Oral Answers to Questions

Jeremy Corbyn Excerpts

Wednesday 17th January 2018 Commons Chamber

[The Prime Minister]

I am very happy to give my hon. Friend that commitment from the Government. He is absolutely right: it is very pleasing to see the figures the Office for National Statistics produced last week, which showed that production has now grown for eight months— the longest streak since 1994—and manufacturing output is at its highest since February 2008. And earlier this month, we saw that productivity growth has had its best quarter since 2011. That shows that our economy remains strong and that we are continuing to deliver secure, better-paid jobs. We will continue to do that and support our manufacturing sector.

[Jeremy Corbyn (Islington North) (Lab)]

In the last six months, the Government have awarded more than £2 billion-worth of contracts to Carillion. They did so even after the share price was in freefall and the company had issued profit warnings. Why did the Government do that?

[The Prime Minister]

It might be helpful if I just set out for the right hon. Gentleman that a company’s profit warning means it believes it will not make as much profit as it had expected to make. If the Government pulled out of contracts, or indeed private sector companies pulled out of contracts, whenever a profit warning was issued, that would be the best way to ensure that companies failed and jobs were lost. It would also raise real issues for the Government about providing continuing, uninterrupted public services. Yes, we did recognise that it was a severe profit warning, which is why we took action in relation to the contracts that we issued. We ensured that all but one of those contracts was a joint venture. What does that mean? It means that another company is available to step in and take over the contract. I say to the right hon. Gentleman that this was not just about the Government issuing contracts; actually, we see that the Labour-run Welsh Government issued a contract after the profit warning last July, and only last week a public sector body announced that Carillion was its preferred bidder. Was that the Government? No—it was Labour-run Leeds City Council.

[Jeremy Corbyn]

For the record, Leeds has not signed a contract with Carillion. It is the Government who have been handing out contracts. It is the Government’s responsibility to ensure that Carillion is properly managed.

Between July and the end of last year, Carillion’s share price fell by 90% and three profit warnings were issued. Unbelievably, the Government awarded some contracts even after the third profit warning. It looks like the Government were either handing Carillion public contracts to keep the company afloat, which clearly has not worked, or were just deeply negligent of the crisis that was coming down the line.

[The Prime Minister]

I am very happy to answer questions when the right hon. Gentleman asks one. He did not.

[Jeremy Corbyn]

I asked the Government whether or not they had been negligent. They clearly have been very negligent. [Interruption.] Tory MPs might shout, but the reality is that as of today more than 20,000 Carillion workers are very worried about their future. For many of them, the only recourse tonight is to phone a DWP hotline.

The frailties were well known: hedge funds had been betting against Carillion since 2015, and the state-owned Royal Bank of Scotland was making provision against Carillion last year. The Government are supposed to protect public money through Crown representatives, who are supposed to monitor these powerful corporations that get huge public contracts. This is a question that the Prime Minister needs to answer: why did the position of Crown representative to Carillion remain vacant during the crucial period August to November, when the profit warnings were being issued, the share price was in freefall, and many people were very worried?

[The Prime Minister]

I am afraid I have to say to the right hon. Gentleman that of course—

[The Prime Minister]

I will indeed answer the question, but I know that the shadow Foreign Secretary has herself praised Carillion in the past for its work.

To answer the right hon. Gentleman, there is obviously now a Crown representative who has been fully involved in the Government’s response. Before the appointment of the Crown representative to replace the one who had previously been in place, the Government chief commercial officer and the Cabinet Office director of markets and suppliers took over those responsibilities, so it was not the case that there was nobody from the Government looking at these issues. That is standard procedure, and it ensured that there was oversight of Carillion’s contracts with the Government during the appointment process for the Crown representative.

[Jeremy Corbyn]

Well, they clearly were not looking very well. Carillion went into liquidation with debts that we now understand to be £1.29 billion and a pension deficit of £600 million. At the same time, the company was paying out ever-increasing shareholder dividends and wildly excessive bonuses to directors. From today, 8,000 Carillion workers on private sector contracts will no longer be paid, but the chief executive will be paid for another 10 months—one rule for the super-rich, another for everybody else. Will the Prime Minister assure the House today that not a single penny more will go to the chief executive or the directors of this company?

