No-Deal Brexit: Cross-channel Freight

Lord Grayling Excerpts

Thursday 2nd May 2019 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Urgent Question): To ask the Secretary of State for Transport if he will make a statement on the no-deal Brexit preparations for cross-channel ferry and freight services.

[The Secretary of State for Transport (Chris Grayling)]

The Government are now reviewing our contingency planning for a no-deal EU exit, in the wake of recent developments. No decisions have yet been taken for the preparations for the new EU exit date of 31 October, although of course many of the preparations that were made for 29 March are still in place. The planning assumptions that underpinned the original maritime freight capacity activity will need reviewing in the light of the article 50 extension, to understand whether they are still valid. A collective view will then be taken across the Government as to the necessary contingency plans that will need to be implemented, and that will include working closely with the Department of Health and Social Care and the Department for Environment, Food and Rural Affairs to understand the needs of their supply chains.

In December, we entered into contracts with ferry operators to provide additional capacity into the UK as part of no-deal planning. Those contracts were scheduled to run up until September, and were an essential insurance policy to ensure the continued supply of category 1 goods—primarily medicines and medical devices for the NHS—in the event of a no-deal Brexit. As I have indicated to the House previously, we took that step because of a change to the modelling carried out across the Government that indicated that flows across the short straits could fall significantly, and crucially for significantly longer than had previously been proposed by our analysts. It would have been irresponsible for the Government not to act, as no deal was and remains the legal default. It was an insurance policy, and insurance policies are a prudent investment, whether or not they are actually used.

Following the article 50 extension until 31 October, the Government have now decided to terminate the contracts with Brittany Ferries and DFDS with immediate effect, to minimise the cost to taxpayers. The termination of those contracts costs £43.8 million, which is lower than the National Audit Office’s estimate of the total termination costs, and I should say that it represents around 1% of the overall £4 billion package of no-deal EU exit preparations that the Government have wisely undertaken to ensure that we are ready for all eventualities.

[Alan Brown]

Thank you for granting the urgent question, Mr Speaker.

I wonder whether we will ever get to the bottom of this whole mess. Truthfully, the Secretary of State’s statement does not give us any more clarification on what the Government are doing in respect of no-deal preparations. We were told that the initial contracts were part of emergency procurement for the unforeseen scenario of a no-deal Brexit, despite our having been told that the Government had prepared. We were then expected to believe the logic behind handing an emergency service contract to a company with no ships and no financial backing.

In response to an urgent question, the Secretary of State for Health and Social Care advised us that the contracts were needed for shipments of priority goods such as medicines, and the Transport Secretary has repeated that in his statement today. If that was the case, why did the contracts kick in automatically on 29 March, rather than being linked to an actual no-deal scenario, whenever that might occur? What exactly did the contracts procure? Why has it taken a month for the latest contracts to be reviewed and cancelled, at a cost of £43 million? What are the Government doing in respect of the next possible no-deal Brexit date of 31 October? If the previous contracts had to be entered into in December for a March kick-in date, it is clear that planning needs to happen now. It is obvious that the Government should be working on preparations right now.

In the emergency debate on the contracts, I asked about the possibility of further legal action and the Secretary of State assured me that there would be none. “A hae ma doots” is what I said at the time, so it comes as no surprise that we now learn that P&O Ferries is suing the Government. When did the Secretary of State find out about P&O’s intentions? Where has that case got to—is it going to go through the courts, or will there be a cave-in and another £33 million settlement?

I know that Governments do not normally publish legal advice, but with this turn of events we are clearly in exceptional circumstances, so will the Government provide or publish the legal advice that they have had over this period? What independent reviews are the Government undertaking to understand the blunders that have happened and to learn lessons so that this does not happen again?

The Secretary of State repeated what the Under-Secretary of State for Transport, the hon. Member for Wealden (Ms Ghani) said earlier in Transport questions: that the £43 million cost of cancelling the ferry contracts is only 1% of the Brexit preparation costs, as if it does not matter. In actual fact, overall the ferry contracts will probably cost up to £120 million, depending on the P&O settlement, so when will somebody become accountable for this waste of money? It is not a negligible amount of money; it is a lot of money.

