Rachel Reeves (Leeds West) (Lab) (Urgent Question): To ask the
Minister for the Cabinet Office and the Chancellor of the Duchy of
Lancaster to make a statement on the risk to public finances and
public services as a result of the serious financial concerns at
Capita, and on the Government’s contingency plans. The
Parliamentary Secretary, Cabinet Office (Oliver Dowden)...Request free trial
(Urgent Question): To ask the Minister for the Cabinet Office
and the Chancellor of the Duchy of Lancaster to make a
statement on the risk to public finances and public services
as a result of the serious financial concerns at Capita, and
on the Government’s contingency plans.
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I have been asked to comment on the stock market update
issued by Capita plc yesterday and its impact on the
delivery of public services. I completely understand that
this is a matter of significant interest to many in the
House following the recent failure of Carillion, but I
can assure Members that this company is in a very
different situation. To be clear, this announcement was
primarily a balance sheet strengthening exercise, not
purely a profit warning. As has been widely reported, the
company has significant cash reserves on its balance
sheet. We do not believe that Capita is in any way in a
comparable position to Carillion. Furthermore, Capita has
a very different business model, and if the House will
allow me, I will give an update on that.
The issues that led to the insolvency of Carillion will
come out in due course, but our current assessment is
that they primarily flowed from difficulties in
construction contracts, including those overseas. By
contrast, Capita is primarily a services business, and
92% of its revenues come from within the UK. As Members
would expect, we regularly monitor the financial
stability of all our strategic suppliers, including
Capita. As I said, we do not believe any of them are in a
comparable position to Carillion. The measures Capita
have announced are designed to strengthen its balance
sheet, reduce its pension deficit and invest in core
elements of its business. Arguably, those are exactly the
measures that could have prevented Carillion from getting
into the difficulties it did. Of course, the impact of
these measures has been to reduce dividends and
shareholder returns in favour of others, so this is
further evidence of shareholders and not the taxpayer
taking the burden on this.
As I have said, my officials met senior Capita executives
yesterday to discuss the impact of the announcement. We
continue to work closely with the company to monitor the
execution of its plan and to ensure the continued
delivery of public services. We continue to engage with
all our strategic suppliers and make continuing
assessments of our contingency plans, where necessary. It
would not be appropriate for me to comment in any further
detail on the specifics of those contingency plans, given
their commercial sensitivity. But let me reiterate that
the priority of this Government, and the reason why we
contract with these companies, is to deliver public
services, and our priority is the continued delivery of
those services. As Members will have seen in respect of
the collapse of Carillion, whatever the shortcomings
there public services continue to be delivered, and we
are confident that public services will continue to be
delivered as provided by Capita.
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I thank the Minister for his response, but I cannot help
but conclude that the Government’s thinking on this is
both muddled and complacent. He has told us that the
situations at Capita and Carillion are completely
different, but let us look in more detail at the
circumstances of both companies: both have debts of more
than £1 billion and pensions deficits in the hundreds of
millions; both paid out dividends of more than £1 billion
in the past five years; both rely on the public purse for
half of their contracts; both were audited by KPMG; and
both grew through acquisition and not through organic
growth. It seems there are more similarities than
differences between these two companies.
I join the Minister in welcoming the decision by the new
Capita chief executive officer to face up to some of
these problems with a rights issue and the suspension of
dividends. But can the Minister honestly say that Capita
could not come to the same fate that Carillion did just
two weeks ago, that people working for Capita have
nothing to fear, and that those saving prudently for a
pension with Capita can rely on that pension paying out
fully on retirement? Can he say to people who rely on
Capita to carry out basic public services, such as the
electronic tagging of offenders or the billion-pound
contract with the NHS, that they can count on it to
fulfil its contractual obligations for the life of those
contracts?
I have some specific questions about what happens now.
