Select Committee on Public Administration Minutes of Evidence


Examination of Witnesses (Questions 420 - 439)

THURSDAY 17 JANUARY 2008

MR STUART ETHERINGTON, DR PETER KYLE AND MS DEBRA ALLCOCK-TYLER

  Q420  Chairman: Could I stay with you for a second because I would like you to say a little bit more about what you say at the beginning of your memorandum to us. You take us back to the heart of the question. You say, "There is a real danger that the current debates about public services are not addressing the real issue: namely why it is that government wants the sector to take on public service delivery and, equally important, why it is that many third sector organisations do want to take on public service contracts. Simply transferring existing services out of the public sector to another provider will not achieve transformation in itself."[10] I want to be clear that I know what you think the real issue is.

  Mr Etherington: If you are just saying, "This is a service we no longer think should be in the public sector, it should be somewhere else, and we want to create contestability" I do not think that, in and of itself, transforms the nature of the service. I will give you an example of why I think voluntary organisations are slightly different in this. This is an example from a community programme at work in Bristol. It is an old settlement really, which goes back a long way but which still has modernised. Here you have a situation where a person came to place their children in a nursery, which was part of the service. That person ended up volunteering within the nursery—so they became part of the production process, if you like—they ended up running the nursery and they now run the settlement. I think that is a different type of experience for people in terms of services. They are engaged or should be engaged in a way where they are, if you like, part of the service. They are developing the service; they are more actively engaged than they would be as a passive recipient. It is a view of citizenship, if you like. That applies both to the role of voluntary organisations in the delivery of services and to the role of citizen engagement in commissioning. The issue is not just about who delivers and on what terms do they deliver, but also a question of who influences the commissioning process. Who is helping design the service? There I think voluntary organisations have a role, as representatives of citizens, in helping public authorities to design the service in a particular way. By "transformation", Chairman, I mean that it changes the nature of the citizen's experience of the service. One of the ways in which we will maintain support for public services in the United Kingdom—which I think part of the reform agenda is about: maintaining public support for public services—is to change the nature of the citizen's engagement. One of the arguments is that that is about choice: that it is a more market-oriented model, that you can choose between this service and that service. I do not think there is a great deal of choice in public services, so I think that is a bit of a piece of mythology. The other argument is that you have voice: that you can engage and change the nature of the services of which you are part and, indeed, for which you are often paying. By "transformation" we mean the latter. How do citizens become involved in changing the nature of the service that is being provided and in engaging with the service in a completely different way?

  Q421  Chairman: The state cannot do this by itself.

  Mr Etherington: I think the state finds it much more difficult to do that because it has not historically sought to engage citizens in quite that way. I do not think, inherently, there is any reason that they could not attempt to do that, and many of the models that are now used in the public sector actually started life in the voluntary sector. It is quite a common method—certainly in the post-war settlement—that voluntary organisations were often acting to create innovative services that were then being translated. Often they provide services first. If you take the hospice movement, the voluntary sector was the first in the game. If you take the initial responses to AIDS and HIV, it was the voluntary sector that responded very quickly to that—often, now, taken up by the public sector. I think the public sector can do it, therefore, but the voluntary sector is pretty good at transforming the experience of individuals and taking a more holistic view.

  Chairman: Let me bring colleagues in and we can explore this with others of you.

  Q422  Kelvin Hopkins: I come to this from a very sceptical position. Reading some of the literature, I must say I was astonished by some of what had been said. The voluntary sector provides for niche areas and new areas. You have mentioned HIV, and there is a whole range of things: looking after homeless alcoholics as a first point of call, often religiously motivated, often self-interested groups, whatever. That is wonderful, but the idea that the voluntary sector could take over major public services—which seems to be the driving thought in the ACEVO paper—I find astonishing. There is a question here. In the ACEVO paper we were given a list of areas where it believed the third sector could have an immediate impact on improving public services. The list includes children services, health and social care, education. Do you think citizens would be happier having a voluntary or third sector organisation provide services than having an accountable public authority, where they know they have rights because they pay their taxes and get a direct public service? Do you seriously think that people would be happier having these serious services contracted out to voluntary organisations?

