It’s gone too far says Godfather of Outsourcing
SIR Rod Aldridge can hardly bear to watch as the outsourcing giant he founded and carefully nurtured for 22 years unravels. ‘I am upset about the way that Capita has gone,’ says the man who is regarded as the Godfather of Outsourcing – the business practice which led to the Government selling off billions worth of contracts to the highest bidder for everything from managing massive IT projects to building HS2.
‘I don’t think you can start something and be a part of it for 22 years and not have a feeling about it and the people – a lot of the people are still there.’
It is the first time Sir Rod, whose wealth is estimated at £135million, has spoken publicly about the company since a series of profit warnings prompted shares to collapse by 90 per cent in just two years.
Capita does everything from collecting the BBC licence fee to running the Congestion Charge zone in London. It has been at the heart of criticism of the Government’s use of external contractors and the privatisation of key public services such as the NHS. But to Sir Rod, who left the firm in 2006 over a controversial £1million loan to the Labour Party, the Capita of today bears little resemblance to the one he built into a FTSE100 powerhouse.
He created a business that was ‘white collar, back-office processing’. ‘We saved money and we made it more effective.’
But in the 12 years since his departure, Capita has done things ‘we would never have done’, he suggests. That includes taking on risky contracts, running front-line services for the NHS, and expanding the business abroad. In short, Sir Rod believes the business has fingers in too many pies.
‘I think they’ve gone too broad into markets and I think they’ve taken on contracts they shouldn’t have taken on,’ says the rosy-cheeked, portly Sir Rod, now 71, whose hair may have turned silver, but who still sports the same goatee from his time at Capita. Earlier this year, Carillion went bust, stalling construction of the £335million Royal Liverpool Hospital and sparking fears other Government contractors and outsourcers could be next.
Inevitably, Capita’s name, synonymous with the industry, was dragged in. Speculation by hedge funds drove shares down further.
But Capita is no Carillion, Sir Rod is quick to stress, and it doesn’t fork out huge sums only to wait years for a return. But, he says, why on earth did the Government award an already troubled Carillion £1.3 billion in contracts?
Ministers looked at outsourcers as a way of cutting costs, rather than improving the way things were run as Sir Rod originally intended, he says.
‘We were there to work in a partnership arrangement, not something where you throw over the problem and sit and watch it. I think Government became too obsessed with wanting to make sure they got a very, very, very good deal, without understanding what the implications of that are on a company that takes it on.’
His view chimes with an official Commons committee report in the wake of the Carillion collapse which said Ministers were too miserly with contracts, forcing firms to take on unnecessary risks.
Sir Rod is talking openly after writing a book charting Capita’s rise, his departure and his current role running the Aldridge Foundation, his young people’s charity, as well as his multi-academy trust – which has schools in underprivileged areas – and his cricket academy. It is quite an achievement for the son of a metal worker who left school aged 16 with just five O-levels.
He became a post boy for East Sussex County Council in Lewes, about 12 miles from where he grew up in Portslade. He remained in local government for a decade before going to work for the Chartered Institute of Public Finance and Accountancy (CIPFA), the public sector accountants trade body.
When Margaret Thatcher began to open up public services to tender, Sir Rod set up a team to navigate the new legislation. In 1984, he launched a computer service business for CIPFA which proved a major hit with local authorities. Three years later, he negotiated a management buyout for just £340,000 and formed Capita.
In a remarkable rise, Capita listed on the stock exchange in 1991 and entered the ranks of the FTSE100, Britain’s top tier of companies, just nine years later.
After a few years which saw Capita come under fire for its botched IT support work for the Criminal Records Bureau (CRB), he was already preparing to step back from the company when his world came crashing down in 2006. It emerged that Sir Rod had given the then cash-strapped Labour Party a £1million loan – highly controversial for the boss of a company that ran Government contracts.
Others who had loaned money had been recommended for peerages by then Prime Minister Tony Blair. The days that followed were ‘lonely’ – and not least because he was still going through a divorce with his then wife, Jacqui.
He ended up quitting Capita in the fallout.
‘I made a mistake. I can understand that now. I didn’t necessarily feel that way at the time, but I can recognise what the issues were,’ he says, adding that he became part of a ‘political game’.
It took him nearly two years to ‘get over it’ as he piled into his charity work.
‘I’m working with some amazing young people and that’s helped a lot,’ he says.
His new base is a luxury apartment complex on the Strand, where we meet. He and his wife Carol have just moved there.
They also own a house in Surrey and a place in Spain where they spend two or three months of the year. Last year, Take That performed at his lavish 70th birthday celebrations. He has met the new Capita boss Jon Lewis, who explained his plans to expand overseas.
While Sir Rod admits growth in the UK may have slowed, he doesn’t agree with the strategy and finds it hard to watch the decline of the company that he spent so long building.
‘If you put your life and soul into developing something, I don’t think you can switch off and ignore it,’ he sighs.
The Government became obsessed with wanting to make sure it got a very good deal