EU Exit Preparations: Ferry Contracts

Joanna Cherry Excerpts

Tuesday 5th March 2019 Commons Chamber

[Chris Grayling]

We did not receive legal advice saying, “Do not do this.” We received legal advice saying that there was a risk in taking the approach, and we judged collectively across the Government that it was a necessary risk to take in the national interest.

[Joanna Cherry (Edinburgh South West) (SNP)]

rose—

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[Chris Grayling]

I am going to make a bit of progress, because I have given way many times.

Let me touch briefly on the issue of Seaborne Freight, which was raised exhaustively by the hon. Member for Kilmarnock and Loudoun, and on which I have answered question after question in the House. First, to be clear, the agreement with Eurotunnel was not about the contract with Seaborne Freight; it was about the procurement process, and particularly about the continuing contracts we have with Brittany Ferries and DFDS for additional ferry capacity into the UK, to provide us with resilience. I have spoken exhaustively in the House about Seaborne Freight. I am disappointed that the contract had to be terminated. I stand by the decision to give that company a chance, particularly since it was backed by Ireland’s biggest shipping firm at the time. We have, as a Government, paid no money at all to Seaborne.

The hon. Gentleman keeps asking me about spending money on due diligence. We spend money on due diligence for contracts that we do not award as well as for contracts that we do award, because rightly and properly in government due diligence is applied to a tender of any sort. That is what we did in this case, and what we do in all other situations. That, again, is the right thing to do.

So it is absolutely clear—I want to be absolutely clear—that when it comes to the Eurotunnel litigation, the settlement struck between the Government and Eurotunnel was separate to the issue of the Seaborne debate, and it was struck, I think, in a way that is designed to ensure that the taxpayer actually receives value through the addition of important facilities at the border that will smooth the flows.

[Joanna Cherry]

On that point, will the Secretary of State give way?

[Chris Grayling]

It was a challenge to the procurement process, on which I said I took detailed legal advice at the time of procuring, which I and my accounting officer took into account when awarding these contracts. We expected that if a legal challenge were brought, any court determination would be brought well after Brexit and would not disrupt the process. All this, as the hon. Member for Kilmarnock and Loudoun will be aware, has already been looked at by the National Audit Office. We have invited it to take a further look, but I stand by the decisions that we took.

These decisions were not simply taken by me and by my Department; they were decisions taken collectively, in the national interest.

[Joanna Cherry]

Can the right hon. Gentleman confirm, just for the record, that not a single penny of the £33 million paid out to Eurotunnel will be returned in the event that there is a deal?

[Chris Grayling]

The deal that we have done is to pay for additional facilities at the border, to create a smoother flow at the border. That is something that we will benefit from at the borders.

[Joanna Cherry]

You are not telling the truth.

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[Mr Speaker]

Order. Look, I understand passions are high, but the hon. and learned Lady must not say that the Secretary of State is not telling the truth, because that—[Interruption.] Order. That is an imputation of dishonesty. The hon. and learned Lady may think that the Secretary of State is wrong, but I am afraid before the debate proceeds further she must withdraw that charge.

[Joanna Cherry]

rose—

[Mr Speaker]

I am not debating it.

[Joanna Cherry]

I will withdraw it and I will speak later in full.

[Mr Speaker]

I say to the hon. and learned Lady that I am chairing this debate. The hon. and learned Lady will speak in full, or otherwise, if and when she catches the eye of the Chair. Thank you.

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[Andy McDonald (Middlesbrough) (Lab)]

It is good to see the Transport Secretary finally in his place today, after I tried and failed to bring him to the House yesterday. Instead he sent the Health Secretary as his human shield, but that came as no surprise, considering how the Transport Secretary has made a habit of treating this House with disdain. Perhaps he will reflect upon that.

I thank the hon. Member for Kilmarnock and Loudoun (Alan Brown) for securing this debate. Understandably, the Health Secretary was not able to answer the questions put to him yesterday, so I am going to have another go at getting some answers out of the Transport Secretary, but I am not holding my breath. In the papers filed at court in the weeks before the case was due to be heard, the Government lawyers described Eurotunnel’s case as “embarrassing”. They were bullish and confident, yet in the early hours of the morning of 1 March a settlement was reached between the Government and the company. This sequence of events raises many still unanswered questions.

[Joanna Cherry]

Does the hon. Gentleman agree that there is at least an apparent conflict between the reported out-of-court settlement of £33 million and the Secretary of State’s claim that the £33 million is to pay for “improved security”, and that we ought to be trying to get to the bottom of whether that is accurate?