Many people ask me why the Secretary of State is still in post after all his blunders. I cannot answer that, but I can ask that he does the right thing, finally takes responsibility and steps aside.

[Chris Grayling]

As usual, we have the customary stream of nonsense from the hon. Gentleman. This issue has been scrutinised, and will continue to be scrutinised, by members of the National Audit Office, who are the appropriate people to do so. I will not comment on ongoing legal matters, except to say that the Government vigorously disagree with P&O and will defend themselves to the hilt. I really do not think that he listened to what I said today, or that he has listened for the past few times that I have talked about this in the House. The fact is that he has disagreed all along with the steps that we have taken. Let me read to him a small excerpt from a letter that I received last month. It said that my officials

“have also asked that critical exports should be given priority access to the additional ferry capacity secured by the UK Government where this is not required for essential supplies.”

That request, clearly recognising the need for that capacity, came from the Cabinet Minister in the SNP Scottish Government.

[Sir Desmond Swayne (New Forest West) (Con)]

We would not have had to spend the money had the party of the hon. Member for Kilmarnock and Loudoun (Alan Brown) voted for the agreement. Is my right hon. Friend looking forward to the return of duty free on the ferries as much as I am?

[Chris Grayling]

It is very much my hope that we do reach an agreement and that duty free will not be necessary, but I am sure that if it becomes necessary, my right hon. Friend will have that opportunity. None the less, he makes a good point. To Members across this House who complain about the money that we have rightly spent on an insurance policy against a no-deal outcome, I say that the way of preventing that money being spent would have been to vote for the deal. Opposition parties have systematically refused to accept that what is before this House, and what has been before this House, is a sensible deal to deliver a sensible future partnership with the European Union. It is just a shame that they have always been unwilling to accept that.

[Andy McDonald (Middlesbrough) (Lab)]

On 5 March, I told the Secretary of State that his settlement with Eurotunnel risked further litigation from other companies. I warned that taxpayers could face more compensation bills in the tens of millions of pounds, and I was dismissed. But I was right, and he was wrong. His Department is now facing legal action from P&O Ferries. This all flows from his decision to award a contract to Seaborne Freight—the ferry company with no ships.

The Secretary of State bypassed procurement processes to award contracts—rules that were put in place to prevent this sort of waste of public money—and awarded a contract that was in breach of UK and EU public procurement law. As a result, he made a potentially unlawful £33 million settlement with Eurotunnel, promoting P&O to take legal action. Who made the decision to bypass procurement rules? Was it the Secretary of State and does he accept responsibility? The Transport Secretary should have recognised that his Eurotunnel decision risked further litigation. Why did he dismiss my concerns, and was he poorly advised?

Yesterday, we discovered that the Department must pay around £43.8 million to cancel no longer needed ferry contracts. Given that the entire Brexit process has been characterised by uncertainty, why did the Transport Secretary not negotiate contracts that could be delayed if the Brexit date was delayed? If he had, he could have avoided this colossal waste of money. What is his estimate of the total cost to the public of his no-deal contracts? Every other week, MPs must debate the Transport Secretary’s latest costly blunder. I am afraid that this will continue for as long as the Secretary of State remains in post. This country can no longer afford the Secretary of State.

[Chris Grayling]

That is indicative of the fact that the Labour party and the hon. Gentleman do not believe in or support the need for this Government and this country making sure that, in all circumstances, the national health service receives the drugs that it needs. I am afraid that that is just irresponsibility on his side.