What is the contingency planning? Do the Government have
representatives in the business, including a Crown
representative? How long have the Government been aware
of the problems at Capita, and how many contracts have
been issued to it since then? What specific risk
assessment have the Government made of other large
outsourcing firms? Capita is currently bidding for the
Defence Fire Risk Management Organisation contract. Will
the Government now review that process and reconsider the
decision to outsource that and other services they are
currently looking to offload?
Will the Government commit to urgently reviewing what
looks like a cosy and complicit relationship between the
big accountancy firms, the Financial Reporting Council
and the corporates they are supposed to be auditing? Is
it not now time to split up the big accountancy firms and
stop auditors being paid for other consultancy work at
the firms they are supposed to be auditing? Capita has
announced a fire sale of assets. Will the Minister
confirm that Capita is in consultation with the trade
unions and its workforce about redundancies and TUPE
arrangements in the event that services are sold off?
Jobs, pensions, small businesses and vital public
services now depend on these outsourcing companies, but
it is time we rethought the whole strategy for public
service provision. How many more warning signs do the
Government need?
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I thank the hon. Lady for her questions. I know she takes
a close interest in this important issue. She has raised
a large number of questions, and I shall seek to address
as many of them as I can. I am pleased that she has
acknowledged that Capita is facing up to its problems.
Indeed, that creates a contrast with Carillion. She
talked about the financial situation of Carillion versus
Capita. The chief executive of Capita has faced up to
this and strengthened its balance sheet—it has been
widely reported that Capita has more than £1 billion on
its balance sheet—which shows that the situation is
significantly different from that at Carillion and gives
us confidence in its ability to continue to deliver
services.
The hon. Lady talked about dividends. Again, as a result
of this announcement, Capita will not be issuing
dividends, which means that money can go back into the
pension scheme, allowing £200 million extra to be spent
on the company’s core services, rather than dividends.
That is evidence that the chief executive has understood
the position and is creating a different situation from
that which pertained to Carillion. She raised an
important point about the major accountancy firms, such
as KPMG, involved in this market. The Financial Reporting
Council is looking into this matter. We expect to hear
from it in about six months, and we will, of course,
respond as appropriate. On her question about a Crown
representative, I can assure her that there is one in
Capita.
I explained in my original answer the role of the Cabinet
Office and the Government and the reason that we contract
with private companies. The previous Labour Government
and other Governments did the same. As has been reported
many times, a third of Carillion’s live contracts were
agreed by the last Labour Government, a third by the
coalition and a third by the current Government.
Governments do this to deliver public services. Our role,
as a Government, is to ensure the continued delivery of
those public services, and the test for me and my
colleagues and officials in the Department is this: is
the company capable of delivering those public services,
and if there is a problem with the company, will those
public services continue to be delivered? In respect of
Carillion, Members will have seen that all those public
services have continued to be delivered, and I am
confident that they will continue to be delivered.
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Will my hon. Friend look at the total contempt that the
Labour party has for the private sector today? Will he
take the time to publish, in due course, a full list of
all the contracts with the private sector that were
entered into between 1997 and 2010? That will provide a
fine example of how the Labour party of today is nothing
like the Labour party of that period when they were in
government.
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My right hon. Friend makes an important point. This
Government, and the previous Government, have engaged
with private sector companies for the delivery of public
services. , Labour’s last
successful Prime Minister—[Interruption.] Well, he was
the last Labour Member to hold the office. May I take the
opportunity to correct the record on that, Mr Speaker?
said:
“It simply would not have been possible to build or
refurbish such a number of schools and hospitals without
using the PFI model.”—[Official Report,
14 November 2007; Vol. 467, c. 665.]
Why is it that we use these contractors? Because we know
that they can deliver. Labour’s position is slightly
confused. Is it honestly now Labour’s position that we
should not use the private sector at all? Is the state
going to start building roads again? Where does Labour
draw the line? It is complete confusion.
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Order. I am keen to accommodate the substantial interest
in this matter, but may I remind the House that there is
the business question to follow, and thereafter two
debates to take place under the auspices of the Backbench
Business Committee? I am anxious that time for those
debates should not be artificially truncated, so pithy
questions and pithy answers, please, and we will make
progress.
