British Steel

Pat McFadden Excerpts

Wednesday 24th July 2019 Commons Chamber

[Greg Clark]

As my hon. Friend says, much steel production requires coking coal, so it needs to be provided. I understand that there was broad cross-party support for the operation that she describes. One of the imperatives is to move steelmaking to be cleaner and greener in its energy efficiency and use of other fuels. That feature of the industrial strategy programme applies very much to the steel industry.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I echo the comments of my hon. Friend the Member for Redcar (Anna Turley) in thanking the Secretary of State for his approach to the industry in general and this issue in particular. He has reminded us today and on previous occasions that we cannot just turn on and off a steelworks like a tap. If it is allowed to go cold, it is very expensive and difficult to set up again. The indemnity has been the key thing in enabling operations to continue while a buyer is found. What assurance can he give the House that that indemnity will continue for as long as it takes to finish the process of finding a buyer?

[Greg Clark]

I am grateful to the right hon. Gentleman; he knows about the manufacturing industry, and he is right in his description of it. I have to report that my request for the indemnity was granted readily; I think the lessons of the Redcar closure have been learned. I have no reason to suppose that the incoming Prime Minister will take a different view—in fact, quite the reverse. I have met him and his competitor, and during the days ahead I hope and expect that that support will continue to be available. But I should be clear with the House: British Steel is in the hands of the official receiver. Neither I nor any other Minister determines its future, so it will be important to conclude a sale to a long-term investor in it. That is not in the bag yet, but I think it is evident that everyone is doing everything they can to secure it.

British Steel

Pat McFadden Excerpts

Wednesday 22nd May 2019 Commons Chamber

[Greg Clark]

I am grateful to my hon. Friend for the hard work that he put into understanding and helping the steel industry during his time as a Minister. I know that it was well appreciated. I echo his tribute to Roy Rickhuss. My hon. Friend, the new Minister and I have always had a good relationship with the trade unions. I spoke to Roy Rickhuss and Steve Turner of Unite this morning, and they share the intention of everyone in this House to get the best possible future for British Steel.

One reason, although it is not the only reason, for the problems that British Steel is experiencing is the uncertainty around whether our future relationship with the European Union will involve tariffs—at least that is what the management say. Like my hon. Friend, I have a high regard for the management of British Steel, which needs to be taken at its word. We should resolve that uncertainty as quickly as possible, because that would be a major contribution that we can make to the future of British Steel.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I am grateful to the Secretary of State for his approach in recent weeks and for his statement today. I thank him for his comments about the difficulty of turning off steel mills like a tap, because they cannot be turned off and on like that. We are all grateful to hear that the wages will continue to be paid for the moment and that the company continues to trade. Will he say anything more about the official receiver’s capacity to keep the situation going so that a new buyer can be found?

[Greg Clark]

I am grateful for what the right hon. Gentleman says. It is important that I should state, and that the House should recognise, that the official receiver is independently appointed by the court. The official receiver has a team of special managers from Ernst & Young who were appointed today, and their responsibility is to secure the best possible resolution for the assets they inherit. They have strict duties to the court, and they cannot be directed by me. My experience of the Insolvency Service and the official receiver is that they will want to recognise the importance of continuity, which I contend will help to secure the best value for the future of the site. From my conversations, I know they have that very much in mind, but it is important to emphasise that they are independent and do not take direction from me.

Carillion

Pat McFadden Excerpts

Thursday 12th July 2018 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I shall endeavour to be brief, Madam Deputy Speaker, as many of the points about the collapse of Carillion have already been made by my hon. Friend the Member for Leeds West (Rachel Reeves) and the hon. Member for Harwich and North Essex (Sir Bernard Jenkin).

Carillion’s headquarters was in Wolverhampton. Of its 18,000 or so UK employees, some 450 were employed in the headquarters, so the city that I represent has a particular interest in the story of the company’s collapse. Six months after the collapse, there are still major questions about corporate governance, audit, ongoing costs, and, perhaps most fundamentally, the policy implications raised by the collapse. I thank both the Work and Pensions Committee and the Business, Energy and Industrial Strategy Committee for their joint report, which paints a very stark picture, describing a story of “recklessness, hubris and greed”. On the accounts of the company, it describes them as having

“misrepresented the reality of the business.”

The report sets out how the company collapsed, how the internal checks and balances failed and it makes damning indictments of the company’s leadership and the system of auditing, culminating in the recommendation that the whole audit system be referred to the Competition and Markets Authority.

