CSC: Redundancies

Toby Perkins Excerpts

Tuesday 28th February 2017 Westminster Hall

[Toby Perkins (Chesterfield) (Lab)]

I beg to move,

That this House has considered redundancies at CSC.

It is a pleasure to serve under your chairmanship, Sir Edward. I want to talk today about the redundancy programme that has been introduced by Computer Sciences Corporation; the impact of the redundancies on my constituency and on services provided to the UK Government and the wider economy; the management of CSC and its financial and service performance; and the way in which CSC performs its functions and how that fits into the UK’s economic interests. I am also keen to explore the plan to merge with Hewlett Packard Enterprise Services to create one of the world’s biggest IT services conglomerates, and whether the rush to deliver that change and the attached bonuses might be becoming a paramount concern over the long-term interests of the business and the impact that it has on the services that it provides in the UK.

CSC is a Texas-headquartered IT services software and outsourcing corporation employing 70,000 people worldwide—that number has gone down 26,000 in the last five years. The company designs, builds, runs and maintains major critical IT systems for many UK private and public sector organisations, including—but not limited to—the Metropolitan police, the national health service, Network Rail, civil nuclear fuels, BAE Systems, HM Passport Office, the Department for Work and Pensions and many other Government Departments. It also has specialisms in other industries, such as insurance.

CSC employs around 5,500 people in the UK. Its latest round of redundancies, which will see about 1,100 more people laid off on top of the 499 redundancies that were recently announced, means that around 2,350 people will have been made redundant in the last financial year. CSC has many employees who work from home—so, in potentially every single constituency in the country—and major offices in Aldershot, Banbury, Chorley, Leeds, London, Preston and in my constituency. Those jobs are high-skilled, with people predominantly employed on salaries that are considerably above the average national wage—we might say that those jobs are precisely the kind that the UK economy needs more of. The move follows the announcement that CSC will merge with Hewlett Packard Enterprise Services to form DXC Technology, which will, with revenues worth $26 billion dollars, be one of the world’s largest IT services companies. I will refer more to the merger shortly, but first I will tell the House about CSC and its impact on Chesterfield, as I think that will put the firm’s performance and actions into context.

CSC has been based in Chesterfield since 2003, when it won the Royal Mail outsourcing contract to provide IT services to Royal Mail. At the time, Royal Mail IT employed around 1,500 people in Chesterfield. Royal Mail has been a very significant Chesterfield employer since the 1960s, when Harold Wilson’s Government set out on a programme of moving Government institutions out of London. Thousands of staff moved to or were recruited into Chesterfield.

The Royal Mail contract was awarded to CSC in 2003. In Chesterfield, 1,500 staff were TUPE-ed across and in the 13 years since the awarding of the contract, around 80% of those staff have left the business. Others have been recruited and about 500 staff now work in Chesterfield on services relating to the NHS contract, BAE Systems, the HM Passport Office, Aviva, Department for Work and Pensions, the Ministry of Defence and others. The 500 employees mean that CSC is still one of the biggest private sector employers in Chesterfield and the jobs make a significant contribution to our economy. I have no idea what the exact cost has been to the Chesterfield economy of the 1,000 skilled, well-paid posts that we have lost over the last 13 years, since CSC took over the Royal Mail contract, but it is very substantial and should not be overlooked.

As we all know in this place, jobs come and go. Tough as it is for a local area—even more so for the families and individuals involved—global businesses will organise their affairs in a way that suits them, and as long as the rules of consultation and severance are followed, there is often not all that much of a role in that for Government. However, elements of this programme of redundancies should concern us in this place.

It is useful to understand and consider how CSC has grown its business to such a significant size in the United Kingdom. The growth has come from winning predominantly outsourcing contracts with a range of companies, including a large number of Government contracts. I have alluded to how 80% of the staff on the Royal Mail contract in Chesterfield are no longer there. CSC’s work with the Department of Health has attracted considerable previous scrutiny, and the last report that I read in The Guardian suggested that its NHS contract was still worth about £2.2 billion. CSC has contracts in a huge variety of sensitive Government and corporate installations, including police services, HM Passport Office, civil nuclear and aerospace. I think it is fair to say that when CSC moves in, jobs often move out. It is not like many firms in my constituency that have moved in, grown exponentially and recruited more as they go. What CSC has done in Chesterfield is move into an existing contract and, over a 13-year period, gradually reduce the number of jobs in the local community.

