I beg to move,
That this House
has considered the application of TUPE to Carillion workers.
It is a pleasure to serve under your chairmanship, Ms McDonagh. I thank the House for finding the time for this important debate, which I am pleased to have secured. I am grateful for the opportunity to speak about the application of TUPE to Carillion workers, which is a necessity due to Carillion’s collapse. I do not intend to speak for long, because I want to allow all Members to express their views about this important issue and to leave the Minister sufficient time to respond to the many questions and concerns that I know Members on both sides of the House have about how the Government claim they are dealing with this important and complex issue.
We are all aware of the history of Carillion plc’s £1.3 billion deficit and the irresponsibility of its directors. I remind Members of the redundancy of tens of thousands of workers who were employed directly by Carillion or indirectly by contractors.
I congratulate my hon. Friend on securing the debate. Does she agree that it is important that we ensure that Carillion apprentices are appropriately looked after? Although about 400 of the 1,400 have been found alternative placements, we must find alternatives for them all.
My hon. Friend is correct: this is about apprentices as well as all the other Carillion workers.
Vital contracts for delivering urgent public services are under threat. Their maintenance is an essential part of the way this country is managed under privatisation. Many long-awaited building projects, such as the Midland Metropolitan Hospital in Smethwick, are under threat and may never restart. Above all, however, I want to focus on the crucial issue of what specific assistance the Government will give to the tens of thousands of workers who have been made redundant and to the contractors whose contracts are now in doubt.
In January, my right hon. Friend Mr McFadden, my hon. Friend Emma Reynolds and I met the Minister. At that meeting, I put to him four questions, which I ask him again today. First, will he bring Carillion public sector contracts back in house? If so, when and how? Secondly, what protections will he put in place for employees’ pensions, and will the Government meet union pension officers to address the many issues arising from liquidation? Thirdly, what guarantees can he give employees who were directly affected by the collapse of Carillion, and what programmes will the Government put in place to assist all those who have lost their jobs in this crisis? Fourthly, in view of the national significance of Carillion plc, will the Government set up a taskforce to deal with its collapse and all the associated fallout, and will that body include union involvement?
In response, the Minister told me that a lot of work had been done to prepare for Carillion’s liquidation. I have to say that it does not look like it. He told me that all public sector contracts would receive a smooth transition. What assurances can he give me that that will happen? He told me that the plan was to transfer the contract for the Midland Metropolitan Hospital to another company. What is the latest on that urgent matter? The Government have promised to set up a taskforce comprising the unions, business organisations and construction companies. What steps are being taken to protect transferred workers?
I refer the Minister to the letter from Frances O’Grady of the TUC on
The Government should, as a priority, look at ways of compelling public bodies to protect the terms and conditions of workers transferring to alternative providers. For example, the Cabinet Office should adopt a statement of practice on staff transfers that applies to all public bodies, including central Government and local government, the NHS, Transport for London and Network Rail. In that spirit, staff involved should be treated no less favourably than if the TUPE regulations had applied, and appropriate arrangements should be made to protect the occupational pensions and the redundancy and severance terms of staff in all types of transfer.
I call for voluntary TUPE agreements with new employers and for workers to be treated contractually as if they have continuous service. Will that be done? Will the Minister confirm that the Government’s objective is to ensure that Carillion workers’ rights remain the same, without any detriment?
Does not the sorry story of Carillion’s collapse illustrate exactly why there should be proper oversight of public sector contracts that are put out to private companies? We have seen problems in the Ministry of Justice with G4S and in the Home Office with Clearsprings. We should set the standard for employment terms and conditions through procurement. Does my hon. Friend agree that this is a real opportunity to do that?
It is a pleasure to be called to speak in this debate. I intend to be brief. I congratulate Eleanor Smith on securing this important debate. As a member of the Business, Energy and Industrial Strategy Committee, which is conducting an inquiry into the collapse of Carillion, I assure her and other Members present that a thorough investigation is ongoing. I am sure that Members are aware of the proceedings of that Committee.
As has been said, Carillion’s collapse was a complete commercial disaster, and one that could have been prevented with proper corporate governance. It is right that we focus our attention on the people most directly affected by the failure of Carillion—namely, the employees. It is not their fault that there was a failure of leadership and culture at the top of that business. They are made to suffer the consequences of a situation not of their making.
I recognise that this debate is not about the business model—we could talk about that endlessly—or the business strategy, how the business was run in terms of the standards adopted, or the culture of the business. In other circumstances we would review all of those carefully, to learn what must be learned from such a catastrophe. The decision making of the most senior executives has been mentioned. Having spent 30 years of my life in business before coming to this House, I can honestly say that I have never met such a sorry bunch of directors as the Carillion directors we had before us.
The hon. Gentleman and I are on the joint inquiry into Carillion. Will he say something about how the pension scheme was managed? Does he agree that dividend payments appeared to be a higher priority than funding the pension scheme for Carillion workers?
Although that is not directly relevant to the debate, I agree with the hon. Gentleman. When we look at the facts, we see that there is no doubt that when the board faced choices about how to use money that, frankly, it did not have, it chose to pay dividends rather than to make payments into the pension fund. Those things need to be scrutinised, and lessons must be learned.
This debate is about the employees: decent, hard-working men and women—and their families—who brought their very best to work and did their very best for a company that many felt great fealty to and enjoyed working for. I know that, because just a few days ago a constituent approached me in the street and, in introducing himself, told me that he was a Carillion employee—in fact, he had been a manager. He spoke highly of the people he worked with and of the business he had spent some time at, which, as I have said, he felt some loyalty to. Graciously, he wanted me, as a member of the Select Committee looking into the failure of Carillion, to know that he and his colleagues—former Carillion employees—appreciated the thorough manner in which the Committee was conducting its inquiry. He said, “I know it won’t change anything, but it is right that the directors should be openly held to account. It’s about getting some form of justice, really, isn’t it?” That is what has brought me to my feet today. I needed to come to the debate to stand up and ask the Minister for some form of justice for the Carillion workers.
I congratulate the Government on the actions they have taken on the failure of Carillion, because they have managed to deal with the failure of the business. They could have been tempted to bail out the failing company by putting large sums of public money into it, but thankfully they resisted that temptation. They could have stood back and done nothing at all, but that would have been an abrogation of responsibility. In fact, the Government acted pragmatically, given the circumstances.