Others will focus on particular parts of this story, but the part on which I wish to focus is the role of Government and the decisions before Government when a company of this nature is in danger of collapse. I have written to the Minister before about these questions. Carillion is a specific type of company. It was a private company, but it was engaged for much of its activity in the delivery of public services. Therefore, the responsibilities cross both the public and the private sectors. The National Audit Office report on this issue, published last month, says that the company, in its dying days, asked for a loan of £160 million from Government and a deferment in tax payments of £63 million. That is a difficult decision for Government. What do Ministers or officials do when a company comes and asks for such substantial funds? In those circumstances, Ministers and the government machine have to make an assessment between loaning that kind of money and letting the company go under.

[Dan Carden (Liverpool, Walton) (Lab)]

My right hon. Friend will know that the National Audit Office report has outlined that, in 2017, Carillion projected a loss of £83 million on the Royal Liverpool University Hospital. Does he know where that projected loss now sits?

[Mr McFadden]

That is a very good question and is exactly the kind of thing that Ministers had to look at when considering this request. In letting the company go under, the Cabinet Office realised that the taxpayer was still on the hook, because at the moment that it decided to say no to the company’s request for the loan, it gave the official receiver £150 million of taxpayers’ money to process the liquidation. Therefore, the taxpayer being on the hook does not stop when the decision is made to allow the company to go under. The taxpayer has been on the hook for the six months of this story, and it does not stop with the money for the official receiver. Public sector bodies are facing a 20% premium for some of the post-liquidation service delivery costs. As my hon. Friend just said, there are three major projects that lie unfinished. There is the Midland Metropolitan Hospital, the Royal Liverpool University Hospital, which he raised earlier this week in Parliament, and the Aberdeen bypass.

One question that I hope the Minister addresses is the one raised by my hon. Friend a moment ago. What will it cost to finish these projects and where will the money come from? The National Audit Office says that these projects face losses respectively of £91 million for the Aberdeen bypass, £83 million for the Royal Liverpool University Hospital, and £48 million for the Midland Metropolitan Hospital. In his winding up, will the Minister confirm how these projects will be finished and how they will be paid for? It was a public policy decision to build a new hospital in Liverpool; it was a public policy decision to build a new hospital in Sandwell; and it was a public policy decision to build a new road in Aberdeen, so whoever is carrying out the project, the public policy responsibility, in the end, still lies with Government. Can the Minister confirm that at the moment of collapse, the Government thought that the cost might not be the £150 million that they set aside, but more than £300 million, as paragraph 13 of the National Audit Office summary suggests?

This not just a story of corporate mismanagement; it raises major public policy questions. What does the Minister think are the lessons for Government decision making about: how procurement happens; whether a contract is to be tendered and how that tendering process is managed; and how they balance the risk of rescue and the cost to the taxpayer when a company engaged in the delivery of public services is in danger of collapse? Those are the fundamental public policy questions raised by this story.

[Several hon. Members rose—]

Leaving the EU: Airbus Risk Assessment

Pat McFadden Excerpts

Monday 25th June 2018 Commons Chamber

[Greg Clark]

I disagree with my hon. Friend. I think that the company has set out what it requires to be agreed in the negotiations so that it can continue to prosper. It is true that the company, like most companies in the aerospace sector, has been part of a successful investment with the Government in innovation and training. That is one foundation of our success, and I very much want that to continue.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Fourteen thousand jobs directly affected; over 100,000 in the supply chain, including in our crucial aerospace cluster in Wolverhampton. What does the Secretary of State think is in the minds of leading Brexiteers when they hear warnings like this, which are anything but ridiculous? Does he think that they take them to the heart, or do they in the end believe that this is a price worth paying, because the overall imperative of controlling immigration comes before any economic or employment consideration?

[Greg Clark]

My experience gives me confidence that the evidence and the facts will ultimately determine the outcome of the negotiations; respect for the facts on both sides of the negotiations will be what determines a solution in the interests of both sides. That is what I am determined to pursue. When companies offer evidence, as others are completely free to do, it should be considered in a serious and sober way, and used to inform those discussions.

Industrial Strategy

Pat McFadden Excerpts

Wednesday 18th April 2018 Commons Chamber

[Greg Clark]

I am coming on to talk about that, but I will say now that one of the major breakthroughs in the industrial strategy is to recognise the utmost importance of investment in research and development, not only on the part of the private sector but on the public sector side as well. All around the world, advanced nations are investing in the future through R&D, and we have in the industrial strategy the biggest increase in research and development that we have ever seen in this country. It is a matter of pride that we were able to achieve that.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I very much welcome the fact that the Government are committed to the industrial strategy. When I was a Minister in the Secretary of State’s Department some years ago, we rebooted and renewed the belief in an industrial strategy in the wake of the financial crisis. I am glad that it has survived and that there has been a lot of continuity through the years of the coalition Government to his tenure. This is a welcome move away from the laissez-faire approach that we had in the 1980s, but it will only work if it is bought into by others beyond his Department. Given that many other countries are trying to do similar things, is he confident that he has the commitment right across the Government and the scale of resources and buy-in necessary from the Treasury and others to make this a success?