[The Prime Minister]

First, I say to the right hon. Gentleman that this is obviously a situation that is changing as decisions are being taken, but my understanding is that a number of facilities management contractors have now come to an agreement with the official receiver that means that their workers will continue to be paid. It is important to say that the official receiver is doing its job and working with those companies.

The right hon. Gentleman raises the issue of bonuses, and people are of course concerned about the issue and are rightly asking questions about it. That is why we are ensuring that the official receiver’s investigation into the company’s business dealings is fast-tracked and that it looks into not just the conduct of current directors, but previous directors and their actions. In reviewing payments to executives, where those payments are unlawful or unjustified, the official receiver has the powers to take action to recover those payments. It is important that the official receiver is able to do its job.

What is also important is that the Government’s job is to ensure that public services continue to be provided, and that is what we are doing. The right hon. Gentleman said earlier that it was the Government’s job to ensure that Carillion was properly managed, but we were a customer of Carillion, not the manager of Carillion— a very important difference. It is also important that we have protected taxpayers from an unacceptable bail-out of a private company.

[Jeremy Corbyn]

When Carillion went into liquidation, many contractors were still unpaid. The company was a notorious late payer, taking 120 days to pay and placing a huge burden on small companies. That is four times longer than the 30 days in the prompt payment code that Carillion itself had signed up to. Why did the Government allow a major Government contractor to get away with that? Will the Prime Minister commit to Labour’s policy that abiding by the prompt payment code should be a basic requirement for all future Government contracts?

[The Prime Minister]

Of course we look at the behaviour of companies that we contract with in relation to payments. The question of prompt payments has been brought up in this House for as long as I have been in this House, and work is always being done on it, but the right hon. Gentleman has raised an important point about the impact of Carillion’s liquidation on small companies. That is why the Business Secretary and the City Minister held a roundtable with the banks this morning to discuss credit lines to small and medium-sized enterprises and to make it clear that SMEs are not responsible for Carillion’s collapse. The Business Secretary has also held further roundtables today with representatives of small businesses, construction trade associations and trade unions—workers’ unions—to ensure that we are on top of the potential effects on the wider supply chain. It is right that we look at those very carefully and that we take action. It is also right that, through the Department for Work and Pensions, we put in place support for any workers who find themselves no longer employed as a result of this.

[Jeremy Corbyn]

It is a bit late for one subcontractor. Flora-tec, which was owed £800,000 by Carillion, has already had to make some of its staff redundant because of the collapse. This is not one isolated case of Government negligence and corporate failure; it is a broken system. Under this Government, Virgin and Stagecoach can spectacularly mismanage the east coast main line and be let off a £2 billion payment, Capita and Atos can continue to wreck lives through damaging disability assessments of many people with disabilities and win more taxpayer-funded contracts, and G4S can promise to provide security for the Olympics but fail to do so, and the Army had to step in to save the day. These corporations need to be shown the door. We need our public services to be provided by public employees with a public service ethos and a strong public oversight. As the ruins of Carillion lie around her, will the Prime Minister act to end this costly racket of the relationship between Government and some of these companies?

[The Prime Minister]

I might first remind the right hon. Gentleman that a third of the Carillion contracts with the Government were let by the Labour Government. What we want is to provide good-quality public services delivered at best value to the taxpayer. We are making sure in this case that public services continue to be provided, that the workers in those public services are supported and that taxpayers are protected. What Labour opposes is not just a role for private companies in public services but the private sector as a whole. The vast majority of people in this country in employment are employed by the private sector, but the shadow Chancellor calls businesses the real enemy. Labour wants the highest taxes in our peace-time history, and Labour policies would cause a run on the pound. This is a Labour party that has turned its back on investment, on growth and on jobs—a Labour party that will always put politics before people.