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I will take your advice, Mr Speaker.
Only two weeks ago, I warned that there was a danger that
this whole outsourcing problem would become a set of
dominoes, with one falling after another. I believe the
House will conclude that the Government’s behaviour in
response, and the Minister’s response today, has been
marked by indifference to corporate mismanagement,
incompetence in office and complacency in the face of a
crisis.
The Minister will not tell the House, but I will: Capita
was given 154 Government contracts last year. Only last
week, Carillion contracts were being re-brokered to
Capita, yet the company was clearly in trouble. Share
values were plummeting and profit warnings were being
issued. There was short selling on the stock market and
allegations against Capita of fraud in the handling of
public contracts. Yesterday, Capita’s total value on the
exchange was barely much more than its total debt. The
company is in serious trouble. It is a familiar tale of
woe, with strong echoes of Carillion.
We want to know that the Government’s contingency plans
in relation to Capita will assure jobs for current
employees and protect the pensions of those employees and
the pensions of the public sector workers that the
company is managing. Will the Minister confirm that the
public services that Capita manages will be protected in
the event of a corporate disaster? Does the Government’s
contingency plan allow for that? What will be the common
impact of the problems at Carillion, and now Capita, on
the spiralling costs of HS2? Does the Minister agree with
the Opposition that not a single penny should be used to
prop up badly managed outsourcing companies?
The Government are blind to the corporate greed of these
outsourcing companies. Does the Minister agree that it is
clear that, as the Under-Secretary of State for Justice,
the hon. Member for Bracknell (Dr Lee), said only the
other day, the Government should be driven by the
“evidence, not dogma” on outsourcing?
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I thank the hon. Gentleman for his questions, the core of
which was about support for outsourcing companies. He
said we should not provide a penny more to prop up badly
managed outsourcing companies. Indeed, that is exactly
what we did in respect of Carillion. We took the decision
that this was a private company and should bear the loss.
That is why shareholders in Carillion are unlikely to get
more than a few pennies in the pound back for their
investment. The private sector has taken the risk, but
the job of the Government is to ensure the continued
delivery of those public services—to ensure that the
dinner ladies get paid, that the hospitals get cleaned,
and that the railways continue to be built. That is
exactly what we did in respect of Carillion and it is
exactly what our contingencies involve for all our
strategic suppliers. That is the test for the Government:
can we ensure the continued delivery of those public
services, and can those public services continue to be
delivered?
The hon. Gentleman made a point about pensions. The fact
that Capita has embarked on this course of restructuring
means that it is effectively choosing to switch resources
away from the continued payment of dividends and towards
pension funds. That should give pensioners confidence in
respect of that pension fund. He also asked about jobs,
and again, the restructuring can give confidence about
the continuing delivery of those jobs.
I keep coming back to the same point. This is a private
company and the interest of the Government is to ensure
the continued delivery of those public services, and
those public services continue to be delivered. That
takes me back to Labour’s position. What Labour seems to
be suggesting is that the private sector has no role in
public life, and that the level of small and medium-sized
businesses working for the Government should be zero. If
that is not Labour Members’ position, are they going to
tell us where they choose to draw the line? Labour has
gone from pumping billions of pounds into private
companies for the delivery of public services when
and were Prime
Minister, to saying that they should not have a penny.
Some clarity would be helpful, because otherwise people
may draw the conclusion that there is more than an
element of opportunism here.
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Does my hon. Friend agree that it would be irresponsible
of this Government to cancel private companies’ contracts
simply on the basis of a single profit update?
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I thank my hon. Friend for that question, and this is an
important point about profit warnings. A profit warning
does not mean that a company is imminently going to
collapse. A profit warning is a warning to the markets
that its results will not be in line with what it had
previously thought. If every time that a company issued a
profit warning, we as a Government said that we would
cease to contract with them, there would be very few
companies we could contract with. I will not name leading
companies, because I do not want to influence their
market value, but I could name a huge list of FTSE 100
companies that routinely issue profit warnings. That does
not mean that they are about to disappear.