[Greg Clark]

The right hon. Gentleman makes an excellent point. First, in terms of what was achieved before, he is right to recognise that we are building on what have been successes. Successful arrangements that have been put in place in the process industries, for example, are recognised and built on in the strategy. It is very important that we have a long-term approach. He is absolutely right; this is not my Department’s industrial strategy, my industrial strategy or even the Government’s industrial strategy. The ambition for this strategy is to unite all the nations of the United Kingdom and the UK Government certainly, but also the leaders of our cities, towns, counties and universities. The approach we have taken in developing the strategy is precisely for that purpose.

I have a set of responsibilities which the right hon. Gentleman will know, from his tenure in my Department, are limited to those allocated to the Business Department. However, when it comes to skills or investment in transport infrastructure, for example, it is vital that all join together. One of the strategy’s purposes is that we can clearly brigade in a way that reinforces the different contributions.

Carillion: TUPE

Pat McFadden Excerpts

Wednesday 21st February 2018 Westminster Hall

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Ms McDonagh, it is traditional at the start of these debates to say what a pleasure it is to serve under the Chair, and today it is really true. I begin by congratulating my parliamentary neighbour, my hon. Friend the Member for Wolverhampton South West (Eleanor Smith), on securing the debate and by thanking the Minister for his close engagement in this issue in recent weeks, since the company went into liquidation.

As the hon. Member for Stirling (Stephen Kerr) just said, many aspects of Carillion’s collapse are the subject of the inquiries by the Work and Pensions Committee and the Business, Energy and Industrial Strategy Committee, including how the company got itself into such financial trouble, why so many big contracts went wrong at the same time and why the company kept paying out dividends while the pension deficit built up, among many other questions. Today, we focus on one in particular: Carillion and its staff.

At the time of Carillion’s collapse, the company employed roughly 20,000 people in the United Kingdom and a similar number abroad, with 450 employed in its Wolverhampton headquarters. Since then, more than 1,000 of those workers have lost their jobs. Many of them would have had access to the various voluntary redundancy schemes that the company put forward in the 18 months or so running up to its collapse.

That raises a moral dilemma. Workers who had 20 or 30 years of service would have got quite generous voluntary redundancy payments had they pursued that option in the run-up to the company’s collapse. Therefore, the first question is: what was the gap in knowledge between the workers who were simply doing their jobs—perhaps thinking that there might be another couple of rounds of voluntary redundancy, so there was no urgency —and those at the top of the company, desperate to keep the company afloat? What did those at the top know about the prospects for the company’s collapse, compared with the workers, who perhaps did not? That gap in knowledge could result in a loss of tens of thousands of pounds—the difference between what someone would have got under voluntary redundancy and the bare statutory minimum they are now entitled to if they lose their job.

[Louise Haigh (Sheffield, Heeley) (Lab)]

My right hon. Friend is making a really important point. A constituent of mine came to see me about the lack of information from Carillion and, frankly, the downright lies they have been told by their management and leadership. They were told that they would be made redundant on 31 January, and the goalposts have been moved time and again.

Now, staff in Sheffield are being made redundant on a rolling basis—they do not know when it will happen. Staff who have been there for 20 or 30 years, as my right hon. Friend said, run the risk of losing out on significant redundancy payments or are choosing to leave the company and find extra work. I hope the Minister will respond on information and transparency in the company.

[Mr McFadden]

My hon. Friend makes a good point. The first thing I will raise is the question of redundancy and the payments available to those 1,000 or so people who have lost their jobs, but the second issue is about the workers who are left.

Carillion was, of course, a complex web of contracts, covering sectors as diverse as the Ministry of Defence, construction, prisons, school maintenance, cleaning and a whole number of other things. The official receiver is now going through those contracts and looking for alternative suppliers to take them over. The central question before us in this debate is on what terms those will be taken over, and what the pay levels and conditions will be for the workers who find themselves transferred.

