WHEN the Labour Party were in opposition, they lambasted the ruling Conservative Government for spending up to £500 million a year on management and IT systems consultants. This was, they thundered, a disgraceful waste of taxpayers’ money — money that should be spent on front-line services like hospitals and schools rather than being handed over to a few already wealthy consultants.

Now new Labour are in power, they seem to have changed their minds. Blair’s and Brown’s new Labour will not be spending a mere £500 million a year on consultants — they have much more ambitious plans than that. The Government have evidently become tired of those who do not share their blue-skies thinking vision for Britain. So, in their grand plan to modernise the delivery of public services, they seem to have sidelined the Labour Party and the Civil Service and have decided both to make their new policies and to implement them using their favourite management and IT systems consultants.

This is turning out to be an expensive exercise that will cost us, the taxpayers, well over £70 billion — more than £20 billion for management consultants and at least another £50 billion for IT systems consultants.

A catalogue of catastrophes In 2000, as part of new Labour’s e-government initiative, Customs and Excise launched a programme to provide e-services. By June 2004, the department had spent over £100 million on its e-VAT service. According to the Public Accounts Committee (PAC), the introduction of an electronic VAT return in March 2000 was a failure because the new system was more complicated than the previous paper-based version.

So, four years after its launch, less than 1 per cent of traders were using it — somewhat below the target of 50 per cent. The solution proposed by Customs and Excise was to force companies to complete the electronic form. However, the PAC suggested that the department would be more likely to hit its targets by offering a decent service that businesses wanted to use. The PAC also criticised the department for having failed properly to test e-services before roll-out. In addition, the Customs and Excise PFI with Fujitsu didn’t seem to be totally under control as its costs almost doubled from £500 million to £929 million.

The PAC also criticised Customs and Excise for its use of management consultants. The department apparently spent £28 million on 300 consultants between November 2001 and March 2003, without any clearly identifiable results. Overall, the PAC didn’t appear too impressed with Customs and Excise’s managerial capabilities and apparent profligacy with our money as it slammed the department for spending “huge sums of public money without being confident of the scale of the likely benefits”.

A licence to print money

Management and IT systems consulting is one of the most profitable businesses in Britain today. We can take somebody straight off the street, teach them a few simple tricks in a couple of hours and easily charge them out to our clients for more than £7,000 per week, while we probably pay them around £700 per week.

If a new consultant has any kind of reasonable education, yet no business or working experience whatsoever, they’ll fetch at least £8,000 per week. And if they have also worked for a few years in what we call “a proper job” before becoming a consultant, anywhere from £10,000 to £25,000 per week is normal. Surprisingly, very few clients do the simple mathematics and ask why they should be paying over £300,000 a year for an inexperienced junior consultant who is being paid just over a tenth of that.

Overcharging

This is an old favourite and one without which any list of more questionable management consultancy money-earners would be incomplete.

Most consultancies have different weekly billing rates depending on the seniority or experience of the consultant. For example, a simple consultant may cost a client a mere £5,000 or so a week, a project manager £7,000 to £10,000 and a partner or vice-president £15,000 to £20,000 a week.

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