Billionaire Tory donor’s firms paid millions by Scottish Government

Recruitment companies controlled by a billionaire Conservative donor and peer have received tens of millions of pounds in taxpayers’ money from scores of public sector bodies across Scotland over the past three years, with the Scottish Government and the besieged NHS two of the biggest spenders, an investigation by Scotland on Sunday can reveal.

The vast tranche of payments, totalling more than £41 million, has gone to a series of subsidiary companies of Impellam, a major international employment agency which counts Lord Ashcroft, the former deputy chairman and treasurer of the Conservative party, as its majority shareholder and ultimate controlling party.

The Scottish Government itself has directly paid Ashcroft’s firms more than £7.39m since April 2019, while more than £14.44m has come from health boards and other NHS bodies across Scotland, with the funds used to hire agency workers, including nurses and midwives, to help plug staffing shortfalls across the crisis-hit health service.

The decision to enlist Ashcroft’s companies to bolster staffing levels at struggling public bodies before and throughout the pandemic has sparked anger among unions at a time when NHS workers in Scotland are on the verge of striking over pay, and the Scottish Government is preparing to cut as many as 30,000 devolved public sector jobs to address a £3.5 billion funding gap.

Alex Cole-Hamilton, leader of the Scottish Liberal Democrats, described the relationship between the Scottish public sector and Ashcroft’s companies as “absolutely vast”, and a consequence of the SNP’s underinvestment in workforce planning.

The Scottish Trade Unions Congress (STUC), said it was “hollow” and “completely hypocritical” of the Scottish ministers to “plead paralysis over public sector pay whilst simultaneously handing over millions of public cash to private firms linked to a Tory peer”, and warned the NHS was not “a playground for venture capitalists to extract eye-watering sums”.

Pat Rafferty, the Scottish secretary of the Unite union, said the sums involved were “jaw dropping”. He added: “Scandal is an overused word but this is one and heads should roll.”

One of the Ashcroft subsidiaries in question, Blue Arrow Limited, said in its latest accounts that it had seen “strong growth” in its Scottish Government work, with “Covid-19 staffing” for the public sector a “key focus” for it last year.

Scotland's crisis-hit NHS service has struck deals worth more than £14m with companies controlled by Lord Ashcroft.

HM Revenue & Customs data shows between December 2020 and May last year, the same firm claimed between £50,000 and £135,000 via the Treasury’s Covid-19 job retention scheme.

The catalogue of transactions encompasses nearly 79 public bodies and institutions across Scotland, from local authorities and the Scottish Fire and Rescue Service through to Disclosure Scotland and the Crown Office and Procurator Fiscal Service.

The Scottish Government said its procurement framework agreements were tendered in accordance with “strict rules” to ensure openness and transparency, and that they helped public sector organisations address “immediate resource needs”.

It did not directly address a series of questions about its commercial deals with Ashcroft’s firms.

Lord Ashcroft is a former deputy chairman and treasurer of the Conservative party. Picture: Oli Scarff/AFP/Getty

‘The Scottish Government would rather line the pockets of the private sector’

An analysis of the spending by Scotland on Sunday, drawing on freedom of information (FoI) requests to the Scottish Government, publicly-available procurement records, and mandatory expenditure disclosures made under the Public Services Reform (Scotland) Act 2010, shows that three Impellam subsidiaries - Blue Arrow, Lorien Resourcing Limited, and Medacs Healthcare PLC - have received at least £41,444,875 from the public purse in Scotland since between April 2019 and June this year.

Around £39m of the payments have been made via Scottish Government procurement framework agreements, which came into place in April 2019. The government’s procurement and property directorate says the agreements provide a “financial benefit” for public bodies, given they provide “beneficial pricing”, with contractors also “committed to the delivery of quality services”.

However, experts on the privatisation of the NHS have cast doubt on such assertions. Allyson Pollock, clinical professor of public health at Newcastle University and the author of ‘NHS PLC: The Privatisation of Our Health Care’, said the use of such companies was “very expensive” and a “lazy way out”. She said Audit Scotland should urgently assess the government’s claims.

Pat Rafferty, Unite's Scottish secretary, said "heads should roll" over the "jaw dropping" payments. Picture: Lisa Ferguson

Indeed, Scotland’s ailing NHS service has proved to be a particularly prolific revenue stream for Impellam’s subsidiaries.