  Dr Kyle: You said "these serious services". Are you suggesting that some charitable and voluntary third sector organisations are not serious? What Stuart said is very relevant. One of our members, in particular, has been delivering public services since 1273. We have been doing this since before the state has been doing it. The question is not which sector is best to deliver it but which sector is better for the service. We are not saying that one small charity should be responsible for delivering the entire services throughout the entire NHS to the entire country. Commissioning is done on different levels. You have a Pathways commission, which is an enormous commission—ACEVO commissioned the report from Mavis McDonald which came up with some big recommendations—but many services are commissioned at the local level and they are to do with very small services which deliver to the homeless, to different areas of social care, different areas of education and so forth.[11] Why can't a charity that has been doing that for years and years and years, sometimes tens of decades, sometimes hundreds of years, enter that process? They have nothing to fear from entering their services, which they are convinced through to their fingertips are the best—and the third sector is very good at saying that what they do is the best—into open competition for getting public money to continue what they are doing.


  Q423  Kelvin Hopkins: Lord Adebowale made the very strong point when he came to see us that most public services started as voluntary organisations, often motivated by churches, run by churches or whatever, but they became so essential to a civilised society that they had to be taken over by the state. What you are suggesting is moving backwards in time.

  Dr Kyle: No.

  Q424  Kelvin Hopkins: Moving away from essential state provision, where you will not have the same kind of accountability—because one is in a market, one could also see a private-sector organisation could go under. He also made the point, that really what the Government is concerned to promote is the private sector rather than the third sector; that most of the effort is really driving to get public services in to the private sector rather than the third sector. This is something of a blind to cover that drive in government. In our discussions we have talked about the voluntary sector making niche provision for the kinds of areas we have talked about, where public services do not have coverage, but there is still a need—there is witness protection for example, a whole range of areas which are very valuable. I am a strong supporter of all these organisations myself—but, rather than filling in these niche gaps, taking over from major public services in these kinds of areas—do we really want our children cared for without some kind of genuine democratic accountability through government?

  Dr Kyle: I have had a lot of conversations with Victor over the years on these issues and I recognise some of what you have said in what you started off by saying. But, where you have ended up, I would be very surprised if Victor would go there. It comes down to commissioning. We are not talking about the state. You might be, but we are certainly not saying that the state is disenfranchising, that it is giving away its need to deliver these services and take care of them. We are talking about good commissioning here. Good commissioning does not just let go of services; good commissioning accounts for all different areas of outcomes, all different types of outcomes, and it is repeated. Good commissioning is for a period of time. Commissioners engage with the service. Commissions are owned by the state; they are state organisations. Commissioners are state people; they are there to make sure that public money is spent in the best interests of the service users. The commissioners therefore have to decide who is in the best position. Sometimes it will be a statutory service—and often it will be. Sometimes it will be a private organisation. Sometimes it will be a third sector organisation. Why not judge each organisation on the outcomes it can deliver for the service user? That is what the service user wants. That is what they need. Why you escalate that argument into handing entire swathes of public life over to a different sector, I do not know, because in one area you could end up with the same services being commissioned by different organisations from different sectors.

  Q425  Kelvin Hopkins: I used a phrase the other day in the Commons about a Maoist revolution and letting a thousand flowers bloom driving out services into a more chaotic arrangement, rather than direct, rational, accountable, transparent public services.

  Dr Kyle: Good commissioning is very accountable. In terms of commissioning, which I know is the broad area of your investigation, we want not just a drive to the bottom in terms of the economics of commissioning. We do not want commissioning just to be done on economic grounds. We think the third sector's value-add is in social aspects of commissioning or social aspects of its relationship with service users and the fact that they can offer much more holistic services across the board. Mavis McDonald's inquiry did say that social clauses should become much more a part of the way the commissioning process works, so that it is not just an economic process but it is a social process as well.[12] There is a lot of work to be done on getting commissioning right to make good value and good use of the third sector.


  Q426  Kelvin Hopkins: The state sector supports people's rights. It has duties to care for people and these are decided by government and by law. Any move away from that and there is an element of choice, if you like. An organisation which is perhaps under financial pressure might choose not to take on particularly difficult cases because it does not have a duty to do that—it has a budget and it is worried about that. The state has to deal with everybody, because that is the way we have decided to run our society. It was said today that even Emmaus and one or two of these wonderful organisations do sometimes decide not to take people. They are voluntary organisations, so they have choice about who they care for and look after. The state does not have that choice. The state has to look after everybody because that is what its role is. I may say I find this wholly unconvincing and the paper here looks to me like an ideologically driven paper coming from Downing Street in the ancien régime of Tony Blair and not something that is going to be very useful in future.

