We’re told that Capita’s contract with the Army to provide recruitment services will never make the company a profit. They were chasing revenue, not that profit, so they underbid. This, although few to none will care to note this, means that the taxpayer is doing very well out of the arrangement.
Note what we’re not saying, that Capita is performing well, or that all is ticketty boo. Our point is a much simpler and more basic one. If Capita is being paid less than it costs to provide the service - those costs obviously including the cost of capital - then that’s a transfer from the company to taxpayers. For us taxpayers are getting those services at less than they cost to produce:
Capita will never make money on the troubled £495m contract it signed to recruit soldiers for the British Army, MPs have been told.
The boss of the outsourcing company admitted Capita was “chasing revenue” when it took on the programme in 2012, and which has failed to provide enough soldiers, leaving the Army dangerously under strength.
Again, we’re not saying that it’s a good contract being performed well. We’re only on about that one financial aspect. If the private sector is so competitive that profits are competed away then that’s a benefit to taxpayers, not a problem for us all. For any loss, any price less than covering full economic costs, is a transfer from the capitalist owners of the providers to said taxpayers. That’s a bargain.