In the 38 months to June 2022, NHS Greater Glasgow and Clyde (NHSGGC) paid Blue Arrow, Lorien, and Medacs at least £4.73m. In the first six months of this year alone, the amount stood at £1.78m. The money directed to Ashcroft’s companies by Scotland’s biggest health board includes at least £300,000 given to Medacs specifically for nursing and midwifery staff.

In the 12 months to 31 March, NHSGGC spent £19.1m on agency staff, the highest of any health board, and a 92.3 per cent year-on-year increase. Despite such spending, the board is still facing significant workforce challenges. Only last month, it emerged that at one point this summer, five wards at the Queen Elizabeth University Hospital in Glasgow were forced to operate with just a single registered nurse on duty.

NHSGGC said that in the last year, it welcomed more than 1,400 new nurses and midwives, and nearly 1,300 healthcare support workers. It said 720 newly qualified nurses and midwives will also be joining by October, with a further 60 registered nurses to be recruited in the coming months.

“NHSGGC is the largest health board in Scotland with around 40,000 staff and the agency costs are proportionate to this,” it added. “Across our services our priority is to ensure there are no gaps in staffing levels due to unplanned leave or vacancies.

“Covid-19 has presented unique staffing challenges which, meaning we had to utilise more agency and bank staff than normal to be able to deliver the services required, during an ongoing period of high demand.”

Other parts of the NHS are also frequent customers of Ashcroft’s firms. NHS National Services Scotland, a non-departmental public body which provides advice and services to the rest of NHS Scotland, has paid Lorien and Blue Arrow at least £5.59m.

Gordon Beattie, director of national procurement at NHS National Services Scotland, said: “NHS Scotland’s health boards are bound by stringent Scottish Public Procurement regulations. Contracts for goods and services require to be tendered and if directors of bidding companies have not been disqualified or convicted of any wrong-doing, health boards are unable to disqualify the bidding company.

“Tendering procedures can be responded to by bidding companies and not necessarily by their parent companies. These regulations apply to our use of Medacs, Blue Arrow and Lorien.

"Our tendering procedures and processes ensure quality assurance is at the forefront of any award of business.”

The training body NHS Education for Scotland has spent £1.34m on the same two companies, while NHS Ayrshire & Arran’s outlay stands at £568,000. NHS 24 has paid them nearly £500,000.

As well as Glasgow, six other health boards - Fife, Grampian, Highland, Lanarkshire, Orkney, and Tayside - have paid a total of £1.13m to Medacs, which describes itself as a “leading international healthcare workforce solutions provider”.

Dr Graeme Eunson, chair of the British Medical Association’s Scottish consultants committee, said the sums involved were galling to those working in a “desperately short staffed” NHS.

“We are being told regularly that the NHS workforce in Scotland is at a record high, so it’s somewhat ironic that such massive amounts of money are being spent on agency staff,” he said.

“Spending millions on agency staff to plug gaps short-term is not beneficial to staff or patients. We need stability and continuity across our healthcare system. We need to retain the doctors we already have and stem the tide of retirements we fear may come over the next year as exhausted staff simply say enough is enough.”

Indeed, NHS Education for Scotland statistics show that 11,838 staff left the NHS in the 12 months to 31 March, up 65.8 per cent on the previous year. The number of nursing and midwifery vacancies increased by 38 per cent to 6,209 whole time equivalent roles.

At the same time, there has been a pronounced spike in the use of temporary staff. NHS Scotland spent £102.4m on agency locums over the same period - a 16.9 per cent rise - and a further £88.9m on agency staff, up 126.2 per cent

Such increasing reliance on external recruitment agencies raises questions about the standard of care as well as the management of public finances. In a report this year, the Royal College of Nursing Scotland (RCN Scotland) warned that there was evidence to show that an overreliance on temporary workers to fill staffing gaps can present clinical risks and a lack of continuity of care for patients.

Colin Poolman, RCN Scotland’s interim director, said: “The workforce shortages across Scotland’s health and social care services are at critical levels, impacting on patient safety and the wellbeing of staff. Nursing staff are exhausted, sickness absence rates are high and many are considering leaving their jobs.

““It is no surprise that health boards are having to resort to expensive agency nurses to fill the gaps but the level of spend is simply not sustainable. Our members find it shocking that the Scottish Government would rather line the pockets of the private sector than ensure nursing staff are paid a fair wage and that nursing staff are having to work additional hours in agency roles to make ends meet.

He added: “Some investment in agency nursing will always be needed to cover unexpected events and ensure safe patient care but it is not the solution to the current workforce crisis. The lack of a permanent workforce is having a significant impact on patient care and staff morale.”