  Dr Kyle: In response to that very constructive comment—I take it you looked at my CV, then?—I think your thinking is very mixed. I have listened to you and your colleague this morning. You cannot, on the one hand, say that this process is nationalisation by default and, on the other hand, say that there is no accountability and that the state is abrogating its responsibilities to service users. How do you tailor that? I think you are guilty of some mixed thinking in this regard. In regard to my thinking in this regard, I think you should look much further back in my CV than my previous job, and you should see my previous experience within the third sector as part of delivery organisations.

  Q427  Kelvin Hopkins: Are you asking me a question?

  Dr Kyle: I made the point.

  Kelvin Hopkins: The final point I would make is that I did make a very clear distinction between voluntary organisations filling in niche areas which are not covered by the state, and the duties of the state to provide for the vital rights of the citizen. I think there is a serious distinction there.

  Chairman: And we are entitled to have mixed thinking, anyway!

  Q428  Mr Prentice: That was very controversial. We heard earlier that there has been a shift in the balance between the contracts and grants: contracts going up and grants going down. Is that a good thing or a bad thing? Should we feel concerned about that?

  Ms Allcock-Tyler: It is a very bad thing because the nature of contracting changes the nature of your relationship as an organisation with your client. It distorts who the client is and who it is you are existing to serve. There is a lot of evidence that says that organisations which start to engage in contracting relationships begin to satisfy the terms of the contract rather than satisfy the needs of the user. In fact, it has been really quite horribly evident, when we have been looking at all the oral evidence and some of the submissions that this Committee has had, how very rarely the need of the end user is mentioned at all, of the individual. To give one example, which is a true story, there is a small counselling service up in the North-East—which I cannot name, and you will discover why in a moment—which has been delivering counselling services, under contract from the local authority, to young adults who for one reason or another have suffered severe traumas. The local authority decided, in the interests of fair and open tendering and all the rest of it, that they would take this particular idea of counselling of traumatised young adults and re-tender to deliver it. One of the people served by this is a woman called Manju. Manju, when she was 13, was raped by her uncle and younger brother, and as a result of that got pregnant. Her family booted her out and she ended up in various psychiatric wards and foster homes and several times tried to commit suicide. She ended up at this particular counselling charity, and had not attempted suicide for about five years as a result of that. As a result of this contract tendering process that was introduced by the local authority, the particular charity serving Manju did not win it—because the argument became about it not being fair for other charities not to be able to compete for this service. The net effect of that is that Eve had to go to Manju and say, "I am really sorry, Manju, I can no longer help you" even though the nature of hugely vulnerable people is that they engage in those very special relationships with people. The problem with contracting is that that is exactly what happens: it becomes about us competing with each other. It becomes about: "Should Turning Point get the contract or should it be the local organisation?" rather than the whole blooming point being that there is a person at the end of that whose needs are much, much more than the needs of government to tick boxes or organisations to compete for funds.

