Carillion

Debate between Lord Stunell and Lord Hunt of Kings Heath

Monday 15th January 2018 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, I thank the Minister for repeating the Statement. However, I have to say that it seems remarkably complacent in the face of the catastrophic failure of Carillion. Millions of pounds of public money is threatened, hundreds of thousands of public service users are vulnerable and tens of thousands of jobs are at risk—yet the Government could have ameliorated the crisis. The Statement claims that the Government have been closely monitoring the company since last July—some monitoring. Remarkably, contracts worth £2 billion were awarded during this period, when no fewer than three profit warnings were given by Carillion. Why was that, and why was a consortium of which Carillion was a part so recently given a lucrative deal to work on the HS2 line?

Why did they leave vacant the position of the Crown representative—responsible for helping a company in a situation such as Carillion’s—from August to November during a crucial period of the company’s difficulties? That was surely a gross neglect of their responsibilities to monitor the company? Does the Minister plan an investigation into the Government’s handling of the matter? The Statement refers to the official receiver’s statutory duty to investigate the cause of failure in any company. That will not cover the action of Ministers—and they have their fingerprints all over this debacle. Who will investigate their conduct?

The outcomes of this liquidation will be wide-reaching. Carillion ran 50 prisons, almost 9,000 schools, 200 operating theatres and 11,800 hospital beds. What assurance can the Minister give that none will be affected? The information the Government have released through the Insolvency Service makes no reference to their plans for the ongoing delivery of public services. Will the Minister commit to inform the House about this as soon as possible? Will he act quickly to bring these public sector contracts back in-house?

The Statement says that taxpayers will not bail out this company, but is that believable? The Government have form: there is a pattern of the taxpayer being asked to pick up the pieces of wildly irresponsibly bidding and grotesquely high pay and perks for executives, with the Government using yet more public money, as in the case of the east coast main line, to bail out these failing companies. It is vital that shareholders and creditors are not allowed to walk away with the profits from profitable contracts while the taxpayer bails out loss-making parts. Will the Minister commit to make sure that that does not happen?

Carillion employs almost 20,000 people, with far more in its supply chain. The Minister referred to them, but will he confirm that the pay and conditions of these workers will be the Government’s priority in any financial assistance? The workforce will have turned up today not knowing whether their jobs and pay are safe. Will the Minister commit to doing everything in his power to protect the jobs of those working on public sector contracts? My understanding is that in a compulsory liquidation the contracts of all employees are automatically terminated. Will he say whether that is so? Will the Redundancy Payments Service pay out huge sums for redundancies, arrears of wages, holiday pay and protective awards?

The Minister mentioned pensions. Can he tell us how much the Pension Protection Fund will have to put aside to cover the deficit in Carillion’s defined benefit pension schemes? He also mentioned the supply chain. Lots of SMEs and workers in the supply chain will be threatened, and contracts with large companies are clearly their lifeblood. What will the Minister do to safeguard jobs and workers in Carillion’s supply chain?

The Government are guilty of being too cosy, too incompetent and too profligate: too cosy with the companies; too incompetent in leaving the position of the Crown representative vacant for three months and awarding more contracts to a company that they knew was in severe crisis; and too profligate in handing over public money to the private sector as a result of their dogmatic belief that it should profiteer from our schools, hospitals and public services no matter what its performance.

[Lord Stunell (LD)]

My Lords, I thank the Minister for repeating the Statement. The collapse of the second-largest construction company in the country and a major provider of public services across the country is cause for concern and regret, not least for those employed by that company and those who depend on it because they are part of a long supply chain in many different industries, particularly the construction industry. The official receiver has been appointed and the Statement says that one of his duties will be to hold an inquiry. Can the Minister say something about the status of staff and employees working on public sector service provision and those working on private sector contracts? What is their future? What do the Government intend to do to protect them?

There is, of course, anger on the part of many of those working for and with the company that the warning signs were not quickly followed up by the Government after the alert in July—not least that a Crown representative was not appointed when good practice and ministerial guidelines say that that should have happened. I hope that the Minister will say something about that. If the official receiver’s inquiry does not cover such issues, I will certainly join the noble Lord, Lord Hunt, in calling for a wider inquiry.

In view of Carillion’s role in delivering numerous large-scale infrastructure projects, what are the implications of its collapse on those projects and their timetables, and what impact may it have on the Government’s industrial strategy? We should bear in mind that construction and construction training were key elements of that strategy and that many apprentices are employed not just by Carillion but by those in the supply chain, whose continuing apprenticeships are clearly at risk. Can the Minister help us on that? What are Ministers doing to minimise damage to public services and the capacity of the construction industry? Subcontractors face a very difficult time. It is one thing to say that contracts can be transferred to their partners—for instance, on HS2—but what about the backlog of unpaid bills that Carillion will owe them? Will that be coughed up by their new partners? Is that part of the deal that was arranged when the partnerships were set up, or is it more likely that the subcontractors will be expected to bear the loss?

Finally, what does the Minister have to say about the governance of that company and the way that the warning signs were there? Even the chairman has some form from times past. What exactly do the Government believe is the right governance structure for a major contractor for public services so that in future there will be protection for the public, for employees and for the country?