Carillion — House of Commons, 2018-07-12
Topic: Government Operations
Bernard Christison Jenkin (Conservative, Centre-right): It is a pleasure to follow the hon. Member for Leeds West (Rachel Reeves). I commend her and the right hon. Member for Birkenhead (Frank Field) for their joint inquiry, which has shed a great deal of light on the situation. It was obvious when Carillion collapsed earlier this year that there was more than just one issue with the company. In general, companies do not go under for simple reasons, and there is no doubt that Carillion was mismanaged. The firm was paying ever increasing dividends, eventually reaching an annual figure of £80 million, while experiencing declining financial performance and an ever more rickety balance sheet. It took some time for that situation to arise The reason for Carillion’s importance to the Government and the intense public interest is that its failure was not just due to the spectacular nature of its bankruptcy; before its collapse, Carillion built hospitals, maintained schools, constructed bridges and roads and electrified railways. When it failed, it had approximately 420 public contracts with the Government accounting for 33% of its total global revenue. It was a shattering blow to public confidence in the Government’s ability to deliver public services via private contractors and providers. That was reflected in my right hon. Friend the Chancellor of the Duchy of Lancaster’s recent speech at Reform. The Committee I chair, the Public Administration and Constitutional Affairs Committee, scrutinises the work of the Cabinet Office and the whole civil service in a way that we hope will improve public confidence in government and public services. We have taken a long interest in public procurement and public contracting, and we saw this crisis as an opportunity to consider the main strategic issues around outsourcing. In fact, we had already—prophetically perhaps—embarked on this inquiry before Carillion collapsed. Its terms of reference included whether the Government made effective decisions on outsourcing the delivery of public services, what lessons could be learned from the collapse and, given that the Government depend on so few public service providers, whether the rules on oversight and accountability of contracts needed to be changed PACAC’s findings were published this week, and they are stark. We uncover that sometimes the Government have little or no data on the services they wish to outsource or on the facilities they ask companies to manage. In some instances, what Government data there was was actually incorrect. My understanding—we could not put this in the report because we could not get it in evidence—of the Carillion prisons contract is that the Government originally thought they were transferring about 800 assets, but it turned out that the company was taking over the management of some 8,000 assets. How can such vast errors be made? I am afraid that it underlines how badly public services are run by Departments, but the lesson is not simply to pass that ignorance on as a risk to a private contractor and expect it to cope. We know that the Government are aware of that and have demanded that contractors accept in the contract the risks of their giving them incorrect information. There is no excuse for this carrying on We uncover a culture focused relentlessly on cost—by which I mean price—whereby companies are pushed beyond the limits of commercial viability and where procedures on transparency are not regularly followed. Most staggeringly of all, the Government cannot accurately assess the capacity of companies to which they are outsourcing to deliver a quality service. During the inquiry, PACAC found several instances where the Government had contracted with the private sector without knowing key data about the services they were asking companies to bid for. For example, in 2014, the NAO reported that the outsourcing company Compass believed that the information provided to it by the relevant Department was inadequate. It was managing facilities for asylum seekers Only two months ago, the NAO found that NHS England "did not know enough about the services it inherited to set achievable…specifications and performance standards" for a primary care support contract. Asylum seekers, primary care patients—these are the people who, for one reason or another, find themselves utterly reliant on the state to provide their accommodation food and for their basic human needs, and when outsourcing goes wrong, these people are on the frontline and they are the ones who suffer. The Cabinet Office did a brilliant job of rescuing the situation after the collapse and of keeping public services going, but it should never have come to that—the Government should not have to bail out private contracts with hundreds of millions of pounds of public money.