‘The government should be reviewing these relationships’

The payments will prove politically embarrassing for the SNP, given Ashcroft is one of the most influential figures in Conservative circles. The extent of the contracts have also attracted controversy given the repeated questions Ashcroft has faced over the years about his own financial affairs.

For years, he was domiciled in the Central American country of Belize while he was a member of the Lords, an arrangement which meant he could legally avoid paying UK tax on his overseas income.

The leak of the Paradise Papers in 2017 suggested that he ignored roles around the management of his offshore investments, and gave assets worth hundreds of millions of pounds to the Bermuda-based Punta Gorda Trust in 2000, the year he was created a life peer.

Despite his resignation from the Lords in 2015, the 76 year-old retained his peerage. It is understood he is now based back in Belize, which was on a EU tax haven blacklist until as recently as 2019. The Times reported in April that it is understood he has returned to his non-dom status.

Mr Cole-Hamilton said: “With increasing strain on the services that so many of us rely on ahead, the Scottish Government should be reviewing these relationships to assess whether they have been in the best interests of the people of Scotland, especially when it is unclear whether the ultimate beneficiary is a resident of a foreign tax haven."

Ashcroft remains a key powerbroker in British politics, not least thanks to his polling firm, political books, and the influential right-leaning website, ConservativeHome.

He has also given several million pounds to the Conservatives in recent decades. Over the last five years, the total stands at £786,104, Electoral Commission filings show, with the latest donation to the party, worth £50,000, made as recently as February.

Impellam, the parent company of the three firms which have received payments from Scottish public bodies, is registered in Luton, Bedfordshire. Last year, it posted revenues of more than £2.2 billion, with profits of £8.3m.

As of February, Ashcroft was listed as Impellam’s ultimate controlling party, holding 2,273,755 shares in the firm - just over five per cent of its total share capital, with nearly 57 per cent of the firm’s shareholding with the Lombard Trust, an entity which counts Ashcroft’s children as its beneficiaries.

However, in a letter to shareholders in April, Julia Robertson, Impellam’s CEO, stated that Ashcroft was the company’s “majority shareholder,” with a shareholding of approximately 62 per cent.

Impellam’s most recent accounts state that Ashcroft has influence over more than 50 per cent, but less than 75 per cent, of both its shares and voting rights. He also serves as the group’s chairman and sits on its board of directors. The latest Sunday Times rich list put the fortune of the 76 year-old and his family at £1.266bn, up £9m on the previous year.

‘More than a decade of SNP rule has been an unquestionable success for the former Tory treasurer’

Impellam’s accounts make clear that the pandemic has been good for its bottom line. They state that it enjoyed “high levels of Covid-19 related business, revenue, and adjusted operating profits” in the UK last year, helped largely by a demand for healthcare staff.

The accounts add that “with demand for healthcare professionals outstripping supply in the UK our international placements division recruited over 1,100 overseas nurses in 2021 and have a pipeline in place to deliver more in 2022”.

The firm describes nursing as a growth area, noting that it “continues to suffer a substantial shortfall in candidates,” with over 100,000 vacancies across what it describes as the “healthcare market”.

In its latest accounts, Medacs’ directors expressed confidence that the shortage of healthcare professionals across the UK, “particularly the huge number of nursing vacancies”, will “continue to drive demand”.

Medacs reported revenues last year of £160.9m, up more than 74 per cent on 2020, with profits of £1.46m - a 137 per cent year on year increase. As of last week, it was advertising 32 healthcare vacancies across Scotland on its website, over a third of which were for nursing staff.

The ability of such firms to profit from the ills of the public sector has raised the ire of unions whose NHS staff members are already on the brink of strike action.

Tracey Dalling, Unison’s Scottish secretary described the payments as a “public rip off”.

“If this money was used to provide better public services and fund improved pay awards to public service workers, at least the money in workers’ pockets would support local businesses and jobs in their local communities,” she said.

“Instead, millions leak out of the Scottish economy to fund the lifestyles of billionaire tax exiles, and no doubt a proportion will end up supporting the Tory party.”

Last year, Medacs was at the centre of a political controversy after it emerged the firm had been awarded a £350m contract by the UK government to provide laboratory staff for the Covid-19 testing operation.

That deal was condemned at the time by George Adam, the SNP MSP who is now a junior minister, as an example of “Tory cronyism”, with “millions of taxpayer's money being handed out to chums and donors of the Tory party”. The irony is not lost on those with questions about the Scottish Government’s dealings with Ashcroft.

