Climate Change, the Environment and Global Development

Debate between Rachel Reeves and Stephen Kerr

Wednesday 10th July 2019 Commons Chamber

[Rachel Reeves]

The hon. Gentleman makes an excellent point. We often debate the cost of living in this Chamber. One of the big contributors to the cost of living is the cost of gas and electricity. This Parliament legislated for a cap on energy prices—I welcome that and our Select Committee conducted important pre-legislative scrutiny work—but the cheapest sort of energy is that which we do not use at all. If we improved the energy efficiency of our homes, we would have lower bills. A Government investment strategy through the National Infrastructure Commission that retrofitted homes, particularly for people on lower incomes, would therefore help to reduce our carbon footprint and put money back in the pockets of some of our poorest constituents. That would be a double win and we should all work together to achieve that.

[Stephen Kerr]

I am grateful to the Chairman of the Select Committee that I have the privilege of serving on for giving way. There is a triple win here. A lot of ill health stems from poor-quality housing stock. If we were to have a national mission to upgrade our housing stock, one key benefit would be an improvement in the nation’s health. That would save us a lot in health costs.

[Rachel Reeves]

I thank the hon. Gentleman—I was going to call him my hon. Friend, because he is very much my friend and an excellent member of my Select Committee. He makes a really important point. I do not think any Member in this Chamber has not had a constituent come to their surgery because of problems with a damp or poorly insulated home, while also paying astronomical gas and electricity bills. Would it not be wonderful if we could fix that, particularly for our poorest consumers?

I would like to finish where I started—with what Sir David Attenborough said at our Select Committee yesterday. He said that we “cannot be radical enough” when addressing climate change. If we listened to the young people who have been on strike, the protesters, the people who came to listen to that evidence session and all the people who tune into programmes about our natural environment, this would be a national emergency. We would be taking steps commensurate with the scale of the challenge. I very much welcome the Government’s commitment to net zero by 2050, but it is now imperative that we put in place the policies that will help to achieve that, so that our generation can pass on to our children and grandchildren a better world and a better planet.

Carillion

Debate between Rachel Reeves and Stephen Kerr

Thursday 12th July 2018 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House has considered lessons from the collapse of Carillion.

I am grateful to the Backbench Business Committee for scheduling the debate for today, which is timely. This Sunday it will be six months since Carillion entered liquidation. When it collapsed, it employed 42,000 people, more than 19,000 of them working in the United Kingdom. It held liabilities of £7 billion, including a £2 billion liability to 30,000 suppliers and subcontractors, and it held just £29 million in cash to meet those liabilities. In the past six months, nearly 2,500 Carillion workers have been made redundant and more than 1,000 have voluntarily left what remains of the business. Projects have been mothballed and suppliers have faced ruin.

Since the collapse of Carillion, five Committees have looked into the issues surrounding its collapse. Along with the Work and Pensions Committee, my Committee—the Business, Energy and Industrial Strategy Committee—has considered the causes of the collapse. The debate is also timely because this morning our Committees published a special joint report containing 24 responses to our original report. It gave those criticised in the report, and those with a significant interest, a chance to respond ahead of the Government’s formal response to our findings. In the time that I have this afternoon, I shall set out what my Committee found, and what needs to change. I thank fellow members of the Joint Committee, some of whom are in the Chamber today, for their work to uncover the lessons from Carillion.

When it collapsed, Carillion had been in existence for 19 years. It was the second largest construction company in the UK, having grown through large and frequent acquisitions and Government outsourcing. Carillion’s directors, and those who know the construction industry, told us that it was a low-margin industry, and part of a highly competitive market with inherent risks. Businesses do collapse every day, and the process of business creation and failure is part of any well-functioning modern economy, but warning lights should have been flashing when such a big business was on the brink. We should demand the highest standards of corporate governance to help to ensure that British businesses are well run, but that did not happen with Carillion.

Despite its catastrophic failure, the Carillion directors, when they sat in front of our Committee, continually claimed that the business was sound, even after it had gone into liquidation, and that only a handful of contracts had brought it down. They even said that everything was fine until just a few months before the collapse. As late as the day before Carillion went into liquidation, the directors thought that they could avert the collapse. They seemed to have a sense of entitlement, and a belief that the Government would step in and bail out their failed business. In their evidence to us, they blamed everyone but themselves. They blamed the Bank of England, the Canadian construction market, Carillion’s suppliers, and professional designers of concrete beams.