[Andy McDonald]

The hon. and learned Lady makes an important point on an issue to which I will be returning in a few minutes.

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[Andy McDonald]

I am grateful for that clarification that it took a Cabinet Committee to make such a mess of things. Can the Secretary of State specifically say what is in this standard settlement—or are there other clauses within it? Ordinarily, when such cases are settled, they are done by reference to a consent order, in which there would be a paragraph dealing with the sum of money to be paid. In these circumstances, it may say “£33 million” and it may say the date upon which that sum is to be paid. It may also say that the costs are to follow the event. So we want to know the answers to those questions.

[Joanna Cherry]

Does the hon. Gentleman agree that it would be highly unusual in an out-of-court settlement for the party settling to stipulate how the party receiving the settlement would spend the money?

[Andy McDonald]

I absolutely agree with the hon. and learned Lady on that. Having been in practice for the thick end of 30 years, I have never entered into a settlement where the defendant has told me what I am going to spend the money on. That is absolutely ludicrous, so we need to know the answers.

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[Andy McDonald]

The right hon. Gentleman says, “This is really poor” from a sedentary position, and I agree with him: this is really, really poor. It would be unacceptable at any time, but it is especially outrageous following the years of austerity and neglect that have left our towns and communities hollowed out and our public services in crisis.

[Joanna Cherry]

The hon. Gentleman is giving an excellent speech. Does he agree that if the SNP Government in Edinburgh or the Labour Government in Cardiff were guilty of this sort of profligacy with public money, we would never hear the end of it from Conservative Members?

[Andy McDonald]

The hon. and learned Lady is exactly right: it is one rule for the Tory party and another for everyone else. [Interruption.] No, it is not a funny issue. The right hon. and hon. Members on the Government Front Bench would condemn such waste, and with some justification; they really cannot complain when other people hold them to account for their continuous errors and wastefulness.

There are now 8 million working-age adults in poverty, while child poverty has grown to more than 4 million and rising; councils have had their funding slashed by half; violent crime is rising; and school budgets are seeing cuts for the first time in 20 years. In my constituency and many others throughout the country, there is appalling poverty and people are struggling. We are told that there is not the money to properly fund our schools, hospitals or social care services, yet the Prime Minister always finds the money to indulge the Secretary of State’s latest blunder. A further £1.9 billion has been spent on planning for a damaging no deal. For some, it seems, austerity is over. It is one rule for Tory Ministers and another rule for the rest of us. This cannot be allowed to continue. On behalf of the country, I implore the Secretary of State to resign.

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[Charlie Elphicke]

I thank my hon. Friend for making exactly the point that I am coming to. I set out how we needed to invest to be ready on day one, deal or no deal; as I argued at the time, to get the best negotiation, we needed to be able to get up and walk away from the table. I also set out detailed legal reasons why we did not owe any of the divorce bill—another point that was important to our negotiation.

The Government as a whole—the Cabinet—decided not to spend money at that time. The Cabinet decided not to invest at that time. The Cabinet decided not to take forward contingency planning at a substantial level until after the Chequers discussions. To visit that on the Secretary of State would not be fair, right or proper.

[Joanna Cherry]

rose—

[Peter Grant]

rose—

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[Kevin Foster (Torbay) (Con)]

Thank you for your guidance, Mr Speaker. I will of course observe that courtesy. I would not wish to prevent other Members from having the opportunity to contribute to this debate.

It is interesting to follow the hon. Member for Glasgow North West (Carol Monaghan), particularly given her interest in Coventry airport. As a former deputy leader of Coventry City Council, I know that one of the issues for that airport is that it is quite an underutilised resource since passenger flights from it were ended a couple of years back, when, sadly, the then Labour Government decided not to allow the airport permission for a terminal that would have allowed that service to become financially sustainable. Helpfully, there is quite a large resource there and an ability to develop it further. I hope that gives her some reassurances. Certainly, it is an airport that could contribute a lot more to our economy more generally. I will now focus my remarks more on Torbay.

There is a bit of a groundhog day feeling to this debate. Those who come here to tell us how dreadful no deal would be and to raise legitimate concerns about what that may mean for business and the economy, normally the next day pop back to complain about measures to mitigate no deal. There was always going to be a need to try to move with some urgency, particularly in relation to what the contract is actually about. We keep on talking about the ferries, but what we were actually talking about yesterday is the fact that this is about securing the supply of vital medicines into the UK if there is disruption at the border.

