Interserve

Rachel Reeves Excerpts

Monday 18th March 2019 Commons Chamber

[Oliver Dowden]

As ever, my hon. Friend raises a very important point. He is absolutely right that, post-Carillion, we must ensure that we strengthen the supply chain. One of the ways in which we do that is through increased diversity, particularly by enabling small and medium-sized enterprises to bid and win Government contracts. That is why we have reduced complex pre-qualification questionnaires, why we have set a very demanding target of 33% of all contracts going to SMEs and why, in November, I announced proposals to ensure that strategic suppliers who did not pay their subcontractors on time would face exclusion from winning Government contracts.

[Rachel Reeves (Leeds West) (Lab)]

The Minister spoke as though just a couple of bad mistakes were made at Interserve, but the truth is that this company had gross borrowings of £850 million and an operating profit last year of just £93 million, owing to a whole series of bad mistakes. When my Select Committee did our inquiry into the collapse of Carillion, we warned that it was unlikely to be a one-off and that the whole model, the whole system, was broken. As with Carillion before, the vultures are circling this firm, earning tens of millions of pounds. A total of £90 million was paid out in the past 12 months to advisers—EY, now acting as the administrator; Rothschild, which is advising Interserve; and Grant Thornton, which is bringing in money as well. Why not let the hospitals, the schools, the local authorities and others take these contracts back in-house and manage them in-house in future rather than have this failed contracting-out model? Rather than paying out millions of pounds to advisers, this money should be invested instead in the crucial public services on which we all rely.

[Oliver Dowden]

I have a great deal of respect for the hon. Lady and I know that she has considerable expertise in this field. It is precisely for that reason that in reforming the process of outsourcing—the so-called playbook, the decisions that the Government go through in deciding how and whether to outsource—we now consider whether it is better to bring services in-house or to outsource them. There is a lot of evidence to show that outsourcing brings genuine efficiency savings and genuine innovation—the evidence shows that it can be between 20% and 30%. She castigates me for my description of the situation in respect of Interserve. It is very different from Carillion. There is one major problem for Interserve and that is in respect of the energy for waste contracts. I would much rather that Interserve had dealt with that itself and not been forced into a pre-pack administration. Unfortunately, the shareholders did not consent to that, but the net effect of all of this is that the company is strengthened. It has £100 million more in cash and has considerably reduced debt.