However, the collapse of Carillion has meant that our Committees have been able to see the board papers and minutes from company meetings, many of which we have published. Looking inside the company, we have seen a business that acquired other businesses, and relied on unrecoverable “goodwill” to prop up its balance sheet; a company that kept increasing senior salaries and bonuses, and ensured that a dividend was paid regardless of its own health; a company that was paying suppliers late, and bidding for contracts that it could not afford to deliver on time or on budget.

Carillion’s largest acquisitions—of companies such as Mowlem, Alfred McAlpine and Eaga—allowed it to put “goodwill” on its balance sheet. Those notional values of each acquisition, totalling almost £1.5 billion, were allowed to sit on the balance sheet for year after year, without any link to reality and the real value. When the company collapsed, the goodwill was wiped out, too, showing its true value—a value of zero. Carillion’s board needed healthy balance sheets to continue its dividend policy of increasing its payout to shareholders, but the truth is that it paid those dividends regardless of whether it had the cash flow required for them. Right up to the spring of 2017, it was promoting its growing payout with little challenge—no challenge—from directors as to whether the money might have been better spent supporting the pension fund, for example, or any part of the failing business.

Despite the growing pensions deficit, there is one area where directors felt able to spend money, and that was on growing salaries for the leaders of the business. Its remuneration committee increased payouts on the basis of industry averages, rather than the performance of the business Carillion. A responsible business would see payment by results, not payment by averages.

When Carillion’s directors needed to prop up their balance sheets, they did so by putting pressure on the suppliers. Carillion was, ironically, a signatory to the Government’s prompt payment code, promising suppliers they would be paid within 60 days. When the code was launched in 2013, Carillion was already known to Government as being poor payers, but the National Audit Office report into the company showed that in signing it up to support the policy the Government seemed to turn a blind-eye to Carillion’s failure to meet its duties to suppliers.

We heard on our Committee from the Federation of Small Businesses that some businesses were waiting more than 120 days for payment and Carillion had become notorious as late payers. Carillion managed to use this to its advantage, arranging an early payment facility with the banks, meaning suppliers could receive payments earlier than Carillion’s 120-day terms but they would have to face a cut in what they were owed in order to do so. Carillion was effectively borrowing from its suppliers, propping up its balance sheets again without a care for the state of the balance sheets of the thousands of businesses relying on it and doing its work.

[Stephen Kerr (Stirling) (Con)]

rose—

[Rachel Reeves]

I give way to my fellow Committee member.

[Stephen Kerr]

The hon. Lady is making a powerful case for what we found in the inquiry. As evidence of this house of cards that she is describing, which it undoubtedly was, Richard Adam, the former finance director, told the inquiry that not only did he sell all his shares when he left the business, but he would not be prepared to put his own money at risk by being a shareholder.

[Rachel Reeves]

I absolutely agree. The directors of the business were not invested in the business. They were not part of the pension fund that collapsed and, as the hon. Gentleman said, Richard Adam, the finance director who oversaw the accounting practices that helped to contribute to the collapse of the company, sold his shares as soon as he could because he knew what we all now know: this business was a failing business that would not be around for much longer.

What we found in Carillion was a board focused on short-term fixes and growing payouts, with no plan for what would happen when the illusion was shattered. Looking at the poor treatment of suppliers when the company was solvent and the trail of destruction the management of the company has caused, I cannot see how Carillion’s directors can make any claim that they had anything other than their own personal interests at heart. In the latest responses that we have published today, Carillion’s directors continue to refuse to demonstrate any culpability for the state the company was in. They have denied that our report is accurate, but have given no evidence whatsoever to support their case.

Let me be clear: the directors of Carillion are culpable for the company’s collapse. They should be ashamed of their performance and they should not be allowed to take the helm of a company ever again.

Office for Product Safety and Standards

Debate between Rachel Reeves and Stephen Kerr

Wednesday 9th May 2018 Westminster Hall

[Stephen Kerr (Stirling) (Con)]

It is a pleasure to serve under your chairmanship, Sir David. I pay tribute to the hon. Member for Swansea East (Carolyn Harris) and congratulate her on securing this important and timely debate.