It is worth noting that there was not a contract just with Seaborne Freight; that is how it is regularly portrayed, for pretty obvious reasons. There are also contracts with DFDS and Brittany Ferries, which represent the majority of the capacity. Those contracts are still in place, even though the one with Seaborne Freight is not. As I said in my intervention on my hon. Friend the Member for Dover (Charlie Elphicke), whose speech I found quite informative and useful, this is about the balance of the debate. Let us be candid: if the Secretary of State had refused to take a decision to create additional capacity, we would probably be here debating the potential lack of capacity for medicines to be transported into this country in a no-deal scenario. Instead, we are debating whether the legal risk was the right one to take. That is ultimately the nub of this debate.

In any scenario, we cannot say 100% exactly what the legal risk will be. No one presenting a legal case to court, particularly with any move towards reaching an out-of-court settlement, is going to start with the gambit, “We think we’re done—now we’re going to come here and negotiate.” That would clearly be an absolutely ludicrous position to adopt at the start of any discussions. I have taken part in such discussions myself. Both sides are always going to start with the fact that they feel their case is strong. We would be surprised if Eurotunnel walked in the door having decided that its case was not.

[Joanna Cherry]

Has the hon. Gentleman, like myself and the official Opposition spokesman, ever come across a commercial case where the settler stipulates how the settlee must spend the money? That is simply unheard of. Will he contradict that?

[Kevin Foster]

I thank the hon. and learned Lady for her intervention, which gives me an opportunity to confirm that this is not about £33 million going straight into Eurotunnel shareholders’ pockets—it is about spending it on specified outcomes. I am perfectly content to see what the settlement is being used for.

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[Joanna Cherry (Edinburgh South West) (SNP)]

I am grateful to be able to speak in this debate. I want to start by dealing with the red herring we frequently hear from Conservative Members that this debate is about impugning the Government’s responsibility to prepare for a no-deal Brexit. It is not about that. It is about their ability to make those preparations competently and without squandering taxpayers’ money.

Of course, the Government have to prepare for no deal because they are insistent on keeping no deal on the table, and last week they voted against the SNP amendment that would have taken it off the table. As some Conservative Members have generously accepted, no deal could be taken off the table by a number of routes, including an extension of article 50 or the option of revoking it—the lifeline thrown to the British Government by a number of Scottish politicians, including myself. In that respect, I declare an interest, with the backing of the Good Law Project.

Let us get that red herring off the table. This is not about the Opposition querying whether the Government should prepare for a no-deal or Brexit. This is about the Opposition doing their job and holding the Government to account for making those preparations in a shambolic, chaotic fashion that is wasteful of public money.

Last week, the Government settled out of court litigation brought against them by Eurotunnel for the legal reasons laid out by the hon. Member for Nottingham South (Lilian Greenwood). They paid more than £33 million to buy off the risk of losing the action and having to pay more, and the action was brought because they had failed to put three contracts—not just Seaborne Freight, so far as I am aware, but all three contracts—out to competitive tender. That £33 million was in lieu of a larger sum that would have had to be paid out in damages if the court case had gone ahead and the Government had lost.

That is why I, as a lawyer, am so puzzled by the insistence of the Secretary of State for Transport and the Secretary of State for Health that this £33 million will somehow pay for increased security at the ports. In my long experience of 30 years—20-odd years at the Bar and a number of years as a solicitor—I have never heard of such a stipulation in an out-of-court settlement in this type of case. That is why I was so puzzled, and perhaps expressed my puzzlement in terms that were unparliamentary.

I want to know. The Under-Secretary of State for Transport, the hon. Member for Harrogate and Knaresborough (Andrew Jones), is looking at his phone and is not interested in what SNP Members have to say, as usual, but this is not going to go away because I am going to pursue it with Eurotunnel and others. I want to know—[Interruption.] Well, perhaps he could just listen and be quiet while he is listening. I want to know whether Eurotunnel—

[Sir Peter Bottomley (Worthing West) (Con)]

On a point of order, Mr Speaker. Is it customary for the Member who is speaking to provoke a Minister into looking at her directly and then to say that he is somehow interrupting her. It seems to me it would be far better if the hon. and learned Lady went on addressing the Chair and left the Minister to listen, like the rest of us.

[Mr Speaker]

The hon. Gentleman has his own interpretation of the chronology of events, which those attending to observe our proceedings can make a judgment about for themselves, and that is one point of view. If I may say so, there is another point of view, which is that the hon. and learned Lady was somewhat disquieted, not to say mildly irritated, by the junior Minister’s evident fascination with the contents of his electronic device. It might be thought courteous not to be focusing intently on the said contents when a Member is addressing the House. I hope the hon. Gentleman will not take offence when I say that he is in the end a very loyal sort of person, and it is not terribly surprising that he should spring to the defence of his ministerial colleague and fellow parliamentarian. It was very gracious of him and a nice try.

