insights Ltd trades on and profits heavily from its public origins. In touting for work it boasts of achievements since its inception “in 2010”, all on the back of unrestricted access to the top of government and the active support of the Whitehall machine but, most importantly, no competition. The company’s website shows a large photo of a huddle of its wonks outside No 10 Downing Street.
This gravy train won’t be slowing down as a new government with a slender majority seeks to avoid messy legislation and rely on more superficial and often slightly Orwellian “nudges” to public behaviour to show improvement in services. Maybe parliament could use the time freed up to look at whether taxpayers were nudged into a dodgy deal last year.