Oral Answers to Questions

Debate between Vince Cable and Oliver Dowden

Wednesday 23rd October 2019 Commons Chamber

[Oliver Dowden]

My hon. Friend raises an important point, and it is why local authorities will provide voters who lack the required ID with an alternative ID, free of charge, to ensure that everyone eligible to vote has the opportunity to do so.

[Sir Vince Cable (Twickenham) (LD)]

Is not the inevitable consequence of creating this obstacle to voting in person that anybody who wants to cheat the system will simply migrate to postal and proxy voting, where fraud is easy?

[Oliver Dowden]

I do not understand why the right hon. Gentleman is worried about a measure that is designed to enhance the integrity of our voting system. Any member of the public needs to produce identification to pick up a parcel, for example, or to pick up a book from the library, so why should they not produce identification to engage in the act of voting?

Capita

Debate between Vince Cable and Oliver Dowden

Tuesday 24th April 2018 Commons Chamber

[Sir Vince Cable (Twickenham) (LD)]

(Urgent Question): To ask the Minister for the Cabinet Office if he will make a statement on the financial position of Capita.

[The Parliamentary Secretary, Cabinet Office (Oliver Dowden)]

I genuinely welcome this opportunity to update the House on Capita’s announcement yesterday, which covered its 2017 full-year results, the launch of a £701 million rights issue and an update on its transformation programme. As I have told the House repeatedly, private companies can answer for themselves, but the Government’s priority is the continued delivery of public services. As we demonstrated with regard to Carillion, we have continued to deliver public services without interruption.

The House will recall that I came here in February when Capita initially announced the rights issue. Capita confirmed yesterday that it is proceeding in line with that previous announcement. The House might be interested to know that Capita’s statement yesterday announced that underlying profit before tax is £383 million for 2017, which is in line with market expectations; that, as a result of the rights issue, it has made a £21 million contribution to reducing its pensions deficit; and that, as a result of the announcement, the market reaction was a share price rise of over 10% on the day.

Capita’s board and auditors have confirmed that the company will continue to have adequate resources to deliver on its obligations, supported by its rights issue and other steps designed to strengthen its business. The rights issue is underwritten and the required shareholder vote will take place in early May. Management have confirmed that the key shareholders fully support their plan. In addition, the company has suspended dividends until it begins to generate positive cash flow; it expects to generate at least £200 million in 2020. The impact of all this has been to reduce dividends and shareholder returns in favour of other stakeholders. This, once again, is evidence of shareholders taking the burden, not taxpayers.

I understand that Members remain concerned about outsourcing companies, following Carillion’s liquidation. However, we must be clear that Capita has a very different business model and financial situation; it is not a construction business and it has minimal involvement in private finance initiatives. The measures that it has announced are designed to strengthen its balance sheet, reduce its pensions deficit and invest in core elements of its business. As I said in February, arguably these are the measures that might have prevented Carillion from getting into the difficulties that it did.

It remains the position, as I said in February, that neither Capita nor any other strategic supplier is in the same position as Carillion, but I would like to reassure the House that officials in my Department and I continue to engage regularly with all strategic suppliers. It is in taxpayers’ interests to have a well-financed and stable group of key suppliers, so we welcome the moves that the company announced yesterday.

[Sir Vince Cable]

The public will clearly be deeply concerned that yet another major Government contractor has been in financial distress, following Carillion and earlier service problems with Serco and G4S. Capita is not a construction company, but given that we are dealing with IT services that affect literally millions of people—for example, in relation to tax credits, disability testing and benefits, the congestion charge, the BBC licence fee and Army recruitment—what contingency plans has the Minister put in place since he was informed that the company’s losses are not sustainable? Is there a Crown representative in place? Have new contracts been stopped? Since the new chief executive announced cuts of £175 million a year, to make savings for the new company, how far have these been discussed with the Government, and how far have they a bearing on the provisions of those highly sensitive services? In the light of this development and earlier developments with Carillion, what steps have the Government taken to reform the system of Government procurement, so that we do not have companies low-balling to win contracts that then make losses, and to break up some of the contracts, so that we are not over-dependent on a handful of financially fragile companies?