As well as the impact of CSC’s operating methods, there are legitimate questions about its performance. Managerial and accounting failures led to the business being fined $190 million for over-reporting profits on its NHS work, and it is currently on its fourth UK head in the last two years, having reported very disappointing figures recently. Notwithstanding those reports, the UK management repeatedly advised Unite the union throughout the first 11 months of 2016 that the UK business was healthy and profitable. Given the extent to which there appears to be a constant cycle of change, panic and retrenchment, the unions are understandably concerned.

Unite believes that the company is making redundancies in the UK of such a significant size that it is critically endangering its ability to continue to provide those services. Unite says:

“What is most alarming with this programme is both the scale and the speed with which the company is seeking to achieve the reductions, the sense of chaos it has created within the delivery functions of the company—and the sense of impending catastrophe within the staff body.”

I think that we should take that very seriously. It says:

“The staff cuts are being made seemingly without regard for the impact on staff and services. Senior managers of large parts of the UK business who have questioned the breakneck speed or the business logic”—

of the cuts—

“have been removed, and much of the UK organisation is being managed by managers brought in from elsewhere globally, who know nothing of the day to day running of the UK business, and care little of the significance to the country of the services delivered by the company.”

Under any circumstances, redundancies of that scale should be a cause for real concern. However, when the company has experienced so much upheaval and has gone from one failure to another, and given the sensitivity and national importance of CSC’s work, I think that the Government should be very interested indeed. I would like to know from the Minister what cross-Government work is going on to monitor service delivery, whether there have been any further breaches of contract with Government since the Department of Health found CSC in breach in 2011, and what work she is doing to ensure that the Cabinet Office is aware of the potential impact on Government services if the fears of the unions are borne out.

Members of the House will be aware of the Prime Minister’s suggestion that, although her Government would work to defend free markets and to promote the UK as a place where industry and enterprise is encouraged and thrives, she would expect business and government to work closely together to root out the worst excesses of capitalism. In that context, what interest are the Government taking in the motivations behind CSC’s decisions? The driver seems to be entirely about ensuring that the right financial targets are hit to ensure a merger on the most favourable terms for CSC shareholders. Figures published for the US stock exchange show that 12 individual directors stand to make bonuses of $90 million on successful completion of the merger. How can we be confident that directors who stand to accrue untold riches in the short term will take a long-term view about the best interests of the business, its employees and the customers who rely on it?

Although the tale of CSC’s recent past includes rounds of redundancies, lost contracts, service failures and missed profit targets, followed by further redundancies and the whole cycle repeating itself, one area of CSC’s business has seemed to grow. Many Government contracts paid for by UK tax money are now being serviced by huge offshoring operations in India. An article on CSC’s own website describes how 25% to 30% of its global employees are now employed in India. There is a question for us in the House about how much GDP the UK is losing by allowing the Government to outsource work to an American company that then effectively lays off UK staff in order to provide services to the UK Government from India.

[Mr David Hanson (Delyn) (Lab)]

I have constituents who have been made redundant by CSC and who have found that their jobs have gone offshore. My question to the Minister, via my hon. Friend, is whether the Government knew about the offshoring when it occurred, as part of the contract. Did the Government make representations on that issue, and are they concerned for future employment in the UK in such a highly skilled, highly confidential and highly sensitive business?

[Toby Perkins]

My right hon. Friend makes the point excellently. There is a strategic question for us and for the Department for Business, Energy and Industrial Strategy about co-ordination with other Departments on how services are provided. He sums up perfectly the fact that it substantially affects the UK economy if such highly paid and skilled jobs disappear overseas. Presumably, cheaper contracts save Government money, but the impact on GDP and the fall in tax revenue then hit our economy.

Given the sensitivity of some of the contracts provided by CSC to the Ministry of Defence and other organisations, what national security implications should be considered when they are serviced overseas? I would be interested to hear the Minister’s response to that question. I am also interested in how CSC, run by global operators, sees its responsibilities to the UK and to our employees and constituents. For a company that employs so many people in my constituency and provides services to so many Government institutions, its interest in engaging with MPs seems minuscule. I have had no contact with CSC in advance of this debate, despite attempting to contact the company, and with the exception of a discussion about car parking on Old Road in Chesterfield, I have had no contact from CSC in my six years as an MP. I cannot think of a single company in Chesterfield that employs as many people that has not contacted me.

