How trickle down works and why it matters....

AT last I understand trickle down economics. It has taken a while but recent events have finally given me an accurate picture of how it happens and thus of course why it doesn't help us, the taxpayer.

So it goes like this:

In a crisis Government has to act fast and so they completely ditch the checks and balances built into their procurement process to speed up acquisition of critical kit. But this also means their complex and diligent tendering process is also abandoned.

Now things really speed up. Government ministers spread the word about what they need, how urgently and how easy it will be to win the contracts. Immediately they are inundated with offers of help.

Let us take one easy example. When Covid 19 hit there was a huge need for vast quantities of protective equipment to ensure that front line staff in hospitals and care homes did not go down with the disease. Of course in this day and age there are no 'stocks' of this stuff. 'Just in time' means that everything is made as it is wanted and this saves squillions on storage.

Immediate offers of help came in to Government. One such from a non-existent company with no experience of making this PPE stuff was passed through and placed on what they called the VIP track. This meant it would be waved through without any regulatory or due diligence delays. It was said to be worth £200million and was rapidly agreed. Somehow (not sure how actually) the stuff was produced and offered to Government. Now fortunately one check was still in place – quality control and the kit failed and had to be junked.

So, you ask, what about the trickle down effect? Well it went like this – the person who introduced this to Government got a 10% finders fee – round about £20million in this case. Of course they probably couldn't keep all of it since they owed thanks to other people who waved it through. At the same time a business associate also copped for about the same amount, £20m.

So there you have it – the contract was for £200m and the kit was provided. Sadly of course it went straight into storage we believe as it was useless. And about 20% of the contract trickled down into the pockets of the people who made it all possible.

Of course this example does beg a few questions. 

• Why was the contract fulfilled since the kit was useless? 
• Why did the various fees amount to such a large part of the costs? 
• How did a company that did not exist produce the kit? 
• Was it actually made or simply bought from foreign storage? 
• And finally, when will we, the taxpayer get our money back?

Of course you may mistakenly see this as having some connection with recent events and this is absolutely not the case. It is entirely hypothetical.

However what it demonstrates are the huge benefits to be found for some people in the trickle down process. 

Now, turning to the issue of production since clearly the PP kit was produced by someone, we must assume they were paid and the materials used and the factory in which it was made were all paid for.

According to this example some £160 million was available for these purposes so someone somewhere must have made a huge profit from their hourly pay producing the stuff. 

Even though of course it was useless and is now lying in containers costing us even more. 

But then that too is a form of trickle down – after all someone is getting paid to look after it.. I wonder who and how they got the contract for that?