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For the second time in two weeks, we are discussing a
private firm, responsible for the delivery of vital
services, that has caught us cold with a profit warning.
Will the Minister now acknowledge that there is a role
for a proper public sector? Will the Government now start
to roll back on the privatisation agenda that they and
the previous Labour Government obsessed about? Can we
look forward to a proper plan for taking public services
back into the public sector? And will he now acknowledge
that public sector employees should deliver public
services?
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Of course we acknowledge that there is a proper role for
the public sector. That is why, for example, this
Government committed at the last election to providing £8
billion more for the NHS and a further £6 billion more
for the NHS. To go to the core of the hon. Lady’s
argument, the reason that successive Governments of all
political persuasions have chosen to engage with the
private sector for the delivery of services is that those
companies have a speciality in it. They have a speciality
in delivering such services, so they can deliver them
more efficiently. That means there are savings for the
taxpayer. If the Scottish National party position is
seriously that we should not have any outsourcing, they
need to explain to taxpayers why, instead of ploughing
those efficiency savings back into our schools and
hospitals, they are choosing to use them to pay for less
efficient ways of delivering public services.
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Does the Minister agree that the biggest risk to jobs,
the biggest risk to pensions and the biggest risk to the
delivery of public services would be to withdraw support
for Capita on the basis of a reactionary announcement to
this profit warning?
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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.
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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?
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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.
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The hon. Member for Leeds West (Rachel Reeves), in the
Business, Energy and Industrial Strategy Committee, has
rightly raised concerns about the failure of regulation
from the Financial Reporting Council and KPMG. Does the
Minister agree that the answer to this dilemma is not to
nationalise those companies, but to make sure that those
bodies do their job for the taxpayer and the public
service user?
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Yes, my hon. Friend is absolutely correct. That is why I,
and we as a Government, welcome the fact that the FRC is
looking into the four major accountancy firms and seeing
what lessons we need to learn. Of course we will respond
to that and act appropriately.
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May I bring the Minister back to the core issue, which is
that there are two separate but linked problems: the
business model and the performance of these companies?
Like Carillion, Capita seems to be part of the
over-concentrated, over-leveraged,
dividend-and-bonus-exploiting culture that relies on the
state to bail out failure. Capita incompetence is only
too clear from its lamentable performance on the
recruitment contract for the armed services. When will
this Government finally get a grip?
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Behind the right hon. Gentleman’s question is an
important point about the diversity of suppliers in this
market. We do need to look to diversify further. That is
why, for example, we have set a target that 33% of all
our Government contracting should be with small and
medium-sized enterprises—precisely to ensure that we have
that greater diversity. On his point about state
bail-out, we have done precisely the opposite of a state
bail-out. Carillion went into liquidation, so its
shareholders paid the price; because Capita has decided
to stop paying dividends, its shareholders are paying the
price. Therefore, it is not correct to say that the state
is bailing them out in this situation.
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Is not the Government’s role to continue to act as a
prudent customer and to continue to monitor their
suppliers and the services provided? Right now, the best
thing that the Government can do is to allow the company
to get on with its plans to restructure its business.
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Yes, my hon. Friend is absolutely right. Capita and its
executive and shareholders are responsible for Capita.
Our responsibility as a Government is for the continued
delivery of public services—to make sure that the
services on which the public rely continue to be
delivered. That is exactly what we did in respect of
Carillion, and that is exactly what we are ensuring in
relation to contingency plans for all our strategic
suppliers, including Capita.
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The Minister said that Capita has a positive record of
delivery, but it has been responsible for the £1 billion
contract for the delivery of NHS England’s primary care
support services since 2015. From the outset, both GPs
and local medical committees identified serious issues
with the service, including patient safety, GP workload
and an effect on GP finances. Although some progress has
been made, two and a half years on the service falls far
short of what is acceptable, and there is still an urgent
need to resolve these issues to give practices and GPs
across the country confidence in it. What are the
Minister and the Government doing to improve the quality
of services provided by Capita?