I would like the Government to take a close interest in the services being provided by CSC, and in whether CSC operations and activities in the run-up to the merger pass the Prime Minister’s test, as part of her grand contract between business and the Government, for how businesses should act. What discussions has the Minister had with CSC regarding its UK operations, and what steps is she taking to support the jobs of my constituents and those at the other CSC sites in the UK?

--- Later in debate ---

[Margot James]

I thank the hon. Gentleman for his intervention. I will come on to talk about the effect on the public sector contracts that the company has contracted to provide. I mentioned that at the beginning. I first just wanted to cover the rights of the employees in these circumstances and the support that the Government are trying to offer through Jobcentre Plus. I will, indeed, come on to the important matter that the hon. Gentleman just raised.

To conclude on the employment support that we are able to provide, I am hopeful that the rapid response service will be able to assist those workers who have been made redundant in finding alternative employment. Officials at the Department for International Trade have also contacted CSC and are in close contact with Jobcentre Plus.

I will now move on to the potential impact on public services that various right hon. and hon. Members have mentioned. CSC has undertaken numerous contracts with vital services such as, as we have heard, Royal Mail, the police, civil nuclear and the NHS, and it is indeed of concern to us all that the skills and the contractual obligations given by CSC are honoured. Given the situation, I can well understand right hon. and hon. Members’ concerns about the future. The Cabinet Office has assumed responsibility in Government for dealing with CSC on these matters, and is in regular contact with the company about the viability of the contracts it has assumed. It has been given every assurance that the business will be ongoing and unaffected.

[Toby Perkins]

I am pleased with the tone of the Minister’s remarks. However, I wonder whether she shares my concern—I suspect she does from what she has said. We are being given assurances by an organisation that has had four different leaders in the past two years and has gone, as the Minister has rightly identified, through nine rounds of redundancies. The trade unions have reported that the workplace is in chaos and there is a catastrophe of employee confidence. In that kind of environment, where there is a huge financial incentive to deliver in the short term and a track record of failure, does the Minister agree that there is a real need for the Government to pursue the matter and ensure that the assurances are worth the paper they are written on?

[Margot James]

I have sympathy with the hon. Gentleman. I have the assurances from the Cabinet Office, which is in regular contact with CSC, and I am sure that my Cabinet Office colleagues are wary of the information they are being given in the climate that has been described this afternoon. I will undertake to have a direct conversation with my counterpart in the Cabinet Office to test out the assurances that he or she has been given. In the past, I have been exposed to corporations that have been going through this process of rapid change. That can be very worrying, especially where software and computer contracts are the main focus, because there could be a loss of the skills vital to the delivery of such contracts. In this country, we have had many concerns about public sector contracting for IT systems. It would be a reckless Minister who assumed that all was well, given the circumstances we have heard about this afternoon.

--- Later in debate ---

[Toby Perkins]

It seems rude to say no, so I will briefly sum up.

[Sir Edward Leigh (in the Chair)]

It is always lovely to hear from you.

[Toby Perkins]

In conclusion, I am pleased with the tone of the Minister’s response. I am grateful for her undertaking to pursue with the Cabinet Office the points that have been discussed. We are all conscious that we have had a history of people being put out of work by machines. We know that; it is progress. We are not all still riding on horseback; we have cars now. It seems a shame that we move from the people to the machines, and the machines get ever more efficient, with the outsourcing organisations coming in and saying, “We can provide the same services with many fewer machines.” Even then, the pursuit of profit means that those jobs, funded by the British taxpayer, are ending up offshore, and that poses serious questions for all political parties and for Governments about how we ensure that the desire to get the best value for taxpayer money does not come at too great a cost to the UK economy.

As the Minister has correctly reflected, we have genuine reasons to be concerned by the decision-making processes that have been pursued at CSC. As it lurches from one failure to another, there is concern about the implications not only for those employees and the communities left behind, but for those services that rely on CSC.

Question put and agreed to.

Resolved,

That this House has considered redundancies at CSC.