The hon. Gentleman mentions the Government taking responsibility and not standing back and doing nothing. Does he agree that, given the company’s three profit warnings, the Government should have done something before the collapse?
Many issues relating to those profit warnings and the circumstances leading up to them need to be thoroughly investigated. Yes, at some point all of the stakeholders involved in this rather sorry story will have to explain and account for their decisions. That is right and proper and the way in which we run things in this country. We will learn from what we discover as we go through the process of inquiry. However, I congratulate the Government on acting pragmatically.
I now ask the Minister to act pragmatically on behalf of those workers who have moved from employment with Carillion to employment with a new private employer. We all know of the limitations of the regulations as things stand: TUPE applies only when a worker is transferred to a new company from an existing functioning company; it does not apply in the event of bankruptcy proceedings or analogous insolvency proceedings. I therefore ask the Minister to consider steps to provide, as my constituent said, some form of justice to Carillion workers who are transferred—thankfully, at one level—to another private company. Surely something can be done to protect the pay and conditions of those workers, because that is what would have happened had the contract changed hands: they would have been TUPE-ed across, as the saying goes. Instead, they have been caught up in the failure of Carillion.
It is wrong that these workers, through no fault of their own, should pay the price of lower pay and lesser conditions for doing the same job for a new company as they did for Carillion. When the Minister replies, I very much hope to hear that the Government will insist, at least in the transfer of public sector contracts from Carillion to new private companies, on a transfer of undertakings for the workers affected.
Ms McDonagh, it is traditional at the start of these debates to say what a pleasure it is to serve under the Chair, and today it is really true. I begin by congratulating my parliamentary neighbour, my hon. Friend Eleanor Smith, on securing the debate and thanking the Minister for his close engagement in this issue in recent weeks, since the company went into liquidation.
As Stephen Kerr just said, many aspects of Carillion’s collapse are the subject of the inquiries by the Work and Pensions Committee and the Business, Energy and Industrial Strategy Committee, including how the company got itself into such financial trouble, why so many big contracts went wrong at the same time and why the company kept paying out dividends while the pension deficit built up, among many other questions. Today, we focus on one in particular: Carillion and its staff.
At the time of Carillion’s collapse, the company employed roughly 20,000 people in the United Kingdom and a similar number abroad, with 450 employed in its Wolverhampton headquarters. Since then, more than 1,000 of those workers have lost their jobs. Many of them would have had access to the various voluntary redundancy schemes that the company put forward in the 18 months or so running up to its collapse.
That raises a moral dilemma. Workers who had 20 or 30 years of service would have got quite generous voluntary redundancy payments had they pursued that option in the run-up to the company’s collapse. Therefore, the first question is: what was the gap in knowledge between the workers who were simply doing their jobs—perhaps thinking that there might be another couple of rounds of voluntary redundancy, so there was no urgency —and those at the top of the company, desperate to keep the company afloat? What did those at the top know about the prospects for the company’s collapse, compared with the workers, who perhaps did not? That gap in knowledge could result in a loss of tens of thousands of pounds—the difference between what someone would have got under voluntary redundancy and the bare statutory minimum they are now entitled to if they lose their job.
My right hon. Friend is making a really important point. A constituent of mine came to see me about the lack of information from Carillion and, frankly, the downright lies they have been told by their management and leadership. They were told that they would be made redundant on
Now, staff in Sheffield are being made redundant on a rolling basis—they do not know when it will happen. Staff who have been there for 20 or 30 years, as my right hon. Friend said, run the risk of losing out on significant redundancy payments or are choosing to leave the company and find extra work. I hope the Minister will respond on information and transparency in the company.
My hon. Friend makes a good point. The first thing I will raise is the question of redundancy and the payments available to those 1,000 or so people who have lost their jobs, but the second issue is about the workers who are left.
Carillion was, of course, a complex web of contracts, covering sectors as diverse as the Ministry of Defence, construction, prisons, school maintenance, cleaning and a whole number of other things. The official receiver is now going through those contracts and looking for alternative suppliers to take them over. The central question before us in this debate is on what terms those will be taken over, and what the pay levels and conditions will be for the workers who find themselves transferred.
The right hon. Gentleman is making a valid point about the terms and conditions. I wonder whether he was as concerned as I was to read the reports about Serco picking up the contracts at, I think, about 50 NHS sites somewhere in England—I cannot remember exactly where—and the chief executive saying that it had saved £20 million on the contract. Does the right hon. Gentleman agree with my concern: that that £20 million might be coming from the terms and conditions and the wages of the workforce?
I quite agree; that is a concern. Of course, the context is that a company went into financial collapse while running those public sector contracts, so it hardly looks as though it was making a big killing out of them—frankly, if it was, it would not have gone bust. The margins were already thin, and the public sector has proven itself over the years to be more adept at driving narrow margins. My concern is that somebody who takes over will drive that down further in precisely the way that the hon. Gentleman said and that the people who will pay the price will be workers, some of whom are on quite low pay to begin with.
The legal position is that TUPE does not normally apply in an insolvency; I think hon. Members here understand that. But the point being made in this case is that such a complex web of contracts is involved and there is such a significant public interest: if there is a proliferation of new suppliers, there is a strong case that TUPE should apply, at least where employment is rolled over.
Given Carillion’s collapse into liquidation, it is hard to say that it was earning very heavy margins on the contracts in the first place. The Minister for the Cabinet Office seemed to agree with that point when he told the House, shortly after the company’s collapse, that the official receiver was
“looking at…whether it can offer arrangements whereby workers are no worse off than they were under the terms of their Carillion employment.”—[Official Report,
Vol. 635, c. 347.]
I agree with what the Minister for the Cabinet Office said on that occasion. That is the point I stress today.
I think we all understand that, sadly, in a case of insolvency there may be some job losses; part of the reason why, legally speaking, TUPE does not apply in situations of an insolvency is that there will be job losses. The question to the Minister is a slightly different one. Even if we understand that there are job losses, can the Government and the official receiver not insist that, when we are talking about not job losses but employment being rolled over from Carillion to an alternative supplier, on this occasion, given the public interest, the existing terms and conditions should apply as though under TUPE? That would be reasonable, fair to those workers and fair in terms of the public interest. On this occasion, it is the right thing to do.
