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Serco Justice System

Volume 662: debated on Thursday 4 July 2019

(Urgent Question): To ask the Secretary of State for Justice if he will make a statement on the role of Serco in our justice system following the decision of the Serious Fraud Office.

Thank you for granting this urgent question, Mr Speaker.

We very much welcome the fact that, subject to court approval today, the Serious Fraud Office has reached a conclusion in its investigations of Serco. These historical contracts ended in 2014 and were awarded as long ago as 2004. The agreement allows the parties to draw a line under the matter. Following the successful conclusion of this process, we see no reason why Serco should not continue to be a strategic supplier to Government and to compete for Government contracts.

We conducted an investigation of the matters raised in the agreement announced yesterday, and we are content that matters were resolved in 2013-14, when Serco reached a financial settlement of £68.5 million with the Ministry of Justice and undertook an extensive self-cleaning exercise.

Although we deplore the wrongdoing identified in the deferred prosecution agreement announced yesterday, we have confirmed that, since 2013, Serco has thoroughly overhauled its management, governance and culture and that these changes continue to be effective today. Serco is, and will continue to be, a strategic supplier to Her Majesty’s Government, working across the defence, justice, immigration, transport and health sectors.

Thank you, Mr Speaker, for granting this urgent question.

In 2013, evidence came to light suggesting that Serco may have been fraudulently charging the Government on its offender tagging contract, including for monitoring people who are dead. Serco had to pay back tens of millions of pounds to the Government and lost the tagging contract. A subsequent Serious Fraud Office investigation has seen Serco fined £19 million for fraud and false accounting linked to those prisoner tagging contracts. Does the Minister agree that this is just the latest scandal to hit our justice system involving the private sector in recent months? The private probation contracts were terminated early, HMP Birmingham private prison was returned to the public sector and new research shows disproportionate violence in private prisons. We have also seen the collapse of Carillion, meaning that prison maintenance works were brought back in house. Each time we are told it is an isolated case, so will the Minister finally admit that in reality it is a systemic failure?

Serco has £3.5 billion of current contracts with the Ministry of Justice. Given the findings of the Serious Fraud Office, will the Minister commit to a special audit of all existing Serco justice contracts? Those contracts include running prisons. The Government are currently receiving bids for a new generation of private prisons, so can the Minister assure me that Serco will not be allowed to run these new private prisons?

Finally, there is a current Justice Minister, not here today, who once worked for Serco as its chief spin doctor. Will this Minister guarantee that that Justice Minister has had no involvement in overseeing any current Serco contracts and will have no role in handing over any future lucrative contracts to his former employer?

The hon. Gentleman behaves as though this is somehow a new piece of information that has come to light. In fact, this is a very old piece of news, dating back to 2013-14, that has a very long tail. The SFO has conducted a very complex investigation into the fraudulent aspects of this behaviour, but in 2013-14 there was a vigorous effort on the part of the Government to investigate what Serco was doing and how it was managing these contracts that led to significant cultural change.

I am afraid that all we have heard today is a predictable ideological tirade of hostility towards the role that the private sector plays within our justice system, and it simply does not stand up to scrutiny. The hon. Gentleman raises the spectre of Carillion once again. Carillion was a very different affair; it cannot be compared at all with what is going on with Serco.

The hon. Gentleman also makes a point about the Under-Secretary of State for Justice, my hon. Friend the Member for Charnwood (Edward Argar), who has no Serco contracts within his ministerial responsibility—that is a complete red herring. The Ministry has already begun an audit into the contract for prisoner escort and custody services that Serco currently holds. We took action back in 2013-14, and this has transformed not just how the Ministry of Justice conducts its private sector contracts, but Government as a whole. We are confident that the ongoing work will ensure that we continue to deliver high-quality services at the best value for the taxpayer.

Is the Minister aware of whether any of the people involved in the original wrongdoing are still associated with the company?

I am not aware of any potential individual prosecutions arising from this investigation. What I can say is that, since the point of this investigation commencing, Serco has had a complete overhaul of its senior executives: it has a new chief executive officer, a new chief financial officer, a new chairman and an entirely new board. Serco has had a thoroughgoing overhaul and now recognises what went wrong in the past.

I congratulate the shadow Minister on securing this urgent question. He is right that right across justice, home affairs and other Government Departments, ill-conceived and badly managed contracts —on tagging, prisons, secure units, probation, immigration removal centres and asylum accommodation—are leaving vital public services in disarray.

The Government finally saw sense on probation, but elsewhere all that seems to happen is that the same small group of companies keeps getting more and more contracts, based on a race to the bottom towards cut-price service provision. Is it not time for a fundamental review of how these contracts are awarded so that the Government are not fishing repeatedly from the same small pool of companies? Even the auditors in this debacle have been fined for their role, so what steps will the Government be taking to improve oversight of this type of contract?

I always have a regard for the hon. Gentleman, who is a diligent and effective Member of this House, but I have to disagree with him on this occasion. The Opposition seem to have a blind spot regarding the role that the private sector can and should play in the delivery of services within the public sector.

In December 2018, as part of the programme of audits across Government as a whole, the chief executive of the civil service wrote to all Government Departments asking each to include a contract of audit activity in the implementation of the general outsourcing review, focusing on gold contracts—that is, those of high value and high criticality—provided by strategic players. I am sure the hon. Gentleman will be aware, even if he looks north of the border, that in many of these very complex areas of public procurement, the pool of potential companies that can bid for them will, by necessity, be small. That means that we, as Government, have to do our bit to make sure that we audit and assess the delivery of these contracts on the part of these suppliers.

What contingencies have the Government put in place for the risk that Serco ceases to operate, partly as a result of the fine?

We have absolutely no indication at all that the fine has had any impact on Serco’s ability to deliver its current contracts to the Government.

I think the Minister deserves a medal for coming here with such a positive outlook on what has been a major catastrophe. In the case of all these strategic suppliers, one of the really key issues is the Government’s oversight and management of contracts where things go wrong but the companies are too big to fail. What is his Department learning, and going to do differently, in making sure that the skills are there in the civil service to oversee these contracts and pick up the problems much sooner?

I am sure that there are few individuals in the House better qualified than the hon. Lady to assess the role of these contracts across Government as a whole, given her work on the Public Accounts Committee. Since 2010, one crucial change has been the introduction of Crown representatives in each of these business areas. That makes sure that Government have someone sitting inside the room making sure that decisions will be taken appropriately.

In my Department, we are reviewing all these contracts carefully, working with Serco and other private providers who work in the public sector to make sure that the quality of what they provide meets their contractual obligations.

In the light of these rulings by the court, will the Minister undertake to review the wider operational activities of Serco in the public sector, particularly in relation to its management of asylum seeker housing projects in the city of Glasgow? Will he write to his colleagues in the Home Office about that, particularly because of the issue of gross intrusions of privacy by Serco housing officers, which is a major problem in Glasgow?

The hon. Gentleman raises an issue of which I personally have no knowledge within my own Department, but I am more than happy to offer to raise it with the relevant Government Department he mentioned, and I am sure that it will then get in touch with him to discuss it.

The Minister has been uncharacteristically defensive and quite strident this morning. Some years ago, I had a hand in using the round robin technique to try to explore just how many of these general service companies were being used by all Departments, and what came out of that involved billions of pounds. That started a real scrutiny of what was happening. Is it not the truth that not just at Serco but at many of these general services companies—I am not ideologically opposed to the private sector providing good services—there was a lack of control and a lack of independent checking? The Serious Fraud Office regularly looks at this company: surely he is not complacent about that.

The hon. Gentleman accuses me of stridency. I think that is the first time that