Carillion

Bill Esterson Excerpts

Thursday 12th July 2018 Commons Chamber

[Bill Esterson (Sefton Central) (Lab)]

I congratulate the three Select Committees on the fine work they have carried out in investigating and coming up with conclusions on the Carillion fiasco. I thank my hon. and right hon. Friends—my hon. Friend the Member for Leeds West (Rachel Reeves), who introduced the debate so expertly, my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) and my hon. Friends the Members for Luton North (Kelvin Hopkins) and for Liverpool, Walton (Dan Carden)—for their excellent speeches.

The collapse of Carillion was indeed a fiasco—a fiasco for the 30,000 employees and the 20,000 sub- contractors; for the 27,000 members of its defined pension schemes, who will now have to rely on the Pension Protection Fund for a reduced pension; for the 30,000 suppliers who are owed £2 billion in unpaid invoices; for the children who depended on school meals; for our armed forces personnel whose housing was mismanaged; and for the taxpayer who is picking up the tab for the colossal failure of the Government to safeguard large sums of public money and the delivery of outsourced services and construction contracts.

In Liverpool, the obvious example of the fiasco, as my hon. Friend, and constituency neighbour, the Member for Liverpool, Walton said, is the failure to complete the Royal Liverpool Hospital. Construction came to a grinding halt when Carillion collapsed. It is completely unacceptable that the Government have not taken over the contracts to make sure that, in the interests of patients, the Royal is finished. As my right hon. Friend the Member for Wolverhampton South East said, the same applies to the hospital in Birmingham and the road in Aberdeen. Those are all examples of the fundamental flaws and costs of PFI and, too often, the way in which public contracts are delivered in the private sector.

Last August, Carillion extended payment terms to an outrageous 120 days and charged suppliers a fee for early payment. Such behaviour is indefensible, yet Carillion was a signatory of the prompt payment code. Will the Minister tell us why the Government were not policing their own payment terms and their own code? That prompts the question whether such payment terms are being enforced now. Why were new contracts worth £2 billion awarded after the change of payment terms, after the profit warnings and after the changes in senior management? Why did Government officials accept assurances from Carillion management about the viability of the company, even as it headed towards the cliff edge, and why did Ministers not challenge their own officials? Will the Government support the proposal of the Institute of Directors for a body to be created to police the directors of major companies?

The company continued to pay out executive bonuses and dividends, while reforming its pay policy to protect management from the possibility of having to repay their bonuses. The arrogance and corporate greed that have been described at Carillion simply will not be tolerated any more either by industry or by the wider public. The CBI wants performance in the payment of suppliers to be a consideration in tendering for public contracts. It is also calling for the publication of payment data. Labour Members agree with it and we will be including payment of suppliers as an essential criterion in our procurement policy in government. The next Labour Government will take the action needed to stop the late payment culture that cost our economy £2.5 billion last year and forced 50,000 small businesses to close. This Government have failed to do so. We will guard against insolvency by mandating the use of project bank accounts and retention deposit schemes in public construction contracts.

The chair of KPMG accepts the need for reform, but it is frustrating to learn that he “respectfully disagrees” with Select Committee members who described the firm’s audit of Carillion as complacent. I am afraid that his comments reinforce that very sense of complacency and it is fair to say that many people will respectfully disagree with him. The time has come for an overhaul of our audit system and of the cosy relationships that have come to characterise the way in which the big four accountancy firms operate, so will the Minister tell us whether the Government support the calls for a break-up of the big four accountancy practices? Whether it is the Public Administration and Constitutional Affairs Committee saying that they do not follow Treasury process, the abandoned construction site at the Royal Liverpool Hospital, the failure to enforce their own much trumpeted prompt payment code, or ignoring publicly available information about profit warnings, changes of senior management and excessive bonus payments, this Government have been found wanting, all at the cost of public services and the public finances.

The Government have appointed a senior partner at Slaughter and May as an adviser, despite the £8 million in fees paid to the firm by Carillion, which included £1 million on the day before it collapsed. I had hoped that the Government would have learned from the Carillion fiasco, but the Slaughter and May appointment suggests that they have learned nothing. The mismanagement of Carillion’s contracts was a massive failure by the Government, and the worst of rent seeking and wealth extraction by the few at the expense of the many. However, that culture is coming to an end. The public are appalled by the excesses of Carillion, and the consequences of that for suppliers, workers and public services, and so, too, are the vast majority of decent, hard-working, responsible business people.

The next Labour Government will be a strong partner for businesses that want to put the public good first—businesses that want to work with trade unions, recognise that decent pay and conditions are good for business as well as for workers, and want to treat suppliers fairly and pay them well and promptly. Labour will be the party of responsible business and responsible contracting —the party of business for the many, not the few.