[Joanna Cherry]

It may have been a nice try, but I am not going to leave this one alone. I want to know how much of that £33 million will be repaid in the event of there being a deal. I think I know the answer: it will be nil. I want to know whether there was any legal agreement that any amount of that £33 million was to be spent on improved security, and if so, to what extent. I will not be leaving those issues alone either today or in the future.

I was the first person, to my knowledge, to raise this issue on the Floor of the House or in Committee earlier this year. When I got hold of a copy of the contract with Seaborne Freight, which was readily available on the internet, I, like any lawyer worth their salt, looked up the public contracts regulations and realised that it looked very much as though the Government had avoided the competitive tendering process that they are bound to carry out under law.

That is why I raised this issue with the Secretary of State for Exiting the European Union in the Chamber on 7 January. I am going to go through the chronology because I want to make the point that I have raised at least half a dozen times the question of what was the urgent or unforeseeable event that justified there not being a competitive tender, and that on no occasion have I received the answer that has been given today by the Secretary of State for Transport that it was to do with a decision taken collectively by the Government last autumn to improve the supply of medicines in the event of a no-deal Brexit. The very first time I heard such an explanation was on the television at the weekend, when the Secretary of State for Health used it, and he of course used it again yesterday. However, it is very odd—again, this informs my puzzlement and frustration earlier this afternoon—that we have never heard that explanation before.

Let me go through the chronology. On 7 January in this Chamber, I asked the Secretary of State for Exiting the European Union why the contract with Seaborne Freight had proceeded under the negotiated procurement procedure without prior publication—that is to say, not competitively—because it seems to me that it must have been foreseeable for quite a long time that there might be a no-deal situation and it was therefore hard to say that no deal had come out of the blue and was urgent or unforeseeable. I received the usual non-answer from the Secretary of State. I will not bore hon. Members with the contents of the answer—they can look it up in Hansard—but there is nothing about a requirement to prepare for the urgent supply of medicine and, indeed, no kind of explanation at all.

The following day, 8 January, I raised the same point with the Secretary of State for Transport on the Floor of the House. I said I was concerned about the legality of the procurement process, that I had a copy of the contract notice and that, as my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown) reminded the House earlier that day, no deal has always been a possibility because the Prime Minister said right at the beginning that no deal is better than a bad deal. I asked the Secretary of State what the urgency was and whether the Government had set aside any funds in the event of legal action. I got a non-answer, other than to say it was a “matter of extreme urgency”, and there was no reference to the supply of medicine.

The following day, 9 January, I raised the matter in some detail with the Under-Secretary of State for Exiting the European Union, the hon. Member for Daventry (Chris Heaton-Harris), at a question and answer session before the Exiting the European Union Committee. I am proud to say that the segment where I questioned him went viral on the internet. I asked him a number of times to tell the Committee what the urgent and unforeseeable event was that justified these contracts not going out to competitive tender, and he was unable to tell me.

If the explanation that it had been a collective decision by the UK Government to put these contracts out non-competitively to secure the supply of medicines, I would have expected the Minister in charge of no-deal planning at the Department for Exiting the European Union to know that. The fact that he did not know and, under sustained questioning, did not mention it does raise a suspicion in my mind that it is an explanation that has been invented after the fact, rather than an explanation that has always been the case.

[Charlie Elphicke]

Will the hon. and learned Lady give way?

[Joanna Cherry]

I will finish the chronology, and then I will give way.

That was on 9 January. Later, I put in a written question:

“To ask the Secretary of State for Transport, what unforeseeable events led his Department to award contracts for additional shipping freight capacity under Regulation 32 of The Public Contracts Regulations 2015.”

I received the reply:

“A negotiated procurement procedure without prior publication was concluded…to ensure that capacity can be in place in time for a No Deal exit whilst at the same time securing value for money for the taxpayer.”

There was no mention of the need to secure the urgent supply of medicines in the event of no deal, but there was a mention of value for money for taxpayers. Do the Government still think they have provided value for money for taxpayers, given what we have heard this afternoon? I very much doubt it.

On 31 January, I asked the Attorney General about this matter. I asked him whether he was concerned that the Government could face legal action in respect of their failure to put these contracts out to competitive tender, whether he had been asked to advise on the matter and whether any money had been put aside for the contingency of such court action. He fell back on the Law Officers’ convention not to answer that question, but he certainly did not mention that the reason why these contracts had been awarded as a matter of urgency and non-competitively was the need to secure the supply of medicines.

