Carillion and Public Sector Outsourcing

Pat McFadden Excerpts

Wednesday 24th January 2018 Commons Chamber

[Mr Lidington]

No, and he ceased to be an adviser after the Prime Minister took office.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

The Minister mentioned that the Government are funding the cost of the liquidation. What is the Government’s estimate of that cost?

--- Later in debate ---

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Carillion’s problems have been well trailed: major construction projects running over budget and leaving the company with losses; a huge pension deficit; and work done overseas for which it has not been paid. All that ultimately led to the company’s creditors losing confidence and its collapse into liquidation.

As has been said, the corporate headquarters is in Wolverhampton, where it employs some 450 people. What reassurance can the Minister give to the staff at the HQ, who have been described as the nerve centre of the company? I understand the implications of an insolvency, but an assurance that they will be employed until the end of the month is not good enough when there is only one week of the month left. The staff need more than that.

There are other critical questions about pensions, subcontractors and those who were charged with the stewardship of the company, but in the two minutes I have left I want to concentrate on the collapse itself. Court documents filed by the chief executive last week show that Carillion was engaged in a desperate effort to keep open lines of credit with its banks. From the outside, it is of course difficult to judge whether those efforts may have borne fruit or whether they were always a lost cause. In any case, the liquidation has decided the outcome. However, those discussions involved not just Carillion and the banks; the Government were involved, too.

What exactly did Carillion ask the Government for in the days running up to liquidation? In what form was that help asked? Was it a loan, or was it the underwriting of activities in case cash-flow projections did not materialise? How did the Government take the decision to refuse these requests? Which Ministers were involved, and what was the process for ultimately saying no? Crucially, when the decision to refuse was taken, was any comparison made between the likely cost to the public purse of keeping the company going and the cost of turning down the request for financial help and seeing the company collapse?

Much has been said about the wrongness of using public money to bail out companies. Company failure is, of course, an inescapable feature of any market economy, but in this case the taxpayer was not free to walk away, as we have seen and as has been confirmed. The taxpayer is paying the costs of liquidation.

We want answers to those questions, if not today then certainly in the Select Committee inquiries that follow.