Carillion

Baroness Morgan of Cotes Excerpts

Monday 15th January 2018 Commons Chamber

[Mr Lidington]

First, may I correct the hon. Gentleman on one specific point about schools? He said that 9,000 schools have contracts with Carillion, but the figure I have is about 230—219 plus a small number of building contracts—which is much smaller than the exaggerated figure that he gave the House.

As I said in my statement, 60%—roughly three fifths—of Carillion’s revenues are actually from contracts that have nothing to do with the United Kingdom Government. Indeed, the problems that Carillion faced arose in the most part from those contracts, not from Government contracts.

The position of private sector employees is that they will not be getting the same protection that we are offering to public sector employees beyond a 48-hour period of grace, during which the Government will sustain the official receiver to give time for the private sector counter-parties to Carillion to decide whether they want to accept termination of those contracts or to pay for the ongoing costs. That is a reasonable gesture towards private sector employees.

As for those who have been employed by the Carillion group to deliver public service contracts, the Government are continuing to pay their wages for the services delivered —those payments are being made through the official receiver, instead of through Carillion. That money, of course, is budgeted for by various Departments, local authorities and NHS trusts. The best help that one can give to employees delivering vital public services is to give them the assurance that we are continuing to pay their wages and salaries, and not to indulge in the sort of scaremongering to which I am afraid the hon. Gentleman is prone.

The private sector employees are entitled to know that assistance will be there from Jobcentre Plus after the 48-hour period of grace runs out, when a number of them may face termination of the Carillion contracts through which they have been employed.

The hon. Gentleman asked about the contracts that were awarded after the first profits warning in 2017. As I said earlier, there was a small number of those contracts. The defence contracts were actually agreed and signed before the profits warning, although they were announced afterwards. The Government, quite rightly, have to operate a fair and transparent procurement process, guided by the Public Contracts Regulations 2015. There are a number of tests of financial capability for potential contractors. At the time when all those post-July 2017 contracts were bid for and awarded, Carillion met all the mandated tests, so it would have been, to put it mildly, a legal risk to have treated Carillion any differently from other bidders that were able to meet the tests.

In the light of what was in the public domain about Carillion’s profits warning, the Government Departments responsible for the contracts ensured that there were arrangements, such as the joint venture provision, to give protection in the event of Carillion being unsuccessful in its attempts, about which it was confident, to secure an agreement with its bankers. I emphasise that no money is paid to Carillion, or to any other contractor, other than for services that are actually delivered, so there is no question of money being spent twice for the same service.

I am disappointed that the hon. Gentleman resorted to party politics in his response. It is worth reminding ourselves of who awarded Carillion its contracts. Of the Carillion contracts that, until this morning, were still active, roughly a third were awarded by the Conservative Government, roughly a third were awarded by the coalition Government when the right hon. Member for Twickenham (Sir Vince Cable) was Secretary of State for Business, Innovation and Skills, and the other third were awarded by the Labour Government, during which time the hon. Member for Hemsworth (Jon Trickett), as he knows, worked in the office of the then Prime Minister.

When the hon. Gentleman returns to this subject, I suggest he treats it with the seriousness it deserves and does not preach sermons without taking a long, hard look in the mirror.

[Nicky Morgan (Loughborough) (Con)]

First, let me pay tribute to my right hon. Friend’s calm and workmanlike approach in working through all the contracts and liabilities, which is absolutely the responsible thing to do. I note what he says about the financial capabilities, awarding and the public procurement rules, and I am sure there are many questions to be asked about that and about future arrangements. However, may I just ask him about the small and medium-sized enterprises in the supply chain? Many companies supply Carillion contractors and are in contracts, and they will be concerned about meeting liabilities, perhaps to Her Majesty’s Revenue and Customs or to others. Has he or his Department had discussions with HMRC about things such as time to pay arrangements, so that SMEs are given time, rather than being under pressure to keep paying the taxman?

[Mr Lidington]

I am grateful to my right hon. Friend for that. Let me make two points in response to her. First, the Government, through the official receiver, are continuing to make provision for payments both to suppliers and subcontractors. If any subcontractor experiences any difficulties, I encourage them to talk in the first place to the Insolvency Service. This is exactly the sort of risk that led us to decide to set up a hotline for Members of Parliament and their staff, so that if anything does seem to be going wrong, Ministers can be alerted to it rapidly. May I also say to her that HMRC and the Treasury have been fully in the loop at all stages of these discussions, but I will make sure the point she has just made to the House is reinforced when I chair a meeting of interested Ministers later today?