It is a pleasure to speak in this debate; it is one that I have a particular interest in because of my own constituency and the workers there and across Northern Ireland. First, I congratulate Eleanor Smith on bringing the debate forward, presenting the case, and giving us an opportunity to participate. I thank her for that. It is nice to see the Minister in his place. I spoke to him beforehand. We are looking for substantive responses from him; we are not putting any pressure on him, but we are here to highlight the issues. He knows what the issues are and he knows what we are seeking.
Carillion is undoubtedly one of the biggest shakes in the construction industry in recent years, and yet as one delves deeper one can see that it was not a shock to those in the know but an inevitability. Jo Stevens said in her intervention that there were two or three warnings along the way. I cannot quite understand why nothing happened. What we are seeking, in as gentle a fashion as possible but with firm determination, is to ensure that those warning signs that were clearly there among some businesses are warning signs that the Government are able to take notice of and do something about.
When we hear about other big businesses—hon. Members will forgive me this, because we are probably all the same; I do not think I am any different from anybody else—and hear the names, we say, “Are they okay? What’s their pension fund like?” Those are the questions we ask automatically, right away. If the pension fund is run down, that should be a warning sign of what is happening. I am not sure what powers the Government have on this, but I would be keen to ensure that they have the power necessary to check pension funds and see whether they are being run down.
When I ran my own business, I quickly learned that a business cannot survive with outstanding invoices. A 30-day pay period was my ultimate rule, and for good reason: if the retailer went bust, I would have a loss of £1,000 for one month, perhaps, but if it went for three months it would be £3,000. When the latest diktat from Carillion advised that 120 days could be an invoice period, something major was wrong.
Although we could and should go into a major investigation into how it all could have happened and how Carillion continued to be awarded Government contracts, that is not my most pressing concern. My most pressing concern, and the subject of this debate, is the workers—those with redundancy or uncertainty looming, a mortgage to pay, a family and children to look after and debts creeping up around them. How will the small businesses survive? My hon. Friend Paul Girvan, who is not here today but in a meeting of a Committee he is involved with, has a company in his constituency that finds itself in exactly that problem, with very deep troubles.
Carillion, as we know, employed some 43,000 staff worldwide and provided services for schools, prisons and hospitals, which have been well illustrated—we all know what they are—across the United Kingdom of Great Britain and Northern Ireland. Reports suggest that Carillion had over 200 jobs in Northern Ireland, but sometimes we need to look at what that means, because 200 jobs does not mean 200 employees. That is 200 jobs with contractors, with subcontractors and with suppliers. There is a domino effect on many other companies. They are all hanging in the balance, and that is not a balancing act that any of us would want to sit back and watch.
There were many contracts, including repair and heating services for the Northern Ireland Housing Executive and for Power NI. Boy, do I know that there was a period in which the Housing Executive in my constituency and across Northern Ireland was struggling under the burden of uncertainty! Constituents were ringing up about repairs not being carried out and fearing that their long-awaited and desperately needed maintenance work would not be done, disabled adaptations would not be made or unsafe stairs would not be repaired. The list is endless—we all have such issues in our own constituencies.
The latest news is that the Housing Executive is transferring its Carillion contracts to the UK division of ENGIE, a French energy and outsourcing company. That is great, but it begs the question whether the workers who have the contract continue in their employment. There is no doubt in my mind that the answer should be yes. I, along with other MPs and elected representatives across Northern Ireland, raised those concerns and we were fortunate to be given the assurance that ENGIE was the preferred bidder: identified by PwC’s special managers as a specialist in the field. It was appointed following Carillion’s liquidation.
There is good news there again: the existing terms and conditions of the legacy Carillion contracts, including costs and service delivery, will remain. I noticed in the media that ENGIE confirmed that all staff working on the Housing Executive contracts would keep their jobs on the same pay and conditions.
We have had some good fortune in Northern Ireland, and we are pleased to report that in this debate. That is wonderful for Northern Ireland, but is it happening UK-wide? Perhaps some contributions will indicate that it is not. If it is not, it needs to be. It is time to address this. It must happen UK-wide, and if it does not, we in the House must take the lead. We look to the Minister to give us that reassurance, and I think all Members participating in the debate seek that assurance as well.
It seems to me that in a similar scenario, when the bankers messed up and small businesses paid the price, we did not do the best job in holding those bankers to account. Ensuring that TUPE happens for all existing contracts and contractors will ensure that we step up in the right way for those who are blameless and yet will carry the burden. I always say this—I am sure we are all the same—but my job here is to speak out for the wee man and the wee woman: those who are down there with big business trampling on the backs of their heels and the backs of their necks. That is what we do in the House: we speak out for those people and make sure we can be a voice for them.
There is waiving of fees and extensions of overdrafts, but how long will the banks continue with that without the guidance of this place? Has the Minister had any discussions with the banks on how they can assist and help small businesses? This is a national concern and must be addressed in this place, to stop the little man from drowning in the wake of the cruise liners that have continued to sail on through the storm that they created. We need Government intervention and Government help, and it is important that we receive that assurance today.
Enough is enough. I, for one, have no issue in supporting this motion and the thrust of why we are here today, which is to try to help those who are concerned about their wages, contracts, pensions and all the other things. They are concerned about putting food on the table and looking after their families. The contractors—the men and women who have outlaid money for materials and who have staff to pay and mortgages to pay—are the innocent. They have done no wrong but have been grossly wronged.
We are elected to this place to speak out for what is right and to ensure that we do what is right. At the same time, we ask the Government to ensure that right is done as well. We are called to bring in legislation that benefits our constituents and society as a whole, and that is what the debate represents. While the major players mopping it up in Northern Ireland have confirmed that that is the case, it must also be the case across the whole of the rest of the United Kingdom—in England, Scotland and Wales.
It is a pleasure to serve under your chairmanship, Ms McDonagh. I congratulate my hon. Friend Eleanor Smith on securing this extremely important debate. She clearly has a significant constituency interest in the matter, but as we have heard, such is the reach of Carillion that no part of the country is unaffected by its demise.