  Mr Etherington: It would be worth reflecting on the numbers of the shift between grants and contracts, so that we know the evidence base. I have the numbers here from the data we produce every year. The latest data is 2005-06, although we are producing new data next month, and we will send the Committee a copy of the Almanac which is pretty much the definitive study of economics of the sector. Grants have not fallen in cash terms over the last 10 years. That is just not true. The proportion has changed. Public sector funding has expanded quite rapidly in the sector, from around £4 billion to around £10 billion in a 10-year period. It now constitutes about 38% of general charities' income. Of that just over £10.5 billion, in 1995 contracts were just over £2 billion and grants were about £2 billion; by 2005 grants had increased and in fact had doubled to £4 billion—therefore, there is twice as much money around in terms of grant—but contracts had grown at a much faster rate, from just over £2 billion to £6.5 billion. The rate of growth of contracts is greater and their proportion has changed, although the total amount of cash available in grants has also increased. To come back to your question "Is it a good thing that that shift has taken place?" I come back to a more pragmatic view. People competed for grants as they compete for contracts. Grants were not given by some sort of magical wave of the wand: everybody can have a grant. Voluntary organisations competed for grants—as a different sort of competition, I will grant people that, and it was probably less specific. That is the key point. It is horses for courses. I come back to the original point that I made. In some cases, where you can specify exactly the type of service that you are purchasing, exactly the type of outcomes that you want to achieve and the technology is well-known, it seems to me to be perfectly legitimate if you place on the table that specification and you allow organisations to bid against that. In a lot of cases, it is not easy to specify the outcomes that you want. Voluntary organisations, historically, work with the wicked issues—the very difficult areas of public policy with which the public sector finds it difficult to engage and which the private sector does not want to touch, it seems to me. Because we deal with those issues: difficult areas of drug abuse, alcohol abuse, homelessness—some very difficult, thorny social and public policy problems—there it is more difficult to specify. There it seems to me to be a good use of public money to say, "We cannot be specific about what we want to achieve. We think you probably know better than us about the sorts of interventions that work and, therefore, we are going to make a grant available to you. We might want to measure the outcomes that you achieve later, but we are not going to specify in detailed terms contractually what we want you to achieve because we cannot." I suppose my argument about grants and contracts is that it needs a higher level of sophistication: firstly, to recognise that whilst the balance has changed the totality of both have increased, and, secondly, to recognise that in some cases grants are appropriate where you cannot specify the outcomes that you want and in other circumstances contracts are more appropriate. I think, again, it is a question of balance. What are you trying to achieve and what is the best way of achieving it?

  Q429  Mr Prentice: Before Peter comes in, you said the private sector would not want to touch them but, earlier, you said the trend is subcontracting through voluntary organisations by private-sector intermediaries. I jotted that down. How significant is the private sector when you just told us they do not want to touch these?

  Mr Etherington: They do not necessarily engage with the most excluded groups. I will give you, again, an example. Every so often they let me leave my office and go to visit the members who do the work on the ground. I normally do it in the summer. I went to an organisation this summer that is providing employment rehabilitation for very vulnerable groups in an area north of Newcastle—an old mining village, not a lot of work. The DWP had let a regional contract to provide employment rehabilitation services, Jobcentre Plus, et cetera, et cetera, and they had let it to the private sector. I think there were seven bidders for the regional contract and six of them were private-sector bidders. The voluntary sector is not very good at bidding at scale, but the private sector subcontracted a voluntary organisation in that large village or small town to provide a service for the most disadvantaged. Interestingly, when I asked the voluntary organisation what was their experience of sub-contracting from a private-sector contractor to the DWP, I expected a sort of torrent of abuse but I was quite surprised: they said, "Oh, no, it's much better than contracting with the DWP." I asked them why and they said, "There are two principal reasons: they do understand that if you are working with the most disadvantaged groups the price should be slightly higher; and they have grasped, unlike the public sector, the notion of cash-flow.

  Q430  Mr Prentice: The private-sector intermediary is getting a better deal. That is what they are telling you.

  Mr Etherington: No, in this case the voluntary sector organisation's experience of subcontracting to a private-sector provider was better than its experience of contracting directly with the DWP.

  Q431  Mr Prentice: Yes, but the private sector is getting a better deal from the DWP.

  Mr Etherington: Yes. I do not know what their contractual arrangements were but certainly the voluntary organisation was getting a better price to deal with vulnerable people and it was getting cash on time. You will often find complaints with public sector purchasers, that, because the cash comes in the public sector, they do not understand that organisations can go out of business if they do not get the cash on time. That is an often-heard complaint from voluntary organisations.

  Q432  Mr Prentice: Sorry, Peter, my question about grants and contracts.

  Dr Kyle: I think Stuart made this point very, very well. The figures that NCVO produce on this are really, really useful and very much valued by the sector. As Stuart said, grant money has not decreased in the last decade. The change has been where the increase has been. I think Stuart covered it very well really. All I would like to say is that, whereas Debra makes the case very well for the empowering effects of having a grant and what it can do with that money, there are equally organisations who have been tremendously empowered by engaging with the procurement process and being able to expand and stand on their own two feet. The example I would use is not as emotive but it is quite useful. Jeremy Swain is chief executive of Thames Reach. He gives the story very eloquently about how, when he took over control of Thames Reach, they were dealing with 100 homeless people from a grant. They started engaging in the procurement process, they won, and he talks about the incredible effect it had on his staff. He said it really put a rocket through his staff. The front-line workers suddenly started saying, "We're giving you the best service," because they knew they had competed with four or five other organisations and won.

