The multinational company that ran the Covid free school meals voucher scheme faces fresh scrutiny after posting “eye-watering” profits this year.
Edenred won contracts totalling £384 million to run the government’s free school meal replacement voucher scheme when Covid forced partial school closures.
The scheme was heavily criticised over initial distribution delays, Edenred’s appointment without an open tender and value-for-money concerns.
New accounts filed by the French company’s UK subsidiary show a 28.7 per cent year-on-year jump in overall profits to £13.9 million in 2020, in contrast to many companies’ struggles during Covid.
Total revenues more than doubled to £23.2 million in 2020. The accounts said running the voucher scheme and other contracts “enabled a sustained business performance” in 2020. Its highest paid director earned £444,000, up from £371,000 in 2019.
Government had ‘open book arrangement’
The government had an “open book arrangement”, giving it access to Edenred’s income and costs relating to the scheme. But the NAO found the DfE chose not to use it, admitting it “did not know details of the potential profit or loss Edenred may have made”.
Sarah Olney, a Lib Dem MP, said the public accounts committee (PAC) that she served on had previously found the DfE “failed to ensure the contract terms provided the taxpayer value for money”.
She said it added “insult to injury” for struggling families who had been left waiting for vouchers. “To hear Edenred has enjoyed eye-watering profits, despite these clear shortcomings, is appalling.”
The accounts do not reveal the voucher scheme’s impact on margins and the DfE has cited commercial confidentiality when refusing to share profit details with MPs. But officials told the PAC that profits were “reasonable” and the scheme cost 1 per cent less than the vouchers’ total value.
Edenred declined to comment, but in the past has refuted claims of “profiteering”.
Ministers face demands for transparency
The government now faces demands for transparency over profits made from its contracts, as figures also show rising margins at Computacenter, the school laptop supplier.
The company, awarded £198 million worth of contracts to deliver devices during lockdown, had its fastest profit growth in two decades last year.
Shareholders are set for another hike in payouts this month, with a planned interim dividend of 16.9p a share – up 37.4 per cent year-on-year.
It followed surging revenues in the first half of 2021 and a 59.1 per cent jump in pretax profits to £115.2 million.
The DfE’s laptop programme also came under fire over distribution delays, the lack of competition when Computacenter was given its first deal and founder Philip Hulme’s donations to the Conservative party.
A source close to the company said later agreements followed competitive bids.
Government needs ‘conversation with taxpayers’
Pat Thomson, an education professor at the University of Nottingham, said the government should not only reveal companies’ margins when striking deals, but also have a “conversation with taxpayers” over acceptable profits.
More evidence was needed to prove outsourcing was more efficient. “As taxpayers, we don’t expect this to be a siphoning away of our money, a sort of corporate welfare by stealth.”
A NAO investigation found inadequate transparency over government Covid contract decisions, but acknowledged officials had to act urgently. The Cabinet Office highlighted “rigorous” government processes at the time.
Stephen Morales, the chief executive of the Institute of School Business Leadership, said commercial organisations needed incentives and sufficient margins to sustain their work.
But he said schools and the government alike needed to appeal to tech, building and other firms’ “moral compass” and insist on transparency to avoid being exploited when striking deals.