Product safety standards is a subject on which we should all be focused. It is not so long ago that I wrote a column for my local newspaper, the Stirling Observer, which focused on product safety—especially of tumble dryers. I received an unexpectedly high response to that article compared with others I had written on more current constitutional issues that we might debate in the House and in Scotland.

I also reflect on the first ever surgery I attended as a newly elected Member, in the Mayfield Centre in Stirling. We advertised the event but only two constituents came along to speak to me, so I had some time to speak to the caretaker. He was delighted to speak to his new MP, because he wanted to point out to me an issue that, so far as he was aware, no one was speaking about: the regulation and safety of tumble dryers. Little did I know that, within a few weeks of that, I would be a member of the Business, Energy and Industrial Strategy Committee and that we would be conducting an inquiry into the safety of tumble dryers.

This is an important subject, as has already been mentioned by the hon. Member for Swansea East. Our inquiry found, as can be read in the published report, that companies such as Whirlpool have not made enough of an effort to take responsibility for their products and the consequences of their use when they are deemed dangerous. In fact, the report identified that a million faulty tumble dryers are in everyday use in this country. We also identified in the report gaps in the regulatory regime.

I should mention that, during the hearings that we conducted, Whirlpool made commitments about its willingness to respond to the concerns that we raised. We asked it to resolve issues with defective machines within two weeks. It said that it would do it within a week, but we have no way of measuring whether the company has been true to the commitment that it made and put on the record.

[Rachel Reeves]

I thank the hon. Gentleman for his work on our Select Committee in probing Whirlpool and Ian Moverley, who gave evidence—or at least answered a few of our questions, but not all of them. On the 1 million faulty tumble dryers that Whirlpool knows about, is the hon. Gentleman also concerned that Which? said that it had found as recently as last month through its mystery shopping that customers with these faulty tumble dryers were still being given the wrong advice? That means there are potentially still 1 million tumble dryers in our homes that could catch fire, like the ones we in the Committee heard about and the ones other hon. Members have given evidence on.

[Stephen Kerr]

I am grateful to the Chair of the Select Committee—I have the privilege of serving on it—for her intervention. She is absolutely right, and I share all those concerns—specifically in relation to the Which? report of recent weeks that suggested that Whirlpool customers were being advised that they could continue to use their defective models, even though they were known to be defective and presented a danger to the safety of the people who lived in homes where they were in use.

Similarly, I am also concerned to hear that the BBC and Which? have reported that some of the machines that have had their defects corrected have then caused fires. This is a significant issue and, as I said earlier, is something that should concentrate all our minds—particularly those of Ministers. I am sure that the Minister will wish to address these specific issues in his reply.

Questions need to be asked, and it is vital that the regulatory regime that we have meets the need that we currently place on it. As we take more products into our lives and rely more on technology, the more we need a regulator with teeth. The new Office for Product Safety and Standards is a promising development, but it will need to be tested against reality—the lawyers and the corporate spin machines that defend the spin cycles of the manufacturers.

I should at this point deviate to tell the House that I had a most interesting experience in the last few minutes while visiting a constituent of mine who is here in Parliament. She is at a drop-in event in Portcullis House sponsored by Genetic Alliance UK, which is a charity that works to improve the lives of patients and carers. I told her that I was coming to Westminster Hall to participate in a debate on tumble dryers—that is how I expressed it, even though the debate is broader—and she volunteered that her tumble dryer had been faulty. It was a different make from the one I have discussed. She returned the machine and was offered £100 and a new machine, but that machine was faulty. This product seems to have endemic issues.

I hope Members will forgive me if I dwell a little more on an issue that has bothered me a great deal since being elected: the apparent ineffectiveness of regulators. For example, Ofgem constantly failed to take on the electricity markets, which were obviously broken, and I have found Ofcom to be generally unresponsive to the wireless telephony and broadband connectivity issues of my rural constituents. The list goes on. The debate is not about that, but I am concerned that the new office could be another ineffectual regulator—toothless, ineffective, and sometimes even, sad to say, supine—instead of a body that the Government, and us as parliamentarians, have put good faith in to defend the best interests of people.