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The Government contract with a company to deliver the
individual services, and that is done through each
Department. In respect of health services, that is done
by the Department of Health, which has to ensure that
Capita or any other contractor delivers on what it has
promised. The function of the Cabinet Office in this
respect is to ensure that overall public services
continue to be delivered if there is a failure of the
company.
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If I understand the Minister correctly, this company is
raising funds from its shareholders in order to
strengthen its balance sheet, enhance its pension fund
and invest money in its core business. These corporate
actions should be welcomed on both sides of the House.
Does he share my frustration that the attitude of the
Opposition towards the private sector seems to be,
“You’re damned if you do and you’re damned if you don’t”?
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Yes, my hon. Friend is precisely right. As I said, it
would have been helpful if Carillion had considered these
actions; perhaps then it would not have got into this
position. Members cannot say that somehow the Government
are bankrolling these companies, while simultaneously
saying that we are allowing the companies to go bust if
things go wrong with them and shareholders pay the price.
They cannot makes those two propositions at once.
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Does the Minister agree that, with Carillion and now
Capita, the outsourcing of our services has failed?
Instead of expensive bail-outs, they should be brought
back into public ownership.
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The Government have not bailed out a single supplier. It
is the shareholders who have paid the price. It is the
shareholders of Carillion who will not receive back the
money they invested—or, at least, they will receive a
very small proportion of the money, depending on the
outcome of the liquidation. The hon. Lady’s
characterisation of the situation is simply not correct.
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Will the Minister assure the House that the combatant
steps that the Government have taken to date regarding
Carillion have protected services and ensured that there
is minimal disruption to citizens? Will he also assure us
that they are taking a similar combatant approach to the
Capita situation so that we can protect services such as
the NHS admin that is so important to us all?
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My hon. Friend is absolutely right. Our focus has been to
ensure the continued delivery of public services. In
respect of all the key strategic suppliers, we ensure
that we are confident that public services will continue
to be delivered if there is an interruption to those
companies. That is what the House saw in respect of
Carillion, and it is exactly what we prepare for all the
time with regards to all our strategic suppliers.
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This is a very worrying time for Carillion employees in
Wales, including the hundreds employed at the call centre
in Bangor in my constituency. It is also a very worrying
time for disabled people, as all personal independence
payment assessments in Wales are carried out by the
company. Will the Minister give these people a cast-iron
guarantee that their jobs are safe, and that their
benefits assessments will be carried out properly and
accurately?
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I believe that the hon. Gentleman is referring to Capita,
not to Carillion.
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I assure the hon. Gentleman that it is the priority of
the Government—this is what we are working on—to ensure
that there will be no interruption to the very important
public services that he outlined, no matter what happens
to their delivery. That is what happened with Carillion.
On the very day it was announced that Carillion was going
into liquidation—the announcement was made at 7 o’clock
in the morning—we ensured that the people delivering
public services could continue to turn up to work and to
be paid, and that the public services they delivered
could continue to be delivered.
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Before any new Government contracts are awarded to
Capita, will the Government seek fresh assurances in
respect of existing and future pension obligations to its
employees?
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I can assure my hon. Friend that in fact officials from
my Department met Capita only yesterday. This is an
ongoing process of engagement with all the strategic
suppliers, asking exactly those sorts of questions to
ensure that we have public services delivered. Of course,
we are very cognisant of things like the pension fund as
well.
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One of the real issues that comes through with both
Carillion and Capita is that the enormous growth of the
conglomerate structure means that these corporations are
vulnerable when any part begins to fail, and that of
course puts at risk the whole. Where is the risk
assessment that the Minister and his team have done that
guarantees that we will not see failure in Capita and in
other public service providers?
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As I said, there is a continuing process of engagement.