I will not repeat the stories of greed, arrogance and, probably, negligence that have led us to where we are today, except to say that it is a bitter irony that many of those culpable for the current state of affairs are the least affected by it. We know the company ramped up dividends, borrowed more and more money to effectively hand it over to shareholders, delayed payments to creditors and generally behaved as if there was no tomorrow, with no thought of the consequences of its actions.
On that point, the hon. Gentleman did not mention—it is worth mentioning—the salaries and bonuses the directors were awarding each other, which should bear on our minds as we consider the wee people who Jim Shannon described and who we should all be thinking about.
Absolutely. This is a tale of a corporate system out of control. It sends a real message about how not to run a company responsibly. I hope that some concrete action will come to prevent these kind of scandals happening in the future. Comparing the pension deficit to the bonuses paid really brings home how unfairly and avariciously certain people have behaved in this case.
While it is hoped that, in the short term, there will be some protection for jobs—as we have heard today and as I will go on to explore, there are some questions about the precise arrangements—we must not forget those who work for subcontractors and those who have already been made redundant who need our support as well.
I am told that there is an issue with the liquidators providing termination numbers to redundant Carillion staff. Some of those staff have given a lifetime to the company but have been told by the liquidator that, until that number is issued, their claims for notice pay and redundancy pay cannot be processed. Those who have received those details have been told that they may have to wait up to six weeks for the Redundancy Payments Service to actually process the payments.
As we know from the universal credit discussions we have had in here in recent times, expecting people to wait six weeks for payment after losing their job is far too long, so I do not see why we should allow that situation to occur here. I hope that, when the Minister next speaks to the liquidator, he will raise these issues and ensure that those who have been made redundant are able to access their statutory entitlements as soon as possible. Will the Minister inform us what resources have been allocated to the Insolvency Service to ensure that those payments are processed as quickly as possible?
I congratulate my hon. Friend Eleanor Smith on securing this important debate. On apprenticeships, it is hugely important that apprentices are given alternative apprenticeships. However, in answer to a written question of mine, the Government said that apprentices who are not found an alternative apprenticeship will be paid after
I absolutely agree. While there has been some progress in finding apprenticeships for some of those who have lost theirs, there are still a huge number who have yet to be found one. We should not underestimate how important it is to get people trained in those skills that we will need in the economy in the future. I hope that more effort goes into that.
On the other companies in the supply chain and subcontractors, is the Minister able to tell us what analysis he has made of the number of companies in these sectors at risk of insolvency and the number of employees whose employment is in jeopardy as a knock-on effect of the liquidation? Has he done any analysis of the numbers affected who are perhaps working in another capacity on Carillion contracts—either through agency arrangements or zero-hours contracts? They are really little more than bystanders in this process and are powerless to do anything but accept their fate. I hope we are able to do something to assist those individuals.
As we know, when a particular function transfers, it is normally the case that staff are transferred over under the TUPE regulations. No one is suggesting for a minute that that is not a preferable situation to redundancy, but it seems that there are questions to be answered about the exact basis on which people will transfer over to their new employers. There should be no ambiguity from the Government on this. People’s existing contracts should be honoured in full. We should not have state-sponsored watering down of terms and conditions. The Government should not be a willing partner in the chipping away of employee rights.
Does my hon. Friend agree that this is an ideal opportunity for the Minister to confirm that TUPE, which obviously derives from the European Union’s acquired rights directive, will be maintained after Brexit, and that voluntary TUPE in these circumstances, to protect Carillion workers, could be offered as a commitment of that for the future?
I certainly agree, and I would certainly like some clarity from the Government on a whole range of issues on the impact of Brexit. The acquired rights directive has been in place for some 30-plus years now. It is not perfect by any stretch of the imagination, but it is particularly important in situations like this.
Even if there is a full TUPE transfer, we should not pretend that it will be happily ever after. The reality is that, in the majority of occasions when people transfer over to their new employers, sooner or later that employer will look to change the terms and conditions. When they say they are changing terms and conditions, they mean they are watering them down. We have already heard from some of my hon. Friends that there is considerable anxiety about that. It is a practice that has to stop.
The Government should stipulate that any company running a contract providing public services should respect agreed terms and conditions and look to adhere to the highest standards possible that a responsible employer could adopt—proper rates of pay that provide a living wage, trade union recognition and collective bargaining rights and an occupational pension that is not paid into only when the employer feels like it but is there, as it should be, as part of deferred pay and as an essential part of the contract.
So TUPE applies a certain level of protection. It is far from perfect and often misunderstood, but, contrary to what many people think, it does not provide unlimited protection against changes to terms and conditions. It certainly has more than enough loopholes in it to allow a determined employer to ultimately do as it wishes. Because of the way in which our employment rights system works in this country, changing the terms and conditions of employees is easier to do than finding savings elsewhere. However, in these circumstances it is preferable to redundancy. Let us protect the jobs and get as many transferred as we can, but let us not for a second think that that is the end of the matter. Let us not perpetuate the merry-go-round of misery. Let us take the opportunity to say to whoever ends up running the contracts, “Please respect and protect the terms and conditions of the people who do the day-to-day work.”
The Prime Minister has said that the Government are a customer of Carillion, which is of course true, but we should be much more than a customer. We should be the champion of public services, the defender of the highest employment standards and an exemplar for the private sector of the kinds of companies that we want to see succeed in the country. Perhaps people thought Carillion was a success story at some point, but it was a success built on sand, on deception and on avarice. We should be and we can be much better than that.
It is a pleasure to see you in the Chair, Ms McDonagh. I congratulate my Unison comrade, Eleanor Smith, on securing this debate. As a member of the inquiry into these matters, along with Stephen Kerr, I assure everyone that there will be pertinent questions tomorrow to the auditors and the Pensions Regulator. Clearly there are significant and very real questions for them as to how the company collapsed.
If a politician advocates the outsourcing model of public service delivery—for many reasons I do not subscribe to that theory—they have a duty and a responsibility to protect the workers who deliver those public services using that model. We have heard many examples in the speeches so far about the duty and responsibility that the Government should have in protecting the workers’ terms and conditions, wages and so forth. I gently say to the Minister that there is an immediate solution that he could take up now. He could agree to the provisions that can be found in the Workers (Definition and Rights) Bill, an excellent piece of legislation sponsored by me, which foresees the possibility of a company collapsing. Indeed, it was lodged and printed the day before Carillion collapsed.