  Q433  Mr Prentice: Great stuff.

  Dr Kyle: Then they went to other places, won other grants, and they are now delivering services to 4,000 people.

  Q434  Mr Prentice: Great stuff. Are they getting paid more for this fantastic increase in productivity?

  Dr Kyle: I honestly could not tell you.

  Q435  Mr Prentice: It is an issue, is it not, that bears? I hate to mention Sylvia again, but it is a thread that has run through our inquiry that, perhaps, the Government is making this leap, ideological or otherwise, because it sees public services being delivered on the cheap and that people are being employed in the third sector at a fraction of what they could expect either employed directly by the state or in private-sector organisations. Is that an issue, Debra?

  Ms Allcock-Tyler: Yes. I am not sure it is necessarily a bunch of evil politicians getting together deciding to do it deliberately but I think it is a net effect of what happens. There are examples. I think it is in the report from Strathclyde University that was commissioned by Unison and submitted to this inquiry, where a voluntary organisation lost a contract, competing with a local public authority, because the public authority had not put in, in its own bid for its own contract, the true costs of overheads.[13] Of course, from the voluntary organisation point of view, they are not putting in the cost, effectively, of volunteers, who are essentially free pairs of hands.


  Q436  Mr Prentice: Is this about getting public services on the cheap then?

  Dr Kyle: Let me be quite clear on this. There are two issues here and there is an issue for government and there is an issue for the sector. This should absolutely not be seen as getting public service on the cheap. Absolutely not. There was an issue which ACEVO addressed to do with full-cost recovery—which you might be aware of—where third sector organisations were not as experienced in dealing with the procurement process and were putting in bids for services which were less than other sectors and once the bid was given they realised that they had not included things like telephone costs, travel costs, and some other areas which were involved in running a lot of the organisation which is delivering services. ACEVO has a programme, which has been running for two years now, training organisations in full-cost recovery in order that, when they put a bid in, it takes account of all the staffing costs, all the costs included in that bid, so it is not just done on the cheap. ACEVO has been very unashamedly saying that part of the professionalisation of the sector is making sure that staff are well paid, that staff have good pensions. As Debra has said time and time again, these organisations are dealing often with society's most excluded people. These are people with multiple problems, not just drug addiction and homeless issues and mental health problems and other issues to do with exclusion. They are dealing with a whole raft of these issues. These people are the most vulnerable in society. They deserve to be cared for by people who are well-paid, well-trained, have good pensions and good prospects.

  Q437  Mr Prentice: That may well change the nature of the animal. There is professionalisation that you were talking about. The very act of professionalising, in the way you have just described, turns it from what we, as lay people, would understand as a voluntary organisation to something different.

  Dr Kyle: Think of it in terms of being a service user. You can still have volunteers. BTCV,[14] big volunteer organisations, put a lot of effort now into training their volunteers. People who have incredibly entrenched, difficult, multiple challenges and problems and difficulties to overcome deserve to be cared for and given support from people who are well trained. In order to have the best people doing that, they have to have good training, good management, good systems and good pensions, everything that everyone else in every other sector deserves. We should not be ashamed of the professionalisation of the sector. This is a way of empowering the third sector and it is a way of getting organisations of all sizes. This is not just about big corporate, big charity. This is about all charities which are delivering services delivering the best services for people who need it the most.

  Mr Etherington: The sector employs 650,000 full-time equivalent staff and deploys, depending on how you define it, about 15 million volunteers in various ways. The characteristic of the sector, the market structure of the sector, is that there is a small number of very large organisations and a large number of very small organisations. That is what the sector looks like. In some ways, it is similar to the business sector—although when people talk about the big charities, they are nowhere near the biggest in the private sector, they are dwarves. Even they cannot compete effectively for large-scale contracts. The characteristics of the workforce are more similar to the small business sector and less like the public sector. There are large numbers of very small employers. Levels of training investment are lower. Levels of unionisation are much lower. Levels of benefit are much lower. There is no doubt, whatever the aspiration, that the reality is that the workforce of the sector—the paid workforce, as distinct from the volunteers—has characteristics more like those of the small business sector. It is less organised and it therefore is probably more vulnerable in terms of the benefits to employees.