The hon. Gentleman raises various questions. He mentioned Seaborne Freight. The legal action with Eurotunnel had nothing to do with Seaborne Freight, because the contract with Seaborne Freight had been terminated several weeks before—after it had secured ships but when its principal financial backer withdrew. I did not bypass any processes. Things were done properly in accordance with Government procurement rules. They have been vetted and looked at by the National Audit Office, which has already provided one report on this. This was a collective decision by the Government to make sure that we could look after the interests of the national health service and that we took the right insurance policies in the event of a no-deal Brexit. We will continue to take the right decisions and the right insurance policies if there continues to be—I hope there will not be—a risk of a no-deal Brexit.

[Mr Peter Bone (Wellingborough) (Con)]

I do not see how the House can blame the Secretary of State for believing the Prime Minister, when she said 108 times that we were going to leave on 29 March. When her withdrawal agreement was defeated three times in the House of Commons, it would have been negligent of the Secretary of State not to have planned for a no-deal Brexit. The one thing that is for sure is that the Secretary of State cannot be blamed; maybe the Prime Minister can. Does the Secretary of State agree that a lot of people are making political points based on no evidence whatever?

[Chris Grayling]

That is the central point. The process was carried out properly in the context of the legal advice that was available and the needs elsewhere in Government. My Department never needed any ferry capacity; it was procured because other Departments did. If further contracts are let, it will be because of other Departments’ needs for services such as the national health service. The Opposition seem more interested in trying to score political points than in supporting the securing of drug supplies for the national health service.

[Tom Brake (Carshalton and Wallington) (LD)]

On 11 February, the Secretary of State said in response to my question on ferry procurement:

“I have been absolutely clear that this procurement was dealt with very carefully by officials in my Department and in the Treasury”—[Official Report, 11 February 2019; Vol. 654, c. 623.]

Although the Secretary of State may believe that this matter was dealt with very carefully, I think the rest of the world believes otherwise—that, in fact, he has reached dizzying new heights of incompetence. His latest bungle has cost an extra £43 million, on top of the £2.7 billion he has cost us so far. If P&O wins its case, how much more is the Secretary of State going to cost the taxpayer, and will that be the point at which he finally accepts that he has no choice but to resign?

[Chris Grayling]

The right hon. Gentleman does not believe in Brexit and he clearly does not believe in no-deal preparations. He also clearly did not listen to me previously. I have set out exhaustively in this House why we took the decisions that we did and why we responded in the way we did to the legal advice we had. We simply took steps to ensure that we were ready for a no-deal Brexit—the responsible thing to do. He might not agree with it, but that is what we have done.

[Chris Davies (Brecon and Radnorshire) (Con)]

What steps is my right hon. Friend taking to reduce the amount that has to be paid to the ferry companies involved?

[Chris Grayling]

That is an important point. We have paid a reduced cancellation charge, as set out in the original contracts in the case that we did not need the ferries as a result of a change in circumstance. The change in circumstance, of course, is that the potential no-deal date has moved by seven months. Nobody seriously expects that we would be paying to have ships either sailing empty or moored at the quayside for that time, but the companies incur costs—by leasing extra ships and taking extra staff— that have to be met. At the start, we negotiated a cancellation level of payments, meaning that we did not have to pay the full amount in the contract and mitigated the cost to the taxpayer of the insurance policy that we took out.

[Jo Stevens (Cardiff Central) (Lab)]

The private sector has no faith in the Department for Transport’s ability to undertake procurement properly; confidence has been lost. Is the Secretary of State concerned that his own incompetence will reduce future private sector investment in the transport sector?

[Chris Grayling]

I do not know what the hon. Lady is talking about because she is not being specific. She says that the private sector has lost confidence in the Department’s procurement, but that tends only to be the case if people have not won a contract.

[John Howell (Henley) (Con)]

I have continually voted for the deal, as the Secretary of State knows. The insurance policy protects exports from and imports to the UK, so I fully accept what he is saying. Will he join me in trying to get a change to the procurement rules, so that they include a substantial element of alternative dispute resolution to make the whole thing cheaper and quicker?

