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Volume 635: debated on Tuesday 30 January 2018

1. What assessment he has made of the effect of the liquidation of Carillion on the viability of small businesses. (903611)

I have set up a taskforce bringing together small and medium-sized businesses, the Government, local government and trade unions to assist with the impact on small and medium-sized enterprises and the supply chain. The taskforce has delivered a range of supportive measures, including assistance from Her Majesty’s Revenue and Customs for those experiencing difficulties and more than £900 million of support from UK lenders.

I thank the Secretary of State for his answer, but, with 30,000 small firms thought to be owed money by Carillion due to late payments and fees, will he look at the idea of project bank accounts that hold money in trust in ring-fenced bank accounts to make sure this situation does not arise again? The Specialist Engineering Contractors Group wants Britain to follow what is already happening in Australia, where such project bank accounts are used in all large public and private building contracts.

I will indeed look at that, and it has been one of the recommendations of the taskforce. It is important that we learn all the lessons and apply them quickly, and this is one such suggestion.

The local authority pension fund forum has called for a review of accounting standards, having received opinion that there are substantial legal flaws in international reporting standards. The opinion states that the standards do not enable anyone to make a meaningful assessment of a going concern, which is a highly relevant issue for Carillion. Will the Secretary of State support such a review?

The day that Carillion went into insolvency I wrote to the Financial Reporting Council, and I spoke to its chairman, to ask it to investigate the auditors and those who are regulated as accountants. The FRC has agreed to do that, and it announced yesterday that the investigation is under way. I would expect it to learn the lessons for any changes to the regulations that it applies.

Will the Minister confirm whether the advice to firms that have lost money as subcontractors of Carillion is that they take out a loan? Does he think it is acceptable that those firms should be charged interest on taking out a loan, rather than getting the money they are owed for jobs they completed as supply chain businesses of Carillion?

On the first day of the insolvency, I had in the representatives of all the supply chain organisations. The first request they made was that we get the banks in to make sure that they treat leniently their customers who were caught up in the insolvency. The banks agreed to do that, and they put funds aside to support and assist those customers. Each bank has made commitments that it will apply leniency to any terms and conditions faced by those businesses.

My right hon. Friend has almost answered my question, because I was going to say that cash flow is as important as profitability. The problem with lack of cash flow is when the banks become too heavy and foreclose on smaller firms.

That is exactly the point that the businesses made. That is why I asked the banks to attend in person to meet those businesses, and it is why the banks gave those commitments and guarantees. It is important for Members with constituents who may be affected that the banks have made that commitment and have made a promise that they will deal individually with anyone who is so affected. The measures are on each bank’s website, but any colleague should come back to me if they experience a problem.

This morning, at a joint Select Committee hearing on Carillion, we were told by the chief executive of the Financial Reporting Council that, before and after the collapse of BHS, he had asked for greater powers to regulate companies and take action before things go badly wrong. He told us that there was a lack of Government interest in making the necessary changes. In the light of the collapse of Carillion and the threat to thousands of jobs and suppliers in the supply chain, are the Government interested in taking action now?

I do not agree with the hon. Lady. I engaged the FRC immediately, and it is very important that we and the FRC learn the lessons. We will apply whatever is appropriate that comes from those inquiries.

The hon. Member for Poole (Sir Robert Syms) says that he was not told of the grouping. If that is so, it is a discourtesy—I hope it is not so. Maybe it got lost in the post. Let us hear from the fellow.

The collapse is really bad news for many smaller businesses, many of which will have their capital wiped out. What discussions has the Secretary of State had with banks about forbearance in keeping those businesses going so that there is proper competition in this market for the future?

I apologise to my hon. Friend if he did not receive notice of the grouping—I am sure that is my error.

On engagement with the banks, each of them has responsibilities to its customers to help them through difficult times. The banks have explicitly committed to help them with any cash flow difficulties that they experience, and I expect the banks to deliver on it.

18. Scottish training firm TIGERS—Training Initiatives Generating Effective Results Scotland—is working hard with the Scottish Government, Skills Development Scotland and the Construction Industry Training Board to place 126 apprentices who used to be placed in partnership with Carillion. What is the Secretary of State doing to encourage small businesses to step forward to fill that gap and ensure that all apprentices can complete their training? (903630)

The hon. Lady raises an excellent question, and I want to pay tribute to the CITB, which has been working closely with its Scottish colleagues, for a magnificent response. It has been able to not only contact but offer continuity to all the apprentices—I think I am right in saying that—to give them the ability to continue their training. That was a formidable, agile response to an urgent situation, and it deserves the praise of the House.

In July last year, the Government were warned by the Federation of Small Businesses and the Specialist Engineering Contractors Group that Carillion was transferring risk to its subcontractors. They highlighted that Carillion’s payment period was doubled from 65 to 120 days, that Carillion made money on the back of early payment by charging fees, and that regulation 113 of the Public Contracts Regulations 2015, which relates to 30-day payment, was not being enforced. Will the Secretary of State outline what actions, if any, he took on receipt of that information?

The lessons and the scrutiny of what went wrong in Carillion, both on the part of its directors and its scrutineers, and in the oversight that took place across the whole of the public sector in terms of contracting, need to be looked at and will be looked at, including by Select Committees of this House. Whatever actions are required from that, we will take.

So it is clear that no action was taken and that subcontractors were being mistreated again and again. But that is not all: the FSB and SEC Group also highlighted how retention moneys and project funds due to suppliers were not being protected from Carillion’s potential insolvency. As a result of the Government’s inaction, microbusinesses are now owed on average £98,000, small firms £141,000 and medium-sized firms £236,000, and large businesses are owed on average £15.6 million. Will the Secretary of State therefore explain to the House and all the businesses affected why the Government took no action last July and why many are on the verge of bankruptcy today?

Retentions and project bank accounts have been the subject, in response to those and other concerns, of a consultation on specific measures, which closed very recently. That came out of the recommendations that were made. Part of the taskforce that we have established includes these representative bodies, and they know that they have my commitment to take all the necessary actions to learn the lessons and protect any future concerns against things that could be learned from this case.