EU Exit Preparations: Ferry Contracts

Rupa Huq Excerpts

Tuesday 5th March 2019 Commons Chamber

[Alan Brown]

Well, let’s see. Perhaps I would ensure that no deal was off the table, so that there would be no hint of that cliff edge with no medicines coming through. That is what I would do to start with. We should also consider extending article 50, to try to give this incompetent Government time to make some real preparations, although I have no faith in the possibility that any more time would actually work for them.

I have mentioned transparency and accountability. Let me record my thanks to the journalist who first broke the story about Seaborne Freight in the new year and to the Public Accounts Committee and the National Audit Office for the work that they have done so far in assessing the diligence. Members on both sides of the House have raised some important questions: for instance, my hon. and learned Friend the Member for Edinburgh South West (Joanna Cherry) first raised the matter of the likely illegal tendering process.

We have still to get to the bottom of the overall process. It started in secrecy; it has been shrouded in secrecy ever since; and the Transport Secretary’s non-answers and evasions have not helped us to secure any further clarity. His Department has form when it comes to procurement issues. I remember, years ago, the collapse of the west coast main line franchise, which came about following another court action challenge. That resulted in Virgin receiving a direct award to extend its services, which clearly does not provide the best value for money for the taxpayer.

If the Transport Secretary believes so much in competition and privatisation, we have to ask why so many rail franchises have received direct awards, because that is the complete opposite of competitive tendering. The Southern rail franchise model has clearly failed, and much of that failure has been due to the inaction of the Transport Secretary, and the fact that somebody just wanted to have a fight with the unions rather than trying to improve markets and get services up and running.

That is the background to some of the systemic procurement failings in the Department for Transport, and it brings us neatly to where we are now. When the information about the award of the Seaborne Freight contract first surfaced, it was almost like a sick joke. This was an emergency contract for a company to provide emergency services. The hon. Member for Bolton West (Chris Green) referred to vital services to keep medicines running. The Government, and the Transport Secretary, chose to pick up a ferry company that had no boats, had negative equity of £374,000, and had no history of running ferry or freight services. Both Brian Raincock, one of the directors, and Ben Sharp, the chief executive, had had companies liquidated when they owed money to Her Majesty’s Revenue and Customs. Raincock’s debt was £600,000. I remind the House that HMRC is, effectively, all of us taxpayers.

What, then, constituted the due diligence, and what red flags were identified at that time? We have still to hear the answers to those questions. It turned out—I touched on this earlier—that the due diligence heralded by the Transport Secretary was actually very limited. It was very high-level, that meant that it was not due diligence. The companies which carried it out confirmed that they could not make a proper assessment of the merits of Seaborne being given a supposedly vital contract.

We need to ask some questions, and the Transport Secretary needs to start answering. How on earth did Seaborne get hand-picked for direct negotiation, given the circumstances? Saying that it accounted for only 10% of the vital services is no answer. Saying that that the Government were supporting a vital British start-up company is certainly not an answer. Why should we hand-pick start-up companies for vital emergency services? That makes no sense whatsoever. It was so wrong that it led to a £33 million settlement for Eurotunnel. The Transport Secretary is shaking his head. Hopefully he is managing to multi-task and listen to these points, and will respond to them at the Dispatch Box.

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

Does the hon. Gentleman agree that the £33 million for something that never materialised—the phantom ferry contract—is not dissimilar to the £30 million that the Secretary of State’s predecessor committed to the garden bridge? There is nothing to show for that either. It was not even directly a transport project. The hon. Gentleman mentioned rail upgrades. Vital rail upgrades elsewhere in the country were cancelled when the money was committed to this project. It is taxpayer money, and Members should not laugh at this appalling waste.

[Alan Brown]

I thank the hon. Lady for highlighting yet another miserable failure, with more money being thrown down the drain. It is interesting that Eurotunnel was paid £33 million for vital services, given that that seems in one way or another to replace the contract of Seaborne Freight, which was given only £14 million. So we really do have to ask what extra we are getting for the £33 million, or is this all the compensation that Eurotunnel walks away with and the taxpayer has no chance of recouping? Again, the Transport Secretary really needs to explain this.

The Government have argued that direct negotiation was possible under regulation 32 of the Public Contracts Regulations 2015, which relates to emergency situations brought about by unforeseeable events. So, after more than two years of no-deal planning, we suddenly had an unforeseen event—an unforeseen event, however, that allowed such protracted negotiations and £800,000-worth of due diligence. I would like the Transport Secretary to explain how long those negotiations were ongoing in this supposedly emergency situation, because £800,000 of consultants’ money amounts to a fair bit of time in negotiation, so he needs to explain when the actual emergency situation kicked in.

The argument from the Dispatch Box was that Seaborne Freight would only receive the money if it delivered the service, but that misses the point, because if it did not deliver the service, the emergency service it was contracted for would not happen, and that would leave the Government in a right mess in terms of no-deal preparations. The Transport Secretary has also argued that Seaborne has not cost the taxpayer any money. Hopefully he will re-explain these figures, because I would like to know how £800,000-worth of due diligence, at least some of which was on Seaborne Freight, has not cost any money. How did going to court and defending the Government’s position not cost any money? How did an out-of-court settlement with Eurotunnel at £33 million not cost any money that was related to Seaborne, because I am pretty sure a key plank of Eurotunnel’s objections was the fact that the Transport Secretary gave an important contract to a company with no ships? Meanwhile Eurotunnel is a company that obviously provides successful cross-border services. It is no wonder it was at court.

I would also like to ask the Transport Secretary whether there are any more objections outstanding: any more risks of court action. In response to a written parliamentary question I was told that a limited number of representations were received. In my book, a limited number is more than one. We have already had one court case to date; are any more court cases pending?