Over the years, the Government Commercial Function has
been beefed up. We have brought in people with expertise
who understand these companies and are engaging with them
on a day-to-day basis to understand their business
models. The purpose of doing that is to understand those
business models to ensure that we are confident that we
can continue to deliver these public services.
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Will my hon. Friend confirm that what matters to this
Government is what delivers the best public service
outcomes to our constituents in terms of quality and
value for money—exactly the same considerations that
motivated Labour when, in government, it let so many
public service delivery contracts to private companies?
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Yes, Labour let lots of contracts to private companies,
because it believed that they had the expertise to
deliver them, and that is exactly what we are doing.
Interestingly, since the surge in the use of PFIs that
took place under the Labour Chancellor before last, Mr
, we have
tightened up the terms of PFI. We are learning the
lessons from some of the excessive PFI contracts that we
saw, which had underneath them ludicrous service fees for
some of the services provided.
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Capita is a significant employer in Huddersfield in its
shared transport business. It has a very important role
in gas safety for the Health and Safety Executive. It is
a very important company. Nobody on the Labour Benches
wants to see it fail; like all businesses, we want to it
to succeed. There is nothing wrong with a public-private
partnership: what is important is getting the contract
and the relationship right. What went wrong in many PFIs
was rotten contracts that still bedevil local hospitals
and local schools.
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The hon. Gentleman makes a very important point. He is
precisely right. There is nothing wrong, per se, with
engaging with the private sector for the delivery of
services, but we must ensure that there is rigour in the
contracts. Many contracts in the past have not been
properly negotiated and have not delivered value for the
public sector, and they will continue to burden us for
many decades to come. However, that is not an
invalidation of the model; it is about problems with
specific contractual negotiations.
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It is clear that Capita is unique because it grew out of
outsourcing from the public sector, but as it grew the
structures outstripped its proper corporate
responsibility. It is also clear that we need to argue
the case for the benefits to the public sector of
outsourcing. Will the Minister therefore set out the
benefits of outsourcing and give one or two examples of
where it has been a success and delivered better public
service?
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I am very happy to do so. This is precisely why private
sector companies use outsourcing. Every company engages
in outsourcing because it recognises that there are some
areas where there is greater expertise than can be
delivered by that company. It is exactly the same for the
public sector. We focus on what actually works—what
delivers for the public sector and what delivers the best
price and the best value. Over 4,500 projects have been
delivered since 2010; over a quarter of a trillion pounds
has been invested in infrastructure; and over 70% of our
175 long-term priority projects and programmes identified
are now complete, under construction, or part of a
programme being delivered. This is delivering the public
services that people want.
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Capita employs 450 people in my constituency, who are
principally engaged in administering public sector
pensions. When the Minister has met Capita, what
discussions has he had about the pensions function and
the Darlington site specifically? Will he meet me to
discuss that?
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I would be very happy to meet the hon. Lady to discuss
all those points.
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Will the Minister tell the House the size of the pension
deficit and what arrangements the Government are putting
in place to cover that black hole?
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Capita is a private company, responsible for the running
of its business. If the hon. Gentleman looks at the
announcement made yesterday by Capita, he will see that
it has chosen not to issue a dividend, which has released
more cash and means that it can shore up its pension
fund. It is a positive announcement in that respect.
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Will the Government review all major outsourced contracts
as a matter of urgency, and in particular the contracts
awarded to Capita for assessing personal independence
payments for disabled people? It has been subject to
justified heavy criticism for the way it treats disabled
people during that process.
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The Government routinely publish all significant
outsourcing contracts, and I would be happy to provide
the hon. Lady with a link to the website so that she can
get a full list of those. That is the process for doing
it.
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Is it not time that private companies providing public
services were subject to the same rules of openness and
transparency as the public sector, so that they can no
longer hide behind the cloak of commercial
confidentiality?
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Of course there are lessons to be learned from this.