A general point applies not only to Carillion, but to all sectors of the economy where there is a contractor relationship with a principal employer and where that contractor absconds, as happened in one case I am aware of. A hairdresser with a business in a Hilton hotel in Scotland absconded—to Portugal, I understand—leaving the workers there with unpaid wages and in search of answers. In the case of Carillion, where the public sector contracted Carillion to do work, the contractor should pick up the employment and wages of the workers. That can be found in clause 3 of my proposed piece of legislation, which is of course available in all good Vote Offices on the estate.
Such issues come up too often, which is why I propose legislation. Companies go bust or abscond, and leave workers exposed with nothing. We need to address that issue, so I hope the Government will take that up. I am sure the Minister will respond to that.
There should be a voluntary TUPE arrangement. Certainly in Scotland workers have been transferred to other companies to complete contracts. Jo Stevens raised the issue of why contracts were issued after profit warnings were announced. The Scottish Government did not agree any contracts with Carillion after the first profit warning in July 2017. The UK Government awarded £2 billion of contracts after that profit warning was issued, including for HS2 and for Ministry of Defence bases. The second profit warning was on
There is a real issue with the pension scheme. As someone who has negotiated TUPE transfers, I am aware of the provisions under TUPE. New contractors like to wriggle out of putting in as much money as the public sector did —usually to 6%—and a lot lower than what the public sector put in. Has the Minister looked specifically at occupational pension scheme provision? That will be a real issue for this Parliament to deal with. When we see the Pensions Regulator asleep at the wheel—in this case fast asleep at the wheel—occupational pensions will be a real issue. The Work and Pensions Committee looked at the issue this morning. Will the Minister make a statement today on what occupational pension scheme provision will be given to workers who have transferred?
I again congratulate the hon. Member for Wolverhampton South West on securing this debate. I hope the Government will listen to all hon. Members who have spoken today. I look forward to the Minister’s offer of a meeting with me to discuss my legislation.
It is fantastic to have you chairing this debate today, Ms McDonagh. I congratulate my hon. Friend Eleanor Smith on securing it and on working so hard for her constituents. I know that her eagerness to secure this debate comes from a real anxiety about what will happen to all the workers.
What is wrong with the model of directly employed workers delivering contracts on behalf of the Government on such vital projects as school and hospital builds and prison maintenance; workers who have access to trade unions and vice versa; employers who afford rights and protections to their workers; and work that allows them to live a good life in security? Why not have a model whereby any profits made from the worker’s labour are reinvested in the wages of the workers and the projects that the nation needs? What we saw at Carillion was the absolute opposite of that.
Carillion is not only a well-known blacklister. From 2009 to 2016, it paid out £554 million in dividends—in other words, three quarters of the cash it made from operations. In the five-year period from January 2012 to June 2017, it paid out £333 million more in dividends than it generated in cash from its operations. We know that in the past six months Carillion issued three profit warnings. We also know that during that same period, as has been mentioned, and following those profit warnings, Carillion was awarded three contracts worth nearly £2 billion.
I know that Conservatives and those wedded to freedom of the market would maintain that a business does what it wants with its profits. It is up to them and there should be very little state intervention, but surely even those people—
If the hon. Gentleman will let me finish, he might agree with what I say next. Surely even those people can see that paying out more in dividends to shareholders than the amount made in profits—paying out three quarters of cash made from operations—is not a healthy way to run a business.
I agree with the hon. Lady’s last point, but her description of what Conservatives generally believe about the marketplace is a fallacy. We believe very much in the operation of markets, but within the framework of law. Directors of companies have serious responsibilities, both legal and moral, for the conduct of their affairs. That accountability is framed by the law that regulates the marketplace.
Thanks for explaining the nature of conservatism. That was very welcome. I think the contracts made after three profit warnings tell their own story.
That way of doing business is catastrophic for workers, and damages progress on desperately needed public infrastructure. Imagine all the investment that could have been made if even half the money that went to shareholders had been invested in public projects and workers. That is why the Labour party calls on the Government to bring the contracts back in house. The situation today, with potential mass job losses, is not the fault of the workers, so a degradation of workers’ rights as a result of Carillion’s collapse—which threw 20,000 workers into a future of chaos and worry—is a price they should not have to pay.
The Government are not powerless in this situation, given that they have 450 contracts with Carillion. They were a major customer of the company, with a considerable stake in the future of the contracts and what the new jobs will be like. If there is any doubt that TUPE applies —particularly regulation 4 on protection of contractual rights and regulation 7 on protection from dismissal—I should hope at the very least for a Cabinet Office statement of practice to be issued to ensure the transfer of all employees in Carillion public sector contracts as if TUPE applied. That statement of practice should also apply to all contracts relating to central Government, local government, the NHS and all public bodies. Similarly, could the Government instruct the official receiver to transfer employees in private sector contracts as if TUPE applied? They gave an instruction to prioritise the continuation of public sector contracts, which was a good thing. It is right, in addition, to issue similar instructions on behalf of private sector workers, whose livelihoods are, as we know, no less important than those of people in the public sector.
It is extremely important that when workers transfer to a new employer, their individual contracts of employment and trade union recognition arrangements should follow them. So far, 980 workers have been made redundant and 7,500 have been transferred, but after all these weeks thousands of workers still face great uncertainty, as has been recounted in personal stories from constituencies. The Government, alongside the official receiver and special managers, must provide certainty.
The Government have said that the majority of employees who have already been transferred are on similar terms and conditions. What does “majority” mean—is it 51% or 99%—and what does “similar” mean? With three Conservative Members in the Chamber, I do not want to be accused of being overly sceptical, but the Government are hardly seen as a bastion of workers’ rights, and it is therefore unlikely that in this instance “similar” would equate to an upgrading of workers’ rights. As to those who were not transferred with similar conditions, what degradation was there of their terms?
The full scale of the catastrophe cannot just be forgotten as another failure of outsourcing, especially when, rather than resorting wholesale to an alternative model, the Government are simply allowing a similar operation to bid for contracts. That makes me very concerned about the long-term security of the jobs. How will the Government track the long-term outcomes for Carillion workers in their new employment and training places, as well as those for the self-employed and employees of subcontractors?