  Q438  Mr Prentice: We know there has been a big expansion in the training of commissioners. I think it is 2,000, and the Government wanted it completed by the end of the year. I am still not clear in my own mind, after all these sessions that we have had, whether we are going to see a step-change over the next few years in the number and variety of public services delivered by the third sector or whether it is going to be incremental and nothing that is really going to frighten the horses too much. Because the rhetoric at the very beginning was about step-change, and I am not entirely sure if that is the case.

  Dr Kyle: This is one area where you cannot talk about the sector as a whole. I think there will be areas of social care where there will be a step-change. I do not know the full facts but I know Demos has been doing a lot of work and research into the case of budget holders and service users as budget holders. I think that is being released tomorrow, unfortunately.[15] I would love to see the full statistics, but I have heard some snippets about it and I think the indications are that it has been trialled in 13 different local authority areas. That is relatively small numbers at the moment, but the effect that this has on the users and the users' behaviour is quite profound, in that something like 88% of people who were using residential care choose not to and they choose to use other types of provision, and they will spend it in more community-based local provision which is very imaginative—sometimes which we have not even thought of as providers. In areas like that, there are going to be very profound changes in the way services are commissioned and used and delivered. I think in other areas the rhetoric will not match up to what it feels like for the service users in broad senses.

  Ms Allcock-Tyler: I think it will happen for a number of different reasons. First, we will find what we are already seeing, that it will be a small number of very large organisations at the top and the rest of the sector will largely just carry on about its business. But I also think it depends a bit on whether the taxpayer realises the con: that they are effectively paying for services twice, through their freely given donations and through their taxes. There is this kind of strange situation, that we do not really ask the public—really, properly the public—about what is their perception of a public service, what is their perception of what charities do or do not do, what do they think is right and not right and so forth. It is all about "Is contracting with the third sector"—a dreadful term—"with voluntary and community organisations, good for government or the state and vice versa?" There has not been a great deal of research into what is the public perception of what charities should and should not do and what public services are and are not.

  Mr Etherington: On the question of step-change: I think it will vary from area to area. The classic example that is trotted out is social housing, where there has been a step-change in the provision by non-profit organisations. That had a particular set of characteristics. You had a combined regulated funder in the housing corporation, you had local authorities constrained in terms of their spending of capital receipts, and you had considerable advantages being given to non-profit providers. Interestingly enough, David Orr, who runs the National Federation of Housing Associations, was writing in the Guardian yesterday expressing some concern now that the new Housing Bill will place almost draconian powers in the hands of the secretary of state in order to instruct Housing Associations what to do and, therefore, they will be drawn even more into the net.[16] Social housing, I think, is an interesting case study of what can happen if there is a significant shift. My view is that social housing has been effectively colonised by the state and they do not have a lot of capacity to operate independently, but what will happen is that the private sector will win 80% of public-sector contracts. That would be my prediction. They did in the eighties, in social care, and I suspect that they will win the bulk of large-scale contracting.


  Q439  Mr Prentice: It is a Trojan horse for the private sector.

  Mr Etherington: There will be subcontracting. There will be quite a lot of subcontracting of niche markets between the private sector and the voluntary sector. That is something that is beginning to happen and I think it is something we will see more of. It depends, I think, on two sets of things. One is political will. Do politicians want a significant shift to occur between these areas? Secondly, it is a question of whether or not the capacity really exists to do this well, and I think the jury is out.

  Dr Kyle: If you asked anyone in the sector who is working for an organisation if they felt themselves, as a private organisation, it was a Trojan Horse, they would be horrified at the thought of it. People are very proud who work in the voluntary sector and in the charitable sector of the status and of the organisations they work for. They are motivated by working in the sector often.


10   Ev 155 Back

11   ACEVO, Independent Inquiry into DWP Pathways to Work Contracting, November 2007 Back

12   ACEVO, Independent Inquiry into DWP Pathways to Work Contracting, November 2007 Back

13   Unison, False Economy? The costs of contracting and workforce insecurity in the voluntary sector, May 2007 Back

14   British Trust for Conservation Volunteers Back

15   Demos, Making it Personal, January 2008 Back

16   Society section, The Guardian, 16 January 2008, p 4 Back


 
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