Carillion and Public Sector Outsourcing

John Spellar Excerpts

Wednesday 24th January 2018 Commons Chamber

[Mr Lidington]

As I have already said to the House, these are not political appointments so there is no political intervention in them. It is quite right that donations to all political parties are made public. That is what the House has voted for and embodied in legislation, and it makes the situation clear to everybody.

Let me turn to Carillion’s liquidation. Along with all my fellow Ministers and, I believe, the whole House, I recognise that the collapse of Carillion has caused huge anxiety for the people who work for Carillion companies, the people in Carillion pension schemes, the suppliers and subcontractors and, of course, the people who use the public services provided by the company’s workers.

I reiterate the priorities that have animated the Government throughout the process. They have been: first, to make sure that public service delivery continued without interruption, which has been the case, as no public bodies have reported any major service disruptions; secondly, to reassure the workers employed on public service contracts that they will continue to get paid for their work; thirdly, to make sure that the right support is in place for pensioners; and fourthly, to protect taxpayers from an unacceptable bail-out of a public company, the risk of which is rightly borne by the shareholders and the banks that have lent to it.

The situation today is that the official receiver is now effectively running Carillion, and in the course of time his investigations will show exactly how the company ran into trouble. Although Carillion was under some financial pressure from three UK public sector construction projects—two hospitals and a road scheme in Scotland—it is already clear from the company’s statements to the stock market and from information that has become public since the liquidation that the problems it faced lay largely in its overseas construction projects and in the level of financial risk that it took on.

Within days of the first profit warning in July 2017, the Government retained legal and accountancy support and started an intense period of contingency planning. Preparing these plans involved considerable effort by officials from right across Government. The Department of Health and Social Care co-ordinated a similar exercise for NHS bodies, including trusts, and the Ministry of Housing, Communities and Local Government worked with local authorities that had exposure to Carillion. The key aim of all these contingency plans was to ensure that public services were kept running safely and smoothly in any possible scenario. The solution had to be specific to the contract in question, had to be affordable and had to be capable of being executed, if necessary, at short notice.

As a result of that planning, the work covered by the service contracts has continued with minimal disruption: the school meals have been served, the hospitals have been cleaned and the maintenance staff have continued to go about their work. With regard to the construction contracts, some infrastructure work, such as that on the Aberdeen bypass, now continues uninterrupted. Other construction sites where work has paused have been put into a safe state so that work can be resumed quickly. The official receiver is working hard to resume work on these sites at the earliest possible date. This work requires customers to find new project management firms that can oversee the completion of their projects.

[John Spellar (Warley) (Lab)]

I thank the Minister for giving way and for the information that he is providing to Members of Parliament. The Midland Metropolitan Hospital has a site management in place and a series of contractors. Given that those contractors are now locked out of the site, they will be going off to undertake other work, so increasing costs will have to be borne. There will also be disruption to the work from the delay on an already delayed hospital, which has nothing to do with the workforce.

[Mr Lidington]

The right hon. Gentleman makes a perfectly serious and reasonable point. It is crucial that we do all we can within our power to minimise the impact of delay on the public sector construction contracts, and to retain the knowledge held by the Carillion staff employed on those contracts who, in most cases, are undertaking a project management role, managing the work of a number of different subcontractors. In particular, the development of our future hospitals must continue. This is something that the Minister of State, Department of Health and Social Care, my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay), is working on day by day.

--- Later in debate ---

[John Spellar]

rose—

[Mr Lidington]

May I come to discussing the particular hospital that the right hon. Gentleman cited?

We are working with the official receiver to ensure that Carillion construction staff working on the Royal Liverpool Hospital, the Midland Metropolitan Hospital and the Southmead Hospital in Bristol continue to be paid. This allows for a more orderly timeframe for the discussions to take place between the private finance initiative contractor and the lenders to ensure that new contractors can replace Carillion and that the work can resume at the earliest possible date.

I say to the right hon. Gentleman that we know that we have a lot of work still to do. We have, for example, to find alternative suppliers both for those hospital contracts and for other contracts, but I regard the hospital contracts as a particular priority. The exact structure of those contracts and the extent to which they are nearing completion obviously varies depending on which hospital contract one looks at. The precise solution will differ from Liverpool to Bristol to the west midlands. I assure him that we regard getting on with that job as a very high priority indeed.