As the Government know, regulation 13 of TUPE, which places a duty on the official receiver and the special manager to inform and consult employee representatives in relation to TUPE transfers, is still a requirement even if regulations 4 and 7 do not apply. It is therefore important in setting workers’ expectations and giving clarity about their future. It relates to information about whether there will be a transfer—and the transfer date—as well as the legal, social and economic implications for any affected employees. Have the official receiver and special managers been complying with that duty? That is not clear. Are those representatives being informed and consulted? Worryingly, I read yesterday that Unite the union has discovered that Carillion did not pay into the NHS pension scheme in December 2017, even though deductions were made from employees’ salaries. I should like to know what happened to those pension contributions.
My final point is that there could be an argument that regulations 4 and 7 of TUPE apply in the case of Carillion. I understand that the usual position when a company is put into compulsory liquidation is that trading ceases and operations come to a complete halt. In an ordinary liquidation, priority is given to paying off creditors, and therefore regulations 4 and 7 of TUPE do not apply. In Carillion’s situation, the Government made it clear that the official receiver should instruct some of the Carillion companies to continue with their operations—especially those relating to public sector contracts—so that the services being provided by Carillion could continue without a break. The Minister for the Cabinet office said:
“Let me be clear that all employees should continue to turn up to work confident in the knowledge that they will be paid for the public services they are providing.”—[Official Report,
Vol. 634, c. 624.]
The official receiver’s decision that some Carillion companies should carry on trading to safeguard and maintain the services that they are providing means that the liquidation has been conducted in the same way as an administration, in which regulations 4 and 7 of TUPE would undoubtedly apply.
The Minister shakes his head; if he does not believe me, I point out to him the d’Urso case—that was my northern Italian pronunciation and I am happy to provide the Minister with my notes afterwards. The case considered whether the Italian version of TUPE applied to transfers effected by a company that was subject to a special administration procedure for large undertakings in critical difficulty. The special administration procedure had many of the features of a compulsory liquidation. None the less, the European Court of Justice decided that the business transfers directive could apply if it had been decided that the undertaking should continue trading, for so long as the decision to continue trading continued in effect.
Sitting suspended for a Division in the House.
When you suspended the sitting, Ms McDonagh, I thought that I had done something wrong or was being outrageous, but in fact there was a Division. I was pointing the Minister to the case in Italy. I urge him to look at it and consider the application in Carillion’s case, because there are so many similarities.
Where there is a will, there is a way. The political questions highlighted by the Carillion case are crucial. The model of outsourcing to companies that essentially leak taxpayers’ money to make rich people even richer has had its day. The same taxpayers who fund the obscene wealth of the shareholders face joblessness, degradation of their terms and conditions and a race to the bottom on what rights they will have left. We know that that model has had its day, but I am not sure that the Government do. However, the critical question today is what happens to the workers, their jobs, their pay, their terms and conditions and their security. I urge the Government to take decisive and reassuring action for thousands of these workers and to answer some of the critical questions that we have all posed here today.
Thank you, Ms McDonagh; it is great to have time to breathe and to think about what I will say. It is a great pleasure to serve under your chairmanship. This is only my second Westminster Hall debate as a Minister, so please be gentle with me as we go.
I congratulate Eleanor Smith on securing the debate. I know that she has been incredibly concerned about her constituents. We have spoken. I called her on the very day when Carillion went into insolvency. We have met and spoken on a number of occasions. I know that she brings this matter to the House because she is deeply concerned about the impact that the Carillion insolvency will have on her constituents and the people who work at the Wolverhampton headquarters.
We all recognise the impact that the Carillion insolvency has had and the weight of it. The Government have taken decisive action to mitigate the effects of the Carillion insolvency on employees and firms in the supply chain since it became clear that the company was in severe trouble. Although our No. 1 priority was to protect the vital public services delivered by Carillion, we have also sought to minimise the impact on the private sector and all the jobs that rely on it. Where private sector clients want services to continue, pending transition to another supplier, and have agreed to pay for those services, the official receiver has agreed to maintain them. Through the official receiver and the appointment of special managers, we have ensured that vital public services have been maintained.
There was some suggestion earlier of public services being at risk. We have actually seen an orderly, smooth transition. We have managed to protect the hospitals, prisons and schools—all the public services that rely on the services that were being provided by Carillion. That was our major priority, but of course we have an added interest in doing all we can to protect not only all the thousands of employees employed by Carillion, but the many thousands of jobs in the supply chain—the contractors who, through no fault of their own, find themselves in a difficult position because of the Carillion insolvency.
To date, as I think has been mentioned during the debate, 7,610 of Carillion’s UK employees have transferred to new employers and 1,141 employees have, sadly, been made redundant. I will come on to the support that we are putting in place for those who are made redundant. Carillion had more than 18,000 UK employees, and we hope that the special managers will announce further transfers of jobs and contracts in the very near future.
I thank the Minister for giving way so soon into his speech. I want to stress this point. The Government have essentially underwritten public sector contracts, so that they can continue, which I support. However, does he agree that that is not a usual feature of a compulsory liquidation? It is more like an administration procedure, and therefore TUPE regulations could apply.
That is the point the hon. Lady made in her speech. Let us be clear: Carillion is in insolvency, not in administration—there is a distinct difference in law. While the Government have stood behind Carillion to ensure that those public services continue to be delivered by the company during that smooth transition, in law, Carillion is in insolvency. I commend the hon. Lady on her Italian, but the point she makes is not relevant to the Carillion case, unfortunately. Later in my speech, I will explain why TUPE does not apply in this case.
The new company that I referred to, the GovCo from the Ministry of Justice, will ensure the delivery of, for example, prison facilities management previously provided by Carillion, including things such as cleaning, reactive maintenance, landscaping and planned repair building work. Those jobs have been taken in house to a GovCo. We have also seen positive signs regarding Carillion’s larger contracts.
As I said, a number of jobs have already been secured, but, as hon. Members will have seen, the media have recently reported on Serco’s and Brookfield’s interest in purchasing a number of contracts and transferring roughly 4,000 workers, although that is not yet confirmed. I understand that the official receiver and the special managers are working hard with customers to try to secure agreements, which will secure further jobs.