On 11 February, I raised this matter with the Secretary of State for Transport. I asked:

“Will he state clearly for the record, as I have asked this question of him and other Ministers five times now: what were the reasons of extreme urgency and the unforeseeable events that justified his Department proceeding without competitive tendering”?

He said it was

“a change to the assumptions on the levels and length of disruption that might arise in a no-deal Brexit scenario.”—[Official Report, 11 February 2019; Vol. 654, c. 624.]

Perhaps the junior Minister could take a note that I want to know from the Secretary of State for Transport why he said on 11 February that the explanation was a change to the assumptions on the levels and length of disruption that might arise, and why he is now saying that it was a decision back in the autumn to secure the supply of medicines in the event of no deal.

[Charlie Elphicke]

Will the hon. and learned Lady give way?

[Joanna Cherry]

I will finish the chronology, and then I will give way.

Finally, I raised the point again on 14 February with the Secretary of State for Transport, asking him what he meant by a “change in the assumptions”. I asked:

“Would he care to elaborate on exactly what he meant by that? Does he think that that defence will stand up in court?”

Those were my exact words. He said:

“I recall explaining on Monday precisely what the circumstances were, and I do not want to detain the House any longer by repeating an answer that I gave to the hon. and learned Lady three days ago.”—[Official Report, 14 February 2019; Vol. 654, c. 1038.]

Again, he had an opportunity to say that the explanation was a requirement to secure the urgent supply of medicines in the event of a no-deal Brexit, but he did not. In fact, he told me that he had already told me precisely what the circumstances were, three days before, when he referred to a change in assumptions and said nothing about medicine.

I am going to give way to the hon. Member for Dover (Charlie Elphicke) in a moment, but the point I am making is that this is just an example of the number of times that I have pursued this question. I know that other hon. Members have done so, too, particularly my hon. Friends the Members for Kilmarnock and Loudoun and for Glasgow North West (Carol Monaghan). They have pursued in some detail their concerns about the supply of medicines after a no-deal Brexit, and never has anyone said to them, “Don’t worry, we so are concerned about this that we have risked breaking the law on competitive tendering to sort it all out.” That is why I am highly sceptical.

[Charlie Elphicke]

I thank the hon. and learned Lady for giving way, and I have been listening carefully to her submissions. The question of purpose is dealt with in the National Audit Office report, which states that the decision was meant

“to prioritise the flow of critical goods into the UK”.

Specifically, the report says that in September and October 2018, the intention was to

“‘ensure that capacity and flexibility exists for government to prioritise the flow’ of certain…goods”.

In November 2018, the Department’s business case was

“to ensure that capacity and flexibility exist for government to enable the prioritisation of…certain goods”.

It seems to me that critical goods were always in the mind of the Department, so I am not sure that her submissions to the House are borne out.

[Joanna Cherry]

I am grateful to the hon. Gentleman for that, because he actually reinforces the point that I sought to make. The National Audit Office has that information, and the House of Commons has had it today and yesterday, but my point is that on repeated occasions when I asked a number of Ministers from different Departments what the explanation was for this urgent need to tender non-competitively, not once did any of them mention what we are told was a collective decision to do it for a particular purpose. I therefore question whether that explanation has been invented after the fact.

[Andy McDonald]

The hon. and learned Lady is doing a brilliant job of exposing the facade that has been put up to excuse this reprehensible behaviour, but is the bottom line not that the Government knew that they were in breach of their own procurement rules and that Eurotunnel was going to win? That is why they settled the case.

[Joanna Cherry]

That is the bottom line. The hon. Gentleman is absolutely right.

I am going to draw to a conclusion, because I know that others want to speak. The history of this whole event, which the Government now say that they all knew about as it was a collective decision, has been one of evasion and obfuscation. I and others are left with the inevitable conclusion that they are trying to cover up a monumental error of staggering negligence in their preparations for a no-deal Brexit, which is costing the British taxpayer a lot of money. I would like to point out that Scottish taxpayers did not even vote for all this nonsense in the first place, and their representatives in this House have, apart from the Scottish Tories, done their best to try to get a no-deal Brexit off the table.

I came to the House this afternoon planning to ask for the resignation of the Secretary of State for Transport. That has been asked for by others already. But now that we know that this was a collective decision and that the Government are taking collective responsibility for it, let me say that in any normal, healthy and functioning democracy this scandal would bring the Government down.