Public Services: Security of Provision

Lord Wallace of Saltaire Excerpts

Wednesday 19th October 2011 Lords Chamber

[Lord Haskel]

To ask Her Majesty’s Government what steps they are taking to ensure that companies providing public services are financially secure.

[Lord Wallace of Saltaire]

My Lords, it is the responsibility of the relevant contracting authority to take appropriate steps to ensure that companies providing public services are financially secure, initially when selecting suppliers and then on an ongoing basis through contract management and supplier relationship management. For each of the major suppliers to government, we have appointed a Crown representative responsible for managing the relationship with that supplier.

[Lord Haskel]

My Lords, I find that response a little worrying, because we all depend on public services. Does the Minister agree that, at this time of volatile markets and financial difficulties, the services that we get from these companies are at risk from too much debt, from hidden debt and from hit-and-run investors who try to take over these companies? Are the Government taking any extra precautions in these circumstances, because, at the end of the day, it is we the taxpayers who have to clear up the mess?

[Lord Wallace of Saltaire]

My Lords, one cannot entirely eliminate financial risk either from private or public sector providers so long as public sector providers have a degree of financial and accounting autonomy. We have seen that in a number of public sector cases as well as in private sector cases. The Government are taking considerable care in contracting to ensure that we look at the financial viability of all suppliers and, in particular, do our best to encourage small and medium enterprises and social enterprises to be able to bid for public service contracts. That takes rather more sophistication than dealing simply with major suppliers.

[Lord Brookman]

My Lords—

[Baroness Eaton]

My Lords, does my noble friend agree that one of the best ways of helping businesses, particularly small and medium enterprises, is to scrap complex and unnecessary central prescription around the commissioning process? Will he detail what the Government are doing to simplify the systems that businesses have struggled with for so many years?

[Lord Wallace of Saltaire]

My Lords, I understand that one of the problems particularly for smaller companies and social enterprises bidding for public sector contracts was the prequalification questionnaire, a document which might have been somewhere between 50 and 300 pages long and led to some smaller enterprises simply deciding not to bid. We have now scrapped that and made a much simpler and shorter alternative. We are adjusting the way in which the many hundreds of contracting authorities within the public sector deal with those with whom they operate, but I underline that we are concerned as far as possible to assist mutuals, social enterprises and small companies in playing their role in providing public services wherever possible.

[Lord Brookman]

My Lords—

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[Lord Wallace of Saltaire]

My Lords, I am not fully briefed on the exact details of my honourable friend Paul Burstow’s diary. We have of course been concerned with ensuring that the services provided by Southern Cross should be maintained. There have been various negotiations. Southern Cross confirmed in an announcement to the Stock Exchange on 27 September that it had reached agreement with its principal landlords and that it would transfer the group’s care home leases to its landlords and the related business and assets for the operations of those homes to its landlords or alternative care providers.

[Lord Maclennan of Rogart]

My Lords, does not Southern Cross illustrate that it is not only small and medium sized companies that need to be watched? Is there a continuing process in respect of the larger companies that are providing comparable public services?

[Lord Wallace of Saltaire]

My Lords, one or two of the providers of public services in the private sector are now among the largest companies in Britain and the world. Noble Lords who read the financial pages may know that G4S has just taken over another major multinational company. Liberata, a back-office outsourcing firm, nearly went bankrupt in 2008, partly because of its pensions liability, and had to be restructured. It is now partly owned by its employees and partly owned by the Pension Protection Fund. The Government, as with all others in such circumstances, do get engaged in trying to re-establish companies in difficulty that are playing a valuable role.

[Lord McFall of Alcluith]

My Lords, given the sorry example of Southern Cross and the burgeoning outsourcing of public services, which is estimated to go from £80 billion to £140 billion by 2014, is there not a case for the utmost transparency on the part of the Government through extending freedom of information to private companies undertaking public services so that they can catch the failed business model, which they did not do in the case of Southern Cross?

[Lord Wallace of Saltaire]

My Lords, I have to repeat: one cannot entirely eliminate financial risk from activities which take place either in the private or the financial sector. We all know that cases of mismanagement have taken place in schools, hospitals and other areas in the public and private sector. The Government have established a new major projects authority within the Cabinet Office and a group of strategic suppliers. They are working extremely hard to ensure that as much transparency as possible can be provided. However, if the noble Lord thinks that there is insufficient transparency, I encourage him to return to this issue on future occasions.