We also have to remember that some of these contracts are in the private sector and some are in the public sector. The Government were a customer of Carillion. We did not own Carillion. My hon. Friend Stephen Kerr rightly pointed out that we did not ride to the rescue and bail Carillion out. Our intention was to protect public services and, wherever possible, protect the jobs that relied on them.
Stephanie Peacock has had to leave because of the Division, and I understand that. She mentioned in particular the issue of apprenticeships, which was also raised by other hon. Members. The Construction Industry Training Board, the CITB, has now conducted face-to-face discussions with all of the 1,400 Carillion apprentices and has so far found new employers for 725 of them. In addition, 180 of those were level 1 pre-apprenticeships, and those have been transferred to new training providers. The CITB is working to ensure that remaining apprentices are supported to find new employers and training providers. We are confident—the CITB is confident—that there will be opportunities and new apprenticeships for all of those apprentices who wish to continue with their studies.
As I said, we have had the question of whether TUPE should apply. While we welcome the protection of Carillion’s employees, and I fully understand the desire of the hon. Member for Wolverhampton South West to protect the terms and conditions of the staff that she represents, it might just help if I explain to hon. Members that there are over 300 companies in the Carillion group, of which around 200 are based in the UK. Currently, 27 companies are subject to compulsory liquidation proceedings in the UK. When these companies are responsible for employing Carillion’s 18,000 employees, it is simply a matter of law that some elements of TUPE do not apply. Protections for transferring employers is a well-established principle that, as we have heard today, derives from EU legislation dating back to the 1970s. However, there are good reasons why key TUPE provisions do not apply when a company goes into liquidation.
The reason why TUPE is not applied in various insolvency situations, including liquidation, is that it is considered an obstacle to rescuing the businesses and saving jobs. That has to be our priority, of course. We want to rescue and secure these jobs. A decision taken by policy makers and Governments of all colours not to apply TUPE provisions in these cases is well understood, as are the reasons behind it. As a result, regulation 8 of the TUPE regulations 2006, covers insolvency proceedings and provides that these provisions do not apply
“where the transferor is the subject of bankruptcy proceedings or…insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner.”
That is exactly the case that we see here with Carillion.
There are two good reasons why the Government do not want to apply TUPE. First, it would undermine the intention of rescuing jobs, as I said. Secondly, to apply TUPE specifically to the present liquidation scenario would require an emergency Act of Parliament, creating a special statutory scheme for those named companies, having retrospective effects. That would cut across fundamental principles at the heart of our democracy. I am sure that no colleagues in Westminster Hall today would wish to do that. The compulsory application of TUPE to Carillion companies is not, therefore, a matter that can simply be agreed between the liquidator and the unions. There is legal precedence here that we cannot simply ignore.
My hon. Friend is giving the position as it is, which is what has brought us to this debate. However, is it not possible for the Government, in relation to the public sector contracts, to stipulate, as the customer, that certain aspects of the contract roll over to the new company, such as the voluntary TUPE that has been referred to? Could they not insist on that?
My hon. Friend makes a fair point. As we heard previously, the Secretary of State for the Cabinet Office has explicitly said that we wish to ensure that, wherever practical and possible, workers are not worse off. In fact, I can share with the House that the Secretary of State for Business, Energy and Industrial Strategy has had conversations with the special manager to implore him, wherever possible, to protect workers in that way.
However, as I said, we also have to be aware that a large proportion of these contracts are actually private sector. Of course, the legal requirements and stipulations on the special manager, in order to be able to fulfil his duties and protect the interest of the creditors, are paramount here. It would be inappropriate for Ministers or any politician to try to interfere with that. As a result of agreements that we have seen in the press and entered into over the past few weeks to purchase contracts held by Carillion, we have secured those 7,500 jobs.
Laura Pidcock mentioned that we are on record as saying that most employees who have transferred so far have done so on existing or similar terms. The official receiver has worked to do that. I know that she would like more details—she would like an exact percentage, but she will also understand that given Carillion’s size, complicated governance and business structure and the difficulties in relation to managing the smooth transfer of these contracts, we do not yet have those exact figures. However, I am sure they will be available to her as soon as we have them.
In her speech, the hon. Member for Wolverhampton South West raised the issue of support for employees. Understandably, this remains a very troubling time for employees and we will do everything we can to help those affected. Unless told otherwise, employees who are working will continue to be paid by Carillion during the liquidation. My hon. Friend the Member for Stirling used the phrase “justice”—he wanted there to be justice for Carillion workers. It is not their fault that they find themselves in this perilous situation. I can say to him that those employees transferring across will still be eligible for redundancy payments. So if he is looking for justice, he may find that those payments go some way to delivering that.
Through the special managers, the official receiver has contacted all employees to explain the action being taken by Government and where they can seek advice and support. For example, the special managers and the Pensions Advisory Service have set up dedicated telephone support services. The special managers have a process in place to inform employees being made redundant in a timely fashion, and to give information about their employment status.
There was some suggestion earlier about delays in people being given the required information to be able to claim redundancy. We are in close contact with the special managers, and while we cannot guarantee that everybody has had the information as quickly as we would hope, there is a great imperative in these very difficult times for workers to ensure that they get access to the money that they have a right to receive. So we are working incredibly hard to try to ensure that happens as a matter of urgency.
We are also ensuring that practical support is available from Jobcentre Plus’s rapid response service. Hon. Members might be interested to know that so far Jobcentre Plus reports that it has had 34 claims by Carillion staff and 65 claims by individuals made redundant by firms in the Carillion supply chain. So thus far we have seen a small number of people turning up at Jobcentre Plus and claiming benefits.
I think the reason for that, in reality, is that these workers are incredibly valuable. They are a skilled, trained workforce in a tight jobs market. We have seen today that we have record employment in this country—unemployment is at levels not seen for 40 years. That is a great economic success, but it means that as the jobs market tightens the workers who we are talking about are greatly in demand.
I have heard from my constituents that they have not received proper communication; I think that has been said across the different workforces. The fact that there are over 20,000 and only 20 have gone says something about the communication, which is not going to everybody.
I can honestly tell the hon. Lady that the rapid response team are exactly that. They give a report to the taskforce, which she asked about and I will come to. The rapid response team are working alongside the special managers. When people are made redundant, the team have all the details of the people involved and are proactively doing that. In addition, they are going into Carillion offices and, without causing concern, proactively advising people about opportunities and jobs that are available, and helping those people to prepare should they be made redundant.
