State papers: IRA planned to use Thatcher privatisation policy to fund activities
Paramilitary-linked racketeers seeking lucrative public contracts during the Troubles employed benefit fraudsters to reduce wages and help reduce their costs – maximising their chances of winning competitive tenders often awarded to the cheapest bidder, the records show.
The swindle aimed to enable people linked to the Provisionals or loyalism to undercut other bidders.
Deals for low-skilled services such as contract cleaning in areas dominated by armed groups were amongst the most vulnerable to infiltration by organised crime, NIO officials said.
The details were revealed in the 1990 files made public at the Public Records Office Northern Ireland (Proni).
Dozens of services were delegated to the private sector as part of then prime minister Mrs Thatcher's privatisation drive.
A NIO official wrote: "They might employ people engaging in social security fraud in order to minimise wages and maximise their chances of winning the contract and increasing their profits."
Privatisation was a defining policy of the Thatcher administration and the civil service was considering its roll-out in Northern Ireland in 1990.
Ministers wished to introduce in Northern Ireland the same disciplines as those being applied in Britain and with the same objectives around achieving value for money. Part of that involved putting out public services to competitive tender.
Refuse collection, contract cleaning and street-sweeping were seen as vulnerable to racketeering, particularly in areas where paramilitaries dominated. Concern was also raised about the distribution of the proceeds of the proposed national lottery.
According to the documents, the health authorities believed claiming for benefits while working was "rife" in contract cleaning but they had seen no sign of paramilitary involvement.
A civil servant noted: "It seems at odds with intelligence available to me which states that paramilitary groups in general – and PIRA in particular – encourage working and claiming amongst their members and that one paramilitary group is already poised to take advantage of a forthcoming competitive tendering initiative."
Officials also feared organised criminals might:
:: Intimidate the competition in order to win contracts, either when the first contract was let or more likely at its renewal, with the aim of enjoying the profits of the contract.
:: Win contracts to establish a company through which money obtained from illegal activities could be laundered.
:: Extort cash or favours from companies from whom government services were contracted out. A private company was more liable to extortion than a service remaining in the public sector.
A senior civil servant noted: "The decision that has to be taken in high-risk areas is quite straightforward: should market testing in relation to a particular service proceed even where there is the prospect of a saving to public funds, when it is known that the likelihood of abuse and paramilitary benefit is very strong?
"Such decisions are properly ones for ministers but I am anxious that they should not be under any illusions about the risks involved and the absence of effective safeguards against them."