In some cases, regulators fail not because they do not have enough power but because they lack the will and suffer from organisational atrophy that causes inaction. The regulator in this field, the OPSS, must not fail. If it does, there is the possibility of lives being lost—actually, that is beyond a possibility; it is a fact—consumers being ripped off with faulty goods, and untold damage being done to property.

The situation regarding Whirlpool, which I have already mentioned, is one in which our Select Committee expected action on the part of the company. To our knowledge, that has not been forthcoming. Its actions have been inadequate. Instead of responding to the concerns that we raised with it and those of my constituents and others who have raised issues with me that I have passed on, it has resisted action and, in my view, done the bare minimum that it can get away with. An activist regulator would put paid to the inaction, and a test of the ability of the new regulator will be how it pursues this. It is essential that when questions are raised about products, companies act transparently. That is what we would expect, and what we would expect a regulator to insist on.

I look forward to hearing the Minister’s response to the debate.

Domestic Gas and Electricity (Tariff Cap) Bill

Debate between Rachel Reeves and Stephen Kerr

3rd reading: House of Commons & Report stage: House of Commons
Monday 30th April 2018 Commons Chamber

[Rachel Reeves]

I am pleased that my hon. Friend and fellow Leeds MP mentions White Rose Energy, which is doing fantastic work. It ensures that customers in Yorkshire have a greater choice of energy companies and genuinely puts customers first. During prelegislative scrutiny, we heard from other small companies, including Bulb and Bristol Energy who are also trying to support their customers.

No one in this House wants a situation where the most vulnerable customers see their prices rise because of the price cap. Perhaps Ofgem could operate the safeguarding tariff and the price cap we are debating today simultaneously. That seems entirely possible and desirable to try to avoid the issues that National Energy Action and others have raised from coming into effect.

I hope we will receive assurances from the Minister this evening that these risks will not be allowed to materialise. In that case, I will not press this amendment to a Division. Let me urge the Minister, however, to ensure that the Bill does its job of protecting customers and that energy companies are not able to use any loopholes that would mean prices rising for the most vulnerable customers: those we have the greatest duty to protect.

[Stephen Kerr]

It is a great privilege to follow the hon. Member for Leeds West (Rachel Reeves), the Chair of the Business, Energy and Industrial Strategy Committee.

There was no shortage of energy—or capping of energy—at yesterday’s Stirling Scottish marathon. There was, however, a lot of evidence of determination, particularly as competitors approached the finishing line despite the agonies that some were obviously going through. There was a great deal of grit on display. In addressing amendment 9, it is a lack of grit and determination—almost supine passiveness—that is causing me to have grave concerns about how Ofgem goes about its business.

During prelegislative scrutiny of the Bill, the Select Committee held an evidence session, to which my hon. Friend the Member for Eddisbury (Antoinette Sandbach) referred earlier. I am sorry to have to say this, but I was unimpressed by the evidence presented in January by Dermot Nolan, the chief executive of Ofgem. He did not come across as a person with an appetite for what I feel needs to be done. He lacked that grit and determination. He admitted to my hon. Friend that, in respect of Ofgem’s statutory duty to protect vulnerable customers,

“I accept the point that we could and should have done better on vulnerable customers. We have relatively recently put in place principles for vulnerability, which will give a stronger level of protection.”

When the hon. Member for Hove (Peter Kyle), who is not in his place, challenged Dermot Nolan on what was in effect an admission of failure on his part to fulfil his statutory responsibility towards the protection of those who are vulnerable, he answered:

“We have not done as well as we could have. I fully accept that.”

This perturbs me. It perturbed me then and it perturbs me now. The hon. Gentleman, who is an esteemed member of the Select Committee, seemed to me to hit the nail firmly on the head when he said to Dermot Nolan:

“If you do not mind me saying, throughout the testimony here and before, you have been describing what is happening in the market; you are the single most important player in the market, because you have the most extraordinary powers as a regulator, yet your testimony sounds so incredibly passive. Do you ever just roll your sleeves up and get stuck in? I do not really see the evidence of that.”

I share the concerns expressed so vividly by the hon. Gentleman.

Since becoming a Member of this House last year and having the privilege of being appointed to the Business, Energy and Industrial Strategy Committee, I have had the opportunity to hear first-hand evidence and testimony from a number of regulators. I have, in all honesty, been underwhelmed by every one of them.