[Stephen Kerr]

The right hon. Gentleman is making a valid point about the terms and conditions. I wonder whether he was as concerned as I was to read the reports about Serco picking up the contracts at, I think, about 50 NHS sites somewhere in England—I cannot remember exactly where—and the chief executive saying that it had saved £20 million on the contract. Does the right hon. Gentleman agree with my concern: that that £20 million might be coming from the terms and conditions and the wages of the workforce?

[Mr McFadden]

I quite agree; that is a concern. Of course, the context is that a company went into financial collapse while running those public sector contracts, so it hardly looks as though it was making a big killing out of them—frankly, if it was, it would not have gone bust. The margins were already thin, and the public sector has proven itself over the years to be more adept at driving narrow margins. My concern is that somebody who takes over will drive that down further in precisely the way that the hon. Gentleman said and that the people who will pay the price will be workers, some of whom are on quite low pay to begin with.

The legal position is that TUPE does not normally apply in an insolvency; I think hon. Members here understand that. But the point being made in this case is that such a complex web of contracts is involved and there is such a significant public interest: if there is a proliferation of new suppliers, there is a strong case that TUPE should apply, at least where employment is rolled over.

Given Carillion’s collapse into liquidation, it is hard to say that it was earning very heavy margins on the contracts in the first place. The Minister for the Cabinet Office seemed to agree with that point when he told the House, shortly after the company’s collapse, that the official receiver was

“looking at…whether it can offer arrangements whereby workers are no worse off than they were under the terms of their Carillion employment.”—[Official Report, 24 January 2018; Vol. 635, c. 347.]

I agree with what the Minister for the Cabinet Office said on that occasion. That is the point I stress today.

I think we all understand that, sadly, in a case of insolvency there may be some job losses; part of the reason why, legally speaking, TUPE does not apply in situations of an insolvency is that there will be job losses. The question to the Minister is a slightly different one. Even if we understand that there are job losses, can the Government and the official receiver not insist that, when we are talking about not job losses but employment being rolled over from Carillion to an alternative supplier, on this occasion, given the public interest, the existing terms and conditions should apply as though under TUPE? That would be reasonable, fair to those workers and fair in terms of the public interest. On this occasion, it is the right thing to do.

Budget Resolutions

Pat McFadden Excerpts

1st reading: House of Commons
Tuesday 28th November 2017 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

It is a pleasure to follow the hon. Member for Chichester (Gillian Keegan). We began the debate talking about industrial strategy. I approve of the Government’s industrial strategy. The reason I like it so much is that I launched it eight years ago, and it is nice to see the Government picking up on some of our ideas. However, the big story in this Budget is the downgrade in our growth prospects—the biggest downgrade since the financial crisis and in the history of the OBR. It was described by the Resolution Foundation as

“the mother of all downgrades”.

The prediction is that the economy will, in a few years’ time, be 2%—or in financial terms, £42 billion—smaller than was thought only last year. That means borrowing £13 billion more in a few years, and £17 billion a year after that. It means austerity going on into the mid-2020s. For our constituents, it means lower than expected pay. Average income is expected to fall by £1,400 to £1,500 a year. Those are the real effects of the mother of all downgrades.

There is one area where the Government are setting aside huge sums of money, and that of course is Brexit—there is £3 billion for it in the Budget, on top of the £700 million already announced—and we are told that the Cabinet has agreed to pay a £40 billion divorce bill. In a few short weeks, we have gone from “go whistle”, to £20 billion in the Florence speech, to £40 billion now. There is a lot that we could do with £40 billion. We could build more than 70 new hospitals, or over 1,100 new schools. It is more than the total housing and environment budget. It is more than the total public order and safety budget.

In my constituency, the West Midlands police have lost 2,000 officers and £145 million from their budget in the last seven years. They could do with some of the £40 billion that will be spent on Brexit. We have almost 10,000 people on the local housing waiting list. I see these people in my constituency surgery, desperate for a home. They could do with some of the £40 billion set aside to pay for Brexit. The social mobility study out today describes the midlands as a coldspot where social mobility suffers. Nursery schools in my constituency facing cuts could do with some of the £40 billion set aside for Brexit.

There might be an argument for some of that expenditure if it was going to buy us a better deal, but the Government have said that they want to secure exactly the same benefits for goods and services as the ones we have now, not by staying in the single market and the customs union but by leaving them. Countries normally pay for access to the single market, but we have chosen to pay to leave it. The Government are not investing £40 billion in getting us a better deal than the one we currently enjoy; they are prepared to spend £40 billion, which could go towards public services in our constituencies, on a worse deal. That was not an inevitable result of the referendum. The Government could have chosen to stay in the single market and the customs union, but they did not, and that is a bad deal for Britain.