Mr Cole-Hamilton said: “We saw during the pandemic that Conservative donors benefited from reams of public contracts from the UK government. Now it emerges that the Scottish Government is proving just as lucrative for them. There is barely a corner of the public sector into which these firms haven't inserted themselves.

"More than a decade of SNP rule has been bad news for Scottish public services but it has been an unquestionable success for the former Tory treasurer.”

Its government work is not the only controversy to have surrounded Medacs. In 2019, a domiciliary care agency it ran in London was rated inadequate and placed into special measures by the Care Quality Commission. The inspectorate ruled that “the care people received was not safe,” and identified instances where medicines records showed a potential overdose.

Scotland on Sunday understands that the overall NHS spending on Ashcroft’s firms is even higher than records indicate, and is set to climb further.

In its response to Scotland on Sunday’s FoI request, the Scottish Government did not detail any spending by NHS Lothian. However, another FoI disclosure released by that health board states that it paid Medacs £3.33m between 2018/19 and 2020/21, with the agency’s staff working at least 58,954 hours across various departments.

Only last month, meanwhile, Medacs was confirmed in procurement records as one of 19 successful bidders for a £3.3m NHS National Services Scotland contract to supply temporary agency allied health professionals and other clinical professions. The firm is not a supplier under the wider Scottish Government procurement frameworks.

Prof Pollock said there was a clear need for closer scrutiny of the frameworks and suppliers who are being paid such large sums.

“Using these companies is a very expensive and lazy way out,” she told Scotland on Sunday. “I would really like to see what the government means by the ‘financial benefit’ of these frameworks. How are they deconstructing that? What’s the value for money, and why aren’t we doing it in-house ourselves?”

She said Audit Scotland should be “urgently investigating” the claims made by the government about the financial upsides of the procurement frameworks, and called on the government to insist that the agencies it uses are open to scrutiny and open book accounting.

“For the staff they say that they are employing, let’s see what the government’s giving them in the contract, and how much is being spent on salaries, and how much on administration and profit. We have no way of telling at the moment.”

She stressed: “It’s puzzling why the Scottish Government hasn’t set up its own bank staffing agency for the NHS. They need to increase workforce capacity in the short-term, as well as recruitment from universities and colleges. There’s a need for more innovative solutions that needn’t cost much.”

Prof Pollock suggested the government could look at bolstering staffing at hospital and long-stay social care facilities with paid placements for students applying to medical and nursing schools in the short-term, as well as setting up a centralised bank of staff.

“If nine months of experience in hospital and long term care settings were a criteria for admission to medical and nursing schools it would change the whole ethos and culture of medicine and nursing ” she explained. “If you’re constantly filling vacancies with agency staff, the profits are not passed on to the staff in remuneration.”

She added: “You have to have a government agency that is thinking about a workforce strategy for the short, medium and long-term.”

‘People should be outraged that billionaires are being rewarded from our pockets’

The NHS in Scotland is not the only public sector customer to have spent at least a seven figure sum on Ashcroft’s specialist recruitment companies.

The Scottish Courts and Tribunals Service has paid Lorien £2.74m since April 2019, with the money being used to bolster the independent body’s IT systems and security. Annual procurement reports show that it has used Lorien to hire several cyber security specialists, as well as web developers and infrastructure engineers.

Disclosure Scotland, an executive agency of the Scottish Government has spent £1.84m on Lorien’s services, while the National Records of Scotland, a non-ministerial government department, has given the same firm £1.56m for IT staff.

Registers of Scotland, a non-ministerial office, has directed at least 20 payments to Lorien worth a total of £1.39m for staff to work on its registers and IT development. It has also paid Blue Arrow £7,234.

Other public bodies to give sizable sums to Lorien include Scottish Fire and Rescue (£1.37m), the Scottish Road Works Commissioner (£1.34m), and the Crown Office & Procurator Fiscal Service (£1.1m).

In all, 79 bodies have used the Scottish Government’s temporary and interim staff services framework agreements in order to enlist the services of Ashcroft’s firms. The structure allows suppliers to win call-off contracts, whether via direct awards or a “mini-competition” among the framework suppliers.

Other Ashcroft customers include 14 local authorities (Aberdeen, Aberdeenshire, Clackmannanshire, East Dunbartonshire, East Lothian, East Renfrewshire, Fife, Glasgow, Highland, Midlothian, Renfrewshire, Stirling, West Dunbartonshire, and West Lothian) who have paid Blue Arrow and Lorien nearly £1.7m.

