Carillion
Debate between Philip Hollobone and Meg Hillier
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
As Members will recall, the House agreed on 24 January that the Government’s risk assessments of its strategic suppliers should be released to the Public Accounts Committee. I commend my fellow Committee members for their hard work in looking closely at all those papers. Yesterday, we published in full the papers relating to Carillion, which of course subsequently collapsed. We strongly believe that taxpayers, and those who were served by the public services that Carillion was supplying, deserve to know what happened.
The Carillion papers identify clear and compelling problems with the business in the months leading to its collapse. The Carillion assessments—the documents the Government were using—show that although Carillion had been rated as “amber”, owing to its performance against contracts with the Ministry of Defence and the Ministry of Justice, it was not until after Carillion issued a profit warning in July last year that the Government downgraded it to “red”. It therefore appears that the Government were not aware of Carillion’s financial distress until that point. In November last year, officials recommended a provisional “black” rating for Carillion—that information has come directly from the papers that we have published—but following representations from the company, the Cabinet Office did not confirm that designation. Carillion collapsed less than two months later.
The Committee has also considered papers relating to the other 27 strategic suppliers. A strategic supplier is a company that has business worth £100 million or more across central Government and their agencies. The risk assessments relating to other strategic suppliers raise concerns about their performance against contracts, and about the relationship between strategic suppliers and the Government. The Committee has currently chosen not to publish those papers, although I warn the Minister that we reserve the right to do so. We have been clear every step of the way, as we have looked at these papers, that our duty is to be responsible, not reckless. We are mindful of the impact of releasing information that could damage jobs and smaller supply chain businesses, and it is not our intention recklessly to pursue that. However, there might be information that we choose to put in the public domain at a later point.
The Government have become dependent on large contracts to deliver public projects and services, and great secrecy surrounds them. If a company providing a number of those contracts fails, that is bad news for service users and the taxpayer. The Government should act in the interests of the taxpayer and the public, but the system has become skewed so that too often the Government act to protect the contractor, rather than the service user. The system is broken. There are not enough suppliers bidding for contracts across whole swathes of government, and the system is skewed against smaller, specialist businesses that get work only as part of a longer supply chain. At each stage, margins are squeezed, and too often we see poor service, sharp practice and an unnecessary cost to taxpayers. There remains in government a shortage of the necessary skills to let and manage contracts. Quite simply, the Government are not a clever client, and taxpayers and small businesses are losing out as a result. The Public Accounts Committee has agreed that we will look closely at the nature of the relationship between the Government and their strategic suppliers, the Government’s approach to procurement and contractual management, and—of course—the impact on taxpayers and service users every step of the way.
Failure of essential services is not an option, but neither is the prospect of the Government bailing out private companies that fail. Some of the companies are running such large swathes of government that they have become too big to fail. Carillion continued to believe, as it set out in evidence to us in a joint hearing with the Public Administration and Constitutional Affairs Committee, that it would receive a Government loan to keep it going, right up to the moment of collapse in January.
The Public Accounts Committee has long raised concerns about the lack of transparency in large contracts funded by taxpayers to deliver public services. Our concern, especially given what we have seen in the papers, is that secrecy can lead to a cosy relationship in which the Government are more focused on the interests of the supplier, because of the potential impact of the collapse of that supplier. We can see those problems with other strategic suppliers in the papers we have received, and we will be calling them before the Committee, as well as those in government, to challenge them and to consider how this broken system can be fixed.
Mr Philip Hollobone (Kettering) (Con)
I congratulate the hon. Lady on her statement and her chairmanship of the Committee—she is doing a superb job. I also congratulate her on the release of the papers today. Does she expect to publish a fuller report by the summer recess?
Meg Hillier
As a Committee, we always set deadlines for the Government when we make recommendations, so I commit to the hon. Gentleman that it is fully our intention to publish a wider report on strategic suppliers by the summer recess. We do not quite know how our inquiry will go, because clearly we are evidence-led, but that is our aim.