[Chris Grayling]

I regret that any big company—particularly in the case of Eurotunnel—would take a decision to pursue a legal action at such a time, when the Government are seeking to operate in the national interest. But the law is the law, and we have to fulfil it. I agree with my hon. Friend that alternative dispute resolution is a good way of resolving such matters, when it can be delivered.

[Mr Kevan Jones (North Durham) (Lab)]

The criticism is not that preparations should not have been made; it is criticism of the way in which the contracts were awarded. The Secretary of State is doing his usual trick of standing back and saying that he is the innocent bystander in this situation. Is he actually saying that he just followed the advice of his officials and signed this off, or did he intervene and overrule, especially to ensure that Seaborne Freight were awarded a contract? Or is he just going to hide behind others and say, “It was somebody else’s fault, guv—not mine,” as he did with the train timetable idea?

--- Later in debate ---

[Chris Grayling]

I can categorically say that I did not intervene in any matters relating to the decisions to let these contracts, how they were let and what the recommendations were about letting them.

[Tom Pursglove (Corby) (Con)]

Does my right hon. Friend share my frustration with those in this House who, I think wrongly, rant that a no-deal Brexit would be catastrophic but then oppose every single step taken to try to mitigate any of the concerns that it might bring about?

[Chris Grayling]

The bit I do not understand is that Labour Members do not appear to understand insurance. When someone takes out a home insurance policy each year, they pay their money and they do not get it back. It costs them money, but they have the insurance to protect them against an unforeseen eventuality. We took out this insurance policy because of a change to the forecast that suggested that we might have a problem in dealing with the flow of drugs for the national health service. That was the responsible thing to do—to take out the insurance policy for the country. Labour Members might not want us to do that. They might not want to look after the interests of the national health service, but we will.

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

The Secretary of State calls it an insurance policy, but I do not know what part of an insurance policy involves paying £33 million in an out-of-court settlement to a company because of his own incompetence. That is not really a viable and prudent form of insurance policy. Is not the reality that the Government were never going to have no-deal in the first place and that this has been the mother of all smokescreens by the Government to raise the stakes in effectively playing poker with taxpayers’ money? It is a flagrant misuse of public funds, and he should at least have the grace to admit that.

[Chris Grayling]

I will not, because it is not true.

[Bob Blackman (Harrow East) (Con)]

Will my right hon. Friend confirm that the reality is that cancellation fees are a standard aspect of contracts that exist between the Government and private sector suppliers to cover the costs that are legitimately created when a contract occurs? In the event that cancellation takes place, it is perfectly reasonable for those costs to be covered; otherwise people would not contract with the Government.

[Chris Grayling]

My hon. Friend makes a very good point. It underlines one of the things that makes the business community much more concerned by a Corbyn Government than by Brexit, because Labour Members not only do not understand business—they hate business and do not believe that the Government should work with business. We hear time and again how dismissive they are of business, and this is just another example.

[Wayne David (Caerphilly) (Lab)]

Do the Government’s interesting U-turns reflect a change in their attitude and policy towards Brexit itself?

[Chris Grayling]

Our policy has been consistent from the start: we want to leave the European Union with a deal. We will continue to work to do so but will make appropriate plans for all eventualities.

[Tommy Sheppard (Edinburgh East) (SNP)]

We all knew that a no-deal exit might happen, but none of us could have said that it would definitely happen. So I do not know which is worse: whether the Secretary of State has overseen contracts that did not have the flexibility and caveats built into them to allow for that eventuality, or whether he refuses to admit that that was a mistake. Whatever it is, this combination of incompetence and arrogance is costing the taxpayer a lot of money. What assurances do we have that as we approach the October deadline and he begins over the summer to look at this process again, he will learn from the mistakes and not waste even more money?

[Chris Grayling]

That is precisely why these contracts had early cancellation provisions that enabled us to close the contracts down at a cost that was much lower than the full cost of the contracts.

[Mr Speaker]

Thank you. We come now to the business question, which is not as heavily subscribed as is often the case. Therefore, I think I can say with complete conviction that this session should finish no later than 1 o’clock and preferably long before then.