Carillion and Public Sector Outsourcing

Rachel Maclean Excerpts

Wednesday 24th January 2018 Commons Chamber

[Jon Trickett]

I will get to that in due course. However, the hon. Gentleman did not defend the practice of Crown representatives handing money to the Conservative party. Not only is the Crown representative for the energy sector a Tory party donor, but that person donated £15,000 to the Prime Minister, who took the money.

Court testimonies submitted over the past few days as part of Carillion’s liquidation show that its key clients, lenders and insurers were already pulling out of the business and getting well clear of it months ago. The private sector clearly saw a fire, but the Government did not even detect smoke from a company that appeared to be then, and obviously is now, going up in flames. Perhaps that was why the Government failed to appoint a Crown representative for the three crucial months at the end of last year when it became clear that Carillion was in deep trouble and was issuing profit warnings left, right and centre.

Crown representatives are appointed to monitor, on behalf of the taxpayer, the contracts of key strategic suppliers to Government and to ensure that everything is running smoothly. I have already referred to one Crown representative, but the House may be interested to know about the backgrounds of some of them, because they are curious. A number of them—this is unbelievable—actually oversee contracts that relate to their own private sector work and yet they are appointed by the state to look after outsourcing on the public’s behalf. As I just mentioned, one of them donated £15,000 directly to the Prime Minister herself. I will use some strong language here: the ordinary man or woman in the street can draw only one conclusion, which is that this has been a complete racket.

Carillion posed a clear and present risk to the taxpayer, but not only did the Government fail to act, they had a cosy relationship with the key decision makers, some of whom were active Tory supporters.

The problem goes well beyond Carillion, so let me widen the argument. The Government have failed to think strategically about the risks to the economy, as well as the risks to the taxpayer and public services. The Government handed over 450 separate contracts to Carillion, which employed 20,000 workers and used 30,000 separate subcontractors. This was a major industry that had an impact everywhere in the country, yet the company was clearly deep in trouble for some time. Frankly, I have no confidence at all in the statement rushed out by the Minister for the Cabinet Office and Chancellor of the Duchy of Lancaster, the right hon. Member for Aylesbury (Mr Lidington) in the last couple of hours before this debate. The assurances in that document are pretty feeble. We want an absolute guarantee on behalf of the people employed directly or indirectly by the company that both their jobs and the services provided by the company will be protected.

[Rachel Maclean (Redditch) (Con)]

Will the hon. Gentleman give way?

[Jon Trickett]

I will give way but, in doing so, let me ask her the following question. [Interruption.] This is a debate.

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[Rachel Maclean]

The short answer is yes. The hon. Gentleman says that he has no confidence in this Government’s ability to award public sector contracts. Does he therefore have any confidence in the previous Labour Government, who awarded billions of pounds of contracts to private sector companies, and in Labour-run Leeds City Council, which did the same? Does he have no confidence in his Labour colleagues?

[Jon Trickett]

Carillion did not go bust eight years ago, when Labour was in power; it went bust last week. The fact is that the hon. Lady has not answered the central point, which is that 13 of the 20 biggest Government contractors have subsidiaries in tax havens—[Interruption.] And the Minister is prepared to defend it. It is outrageous. [Interruption.] Leeds City Council, in which I no longer play a part, did not hand over a contract to Carillion the other week.

Thirteen of the 20 largest Government contractors have subsidiaries in tax havens. Those companies are happy to take taxpayers’ money and make a profit, but it seems that they are not prepared to pay tax back, which is morally incorrect and should not be happening. In fact, it is a scandal.

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[Mr Lidington]

As a further assurance following the announcements of the profit warning, external due diligence was commissioned by HS2 Ltd. This revealed that at the time of award in July last year, Carillion did have the financial capacity to continue with its part of the contract. HS2 let the two contracts to the joint venture because it was confident that the joint venture arrangements were robust, as has proved to be the case.

[Rachel Maclean (Redditch) (Con)]

The Minister is outlining very coherently the rigorous process that has to be gone through to deliver quality public services on behalf of the taxpayer. Does he recall that it was a Conservative Government who introduced the Public Services (Social Value) Act 2012, which required Ministers to look at a wide range of factors and also to think about social, environmental and economic benefits for consumers and the taxpayer?

[Mr Lidington]

My hon. Friend is exactly right. The tests we routinely apply take account of quality, not just cost, in assessing bids. I am sure there will be lessons that we want to examine, particularly as we learn about what happened to Carillion from the official receiver. It is interesting, as my hon. Friend points out, that it was a Conservative-led Government who put in place arrangements that had not been so made during the 13 years of a Labour Administration.

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[Rachel Maclean (Redditch) (Con)]

In this country, we have high-quality public services, but the reality is that they are expensive. I am afraid the simplistic statements offered in the Labour party manifesto, suggesting that just a few rich people could pay for everything that our voters demand, do not stand up to the light of day.

The private sector has a role to play, but it must be managed properly. In my area, PFI contracts were awarded under the previous Labour Government to build a new hospital in Worcester that serves the people of Redditch. It provides much-needed health services, but it has been troubled by the financial obligations arising from the financing deal. Lessons must be learned. The awarding of large-scale public sector contracts requires a particular skill set and should be entered into by those with the necessary training.

Removing the private sector completely would not solve the problem. It has delivered benefits to NHS patients that are freely available to all. New, innovative, life-saving equipment—such as I have seen in the new endoscopy unit at Worcester—can diagnose cancers and other life-threatening illnesses, save patients long trips, and save lives. That would not be possible without private sector involvement.

Some Opposition Members have suggested that this debate comes down to ideology. I reject that. It is not a black-and-white choice. The private sector can be managed well or appallingly, just as the public sector can. We should not make a binary choice between on the one hand the public sector as morally superior and above reproach, and on the other hand the private sector as morally bankrupt. Instead, it comes down to an organisation’s culture and values, and they have to be led from the top.

The ownership and corporate structure of an organisation does not, in and of itself, guarantee either good or bad behaviour. Every human being is flawed and imperfect. I suggest that Members read the works of Shakespeare, any of our great works of literature or the Bible, to educate themselves about the human condition. We are all flawed people. Perhaps Opposition Members are flawless, but I am certainly not. People are capable of doing bad things.

As policy makers, our role is to make laws that go as far as they can to prevent individual flawed human beings, such as those we have seen in this case, from being put in a position to flout moral codes. We must uphold those codes and expect the best from those in power. We must all focus on better corporate governance, which is a priority for this Administration that I support. I serve on the Business, Energy and Industrial Strategy Committee, and I am looking forward to taking part in our joint work with the Work and Pensions Committee. I will be calling on the Government to act on our recommendations.