Indeed, that is exactly what bodies such as the Select
Committee on Public Administration and Constitutional
Affairs is looking into. However, there is a distinction
between a private company and a public body. I do not
think it would be appropriate to extend the full FOI
provisions to all private companies.
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If the Minister is serious about getting the best value
for the public, will he commit to learning from the
Scottish Government? The Scottish Futures Trust’s latest
independently audited benefits statement shows more than
£1 billion in savings since it was established.
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I welcome the hon. Gentleman’s question. Of course we
will learn those lessons, but it is worth noting that the
Scottish Government gave a contract to Capita in 2015.
Capita was appointed by the Scottish Public Pensions
Agency to deliver its integrated pensions IT software
solutions, which is another example of Governments
choosing to use the expertise of the private sector.
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There are echoes of Corporal Jones from “Dad’s Army” in
the Minister’s response this morning—“Don’t panic! It’s
all okay.” Why does he think that Barnet Council—a
flagship Tory council, known as “easy council” because of
its extreme outsourcing—has put in place contingency
plans based on the possible failure of this company?
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I can assure the hon. Lady that we are not in any way
complacent. That is why we continue to ensure—I believe
Barnet Council will be doing exactly the same—that there
are contingency plans in place. Indeed, those contingency
plans have worked in respect of the one collapse of a
company we have seen: Carillion. Those public services
continue to be delivered.
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Capita has a £1 billion contract in the primary care
sector of the NHS. The Minister has sought to minimise
the necessity of declaring any kind of contingency plans
to the House. Does he not think that the House and the
general public deserve to know exactly what plans the
Government have in the event that Capita is unable to
provide those essential services to the public?
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I thank the hon. Lady for her question. I have given that
reassurance, and I can reassure the House again that in
respect of all our strategic suppliers, including Capita,
we are understanding their financial position and taking
appropriate contingency measures. I hope she will
understand that lots of these things are commercially
sensitive, and it would not be helpful to go into
excessive detail on that.
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Capita’s stock has dropped 84% since its 2015 peak. Are
there plans for a ministerial taskforce to grip this
situation should it worsen?
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It is worth noting that a large chunk of the drop in the
share price came yesterday in respect of the
restructuring of the business—it was a consequence, for
example, of the rights issue—but we are of course
engaging in such a way. I and the Under-Secretary of
State for Business, Energy and Industrial Strategy, my
hon. Friend the Member for Burton (Andrew Griffiths), who
has responsibility for small businesses, have established
a taskforce for Carillion. We are ensuring that we
provide all the support we can for the private sector
side of Carillion’s delivery of services. For example, we
are ensuring that HMRC is showing flexibility in relation
to payments, and that banks are showing some flexibility.
Should the need arise, we would do exactly the same for
Capita.
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Poor service delivery is often an early warning sign of
future financial difficulties. GP practices in my
constituency have been complaining for at least two years
about the poor quality of service they are receiving. We
know that the contract for assessments for personal
independence payments has been failing, and this morning
we have heard examples of many other service delivery
failures. Rather than leaving this to individual
Departments to manage, should not the Cabinet Office have
a central overview of where service performance is
failing as an early warning of future difficulties?
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Yes, we should, and we do exactly that. We of course take
an overall view of the delivery of public services, the
financial position and contingency. The specifics of
public service delivery clearly have to be contracted by
the relevant Department, because the relevant Department
has a deeper understanding of the need. For example, for
health and education, the Department of Health and Social
Care and the Department for Education are in a better
position to negotiate such contracts.
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Last year, a Press Association investigation revealed
that Capita received £200 million more than originally
planned from the Department for Work and Pensions for PIP
assessments, so there is a clear trail of the Government
rewarding failed performance. Will the Minister assure me
that the Government will not also be rewarding corporate
recklessness?
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No, the Government certainly will not be rewarding
corporate recklessness. Carillion shareholders paid the
price for the failures of Carillion in that they will not
receive back their initial investment, which is precisely
correct. The role of the Government is to ensure that
those public services continue to be delivered, and the
private sector bears the risk.
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