The payees also include nine universities (Aberdeen, Dundee, Edinburgh, Glasgow, Glasgow Caledonian, Napier, Queen Margaret, Strathclyde, and the West of Scotland) and seven colleges (Borders, City of Glasgow, Newbattle Abbey, Shetland, the SRUC, West College, and West Highland).

Daniel Johnson, Scottish Labour’s finance spokesman, said: “The SNP insist there isn’t a penny to spare to help people struggling with the cost of living crisis, but their mismanagement is costing taxpayers millions.

“We need real workforce planning so every penny of public money can go where it is needed, instead of being handed off to big corporations.”

Mr Rafferty, whose union’s representative committee involving local government workers rejected the latest COSLA pay offer last week, said the scale of the payments to Ashcoft’s firms “just beggars belief.”

He hit out: “Tens of millions of pounds from the public purse are being awarded to firms with the active approval of the Scottish Government when derisory pay offers are being made to NHS and council workers.

“Workers are literally taking to the streets because they have no other option but to strike to get the pay rises they deserve. People should be outraged that billionaires are being rewarded from our pockets.”

Ms Foyer described the spending records obtained by Scotland on Sunday as a “damning revelation that shows the inexcusable embedment of private profit within our public sector.”

She added: “Handing sacks of cash over to private corporations to plug an NHS staffing crisis - a crisis that continues to exist - whilst workers survive on the breadline is an intolerable disclosure of government priorities. The Scottish Government needs to come clean on this.”

‘The lack of transparency is an issue’

The Scottish Government’s total spending on agency staff for its own departments has nearly doubled in recent years. In 2017/18, the figure stood at £13.3m; by 2020/21, it had reached £28.3m.

Only a decade ago, the government counted just 646 so-called ‘contingency workers’ - which includes consultants, contractors, and agency staff - in its workforce. As of March this year, the figure stood at 2,036, the highest on record.

According to one senior source in a government executive agency, who did not wish to be named, the influence of Ashcroft’s companies in the Scottish public sector was “made abundantly clear” when Carol Shepherd, head of Scotland for Medacs, was invited to take part in a meeting of Holyrood’s Public Audit and Post-Legislative Scrutiny Committee during the last parliamentary term. She was the only member of a private company in attendance.

“It shouldn’t necessarily surprise people that private companies help governments do business, but the amount of that work, and the lack of transparency around it, are issues that should be brought into the public domain,” the source said.

The majority of the overall spending by all the public bodies across Scotland has gone to Lorien, which received nearly £29m. The most recent annual accounts for the company, billed as a digital, transformation and technology recruitment specialist, show that it made a profit of £4.7m last year on turnover of more than £375m.

The firm, which has said it can provide “in-demand skills which support key Scottish public sector priorities,” is one of just four suppliers on the Scottish Government’s interim IT staff services framework; a further 17 companies had applied to be part of the framework, but were rejected.

In a blog posted on Lorien’s website last year, David Gettins, the firm’s managing director, said the pandemic had brought about positive changes for how workforces operate.

“There’s a joke going around that says that the best change manager in the UK right now is Covid-19,” he wrote in the post, entitled ‘Looking on the bright side of life’. “It’s a bit tongue-in-cheek, but I think there’s some truth to it.”

Blue Arrow, the other major recipient of public funds, is a supplier on two Scottish Government temporary staff services frameworks. It describes itself as “one of the UK’s largest and earliest specialist staffing companies.” The firm registered turnover of £275m last year, with profits of £3.8m.

A strategic report accompanying the recruitment agency’s accounts notes that “Covid-19 staffing for our public sector clients was a key focus” in 2021, with “strong growth across our Scottish Government and Crown Commercial Services frameworks for supporting 84 government and NHS organisations across England, Scotland and Wales.”

Neither Lord Ashcroft nor the Impellam Group responded to a series of questions from Scotland on Sunday.

A spokesman for the Scottish Government said: “The government’s procurement framework agreements are tendered in accordance with strict rules to ensure openness, transparency and fair and equal treatment of suppliers.

“The temporary and interim staff services framework agreements ensure that public sector organisations can recruit temporary and interim staff to address immediate resource needs during crisis responses, busy periods, one off projects or where permanent recruitment exercises are underway.

“This is an efficient way to ensure sustainable procurement in line with best practice.”