[Oliver Dowden]

I thank the right hon. Gentleman for his questions. I will seek to address them all, but please forgive me if I miss any. I will come back to him in writing if I do.

On the company’s overall position, it is important to understand that what has happened is exactly in line with what was announced back in February, so there is not really a new development. The company’s underlying position, as it has said publicly, is that it has about £1 billion of cash that it can call upon.

The right hon. Gentleman asks about the Crown rep. I confirm that the Crown rep is Meryl Bushell. I met her this morning and continue to engage with her, as I do with all the other Crown reps.

The right hon. Gentleman asks whether new contracts had been awarded. Since the statement in February, no new contracts have been announced by central Government. However, I understand that the BBC and authorities in Northern Ireland have announced contracts.

The right hon. Gentleman asks what we are doing to break up the system of Government procurement. I always ask, with every contract that crosses my desk to be authorised, whether we have broken it up into as many small pieces as possible to make it accessible for small businesses. Over the Easter period, I made an announcement to help us meet the very challenging target we have set of 33% of all business going to small or medium-sized enterprises. We set a target of 25% in the last Parliament and met it. I announced a range of measures to help us towards the 33% target. I wrote to all the Government’s key suppliers saying that I wanted them to appoint an SME representative to try to drive business to SMEs. I have required all their subcontracting over the value of £25,000 to be published on the Government’s Contracts Finder. I am consulting on ways to improve prompt payment to make it a condition of business being awarded to strategic suppliers. That is very important to SMEs, and I am looking at ways to give them a right to go over the top of key suppliers to the Government to give them a right of recourse.

I say gently to the right hon. Gentleman that both he and I have a proud record from our time working for the coalition Government—he at a much more senior level, running the Department for Business, Innovation and Skills. In line with other Governments, we continue to award contracts to Capita. The House may be interested to know that of the major central Government contracts that have been awarded to Capita, about 20% were awarded under Labour, over half under the coalition Government and 27% under this Government. This issue does not to relate to one party over another.

The reason we do it is that we know outsourcing delivers efficiencies. According to one survey, we receive efficiencies of at least 11%. If we get efficiencies of 11%, that means more money to spend on health, more money to spend on education and more money to spend on core services. That is why the Labour Government did it, why the coalition Government in which the right hon. Gentleman served did it and why this Government continue to use outsourcing.

Capita

Debate between Vince Cable and Oliver Dowden

Thursday 1st February 2018 Commons Chamber

[Oliver Dowden]

Yes, my hon. Friend is absolutely right. If we were to choose overnight, in the face of one profit warning, to stop contracting with that company, there would be a significant risk of the delivery of public services falling over. As I have said, the objective of the Government is the continued delivery of public services, and we have continued to pay the cleaners, continued to have the dinners served and continued to ensure that what the people out there in the country care about, which is that their public services are delivered, continues to be delivered.

[Sir Vince Cable (Twickenham) (LD)]

Yesterday, the chief executive of Capita said that his organisation was “far too complex”. If the chief executive finds it difficult to understand how his own organisation works, how do the Government monitor the stability and performance of these very large, complex outsourcing companies, such as Capita, Serco, Atos and G4S?

[Oliver Dowden]

The right hon. Gentleman is absolutely right about what the chief executive said, and that is the reason why that chief executive has embarked on this restructuring; it is precisely because of that complexity. I well remember working with the right hon. Gentleman when I was an adviser in Downing Street and he was Business Secretary in the coalition, so he will have knowledge of that. In fact, a third of the contracts from Carillion were agreed by the coalition. The process that we had then, and that we have continued to strengthen, is twofold. First, we look at the published results of these companies and use third parties to understand them properly and verify them. Secondly, we continue to engage on a one-on-one basis with each of those companies through the Cabinet Office, to understand their financial position in order to ensure that we deliver on what the public expect—the continued delivery of public services.