In addition, the team are offering help with job searches, help to identify transferrable skills and training to update skills. This is a Rolls-Royce service. I can say hand on heart that the rapid response team are really excellent. If the hon. Lady has specific examples, I would be delighted to take those up on her behalf and to ensure that if somebody has been missed, we get in touch with them as quickly as possible.
Finally, I would like to set out the support that we are giving to those businesses affected by Carillion. We recognise that while the mass and the attention is on Carillion, the impact in the supply chain is huge. As hon. Members, we will probably all have people working in the supply chain in some way. As the hon. Member for Wolverhampton South West mentioned, we have set up a taskforce; I think it was set up three days after Carillion went into liquidation. The taskforce includes representatives of small business and the TUC. She referred to a letter from Frances O’Grady; Frances sits on the taskforce, which meets at least weekly. We have the Federation of Small Businesses, the Department for Work and Pensions, the Cabinet Office, the Local Government Association and the Construction Industry Training Board. We are working across Government to address the challenges and to come up with solutions that will support affected businesses.
The Business Secretary and I are in regular contact with the construction industry and all of the relevant trade bodies. I meet them weekly to properly understand and respond to their concerns. Following the Business Secretary’s meetings in the aftermath of Carillion’s insolvency, when we called in the banks to ensure that they were providing the necessary support and help to the supply chain, the banks made nearly £1 billion available. That was from lenders such as HSBC, Lloyds, the Royal Bank of Scotland and Santander in the form of loans, credit facilities and further financial support, to ensure that the contractors in the supply chain that are affected get the help and support that they need.
For those companies that may have lost money as a result of Carillion’s collapse, the most important thing is their ability to continue earning. While they may have lost sums as a result of Carillion’s collapse, by standing behind Carillion we have allowed certainty for those businesses. I assure the House that while there have been some concerns about the payment terms of up to 126 days that we saw with Carillion, the special manager has entered into an agreement that he will pay contractors still providing services to the Carillion network in 30 days. That will go a long way towards helping those businesses—small businesses, in particular—that are struggling for cash flow. Her Majesty’s Revenue and Customs is also helping businesses with its Time to Pay scheme.
Justin Madders mentioned apprenticeships, which we have covered. Chris Stephens made a number of points, but most importantly referred to two things. He referred first to the contracts awarded to Carillion after the profit warnings. The first thing to understand is that issuing a profit warning does not mean that a business is on the verge of imminent collapse; if that were so, we would have seen the collapse of Tesco and of Marks and Spencer. It is exactly that: a profit warning to the City and to investors to say that the profits that the company is about to issue will not be as large as expected.
In relation to the award of contracts after those profit warnings, Carillion announced that it had won eight public sector contracts after its first profit warning in July last year. Three of those, for facilities management, were for defence establishments. They were actually awarded before the profit warning, but Carillion chose to make its announcements some weeks later.
Two of the remaining five contracts were awarded by HS2 Ltd to a joint venture including Eiffage, a major French construction firm, and Kier, as well as Carillion. The three companies bid together as a consortium, and as a result all shared responsibility for completing the work. After the profit warning, we asked each partner’s board for written assurances that if one partner failed, the others had a contractual obligation to pick up the work. Those assurances were given. Since the announcement of Carillion’s liquidation, Eiffage and Kier have confirmed that the contracts will continue uninterrupted and that the former Carillion employees working on those contracts have been offered jobs with those new partners.
Following the announcement of the profit warning, a further assurance came from external due diligence commissioned by HS2 Ltd. That revealed that at the time of the award in July last year, Carillion had the financial capacity to continue with its part of the contract. HS2 Ltd let the two contracts to the joint venture because it was confident that the joint venture arrangements were robust. That has proved to be the case.
The remaining three contracts were with Network Rail. They were not new contracts, but variations of contracts let some three years earlier, in 2014. Two were for electrification work. In a similar construct to the HS2 network, they were lets to joint ventures between Carillion and the electrification specialist, SPL Powerlines.
Some of the information that the Minister has given will be helpful for tomorrow’s Select Committee inquiry, and I thank him for that. When a company that is applying for a Government contract issues a profit warning, what checks do the Government put in place and what checks is a public body expected to put in place to ensure that that company is solvent? We now know that after the first profit warning, the alarm bells should have been louder than they were.
Thank you, Ms McDonagh. I reassure the hon. Member for Glasgow South West that stringent checks are consistently carried out by the Cabinet Office and across Government. That preparedness ensured that there was a smooth transition, that contracts have been maintained and that public services have not been put in jeopardy.
I congratulate the hon. Gentleman on the important work that the Select Committee has done. We have written to the Financial Reporting Council to ask it to look at the audit process to ensure that it is rigorous and fair, and to the Insolvency Service to ensure that it looks at things such as bonuses paid to current and previous directors so that, if necessary, we can claw them back.
In relation to pensions, the Pensions Regulator has oversight of pension schemes. As the Pensions Regulator is independent, it would be inappropriate for me, as the Business Minister, to comment, but I am sure the Select Committee will do further work to get to the bottom of the issue.
Finally, I reassure the hon. Member for Wolverhampton South West that we in Government have done all we can to protect public services, support businesses in the supply chain that have been put in peril and secure jobs for all the hard-working people employed by Carillion. In terms of procurement and payment for small businesses, we will learn the lessons to ensure that we protect them as best we can in future.
I welcome the fact that 668 jobs have been saved so far. Nearly 1,000 workers have already been made redundant, however, and 11,800 are still hanging in the balance—we do not know what will happen to them.
I welcome the Government’s assurance that they will look into the situation, but I am a little disappointed that they could not assure me of protection for the workers under TUPE. Jim Shannon said that that had already been done in Northern Ireland, and I had hoped that the Minister would say that he had followed suit. Obviously, he has not. I encourage him to look at the Bill sponsored by Chris Stephens to see whether there is a way for us to do it. We do not want to be in this situation again with another company.
I thank hon. Members for their contributions to the debate and for raising concerns about the protection of the Carillion workers. I also thank the Minister for responding to me, and I hope the Government will continue to look at protecting the Carillion workers.
Question put and agreed to.
That this House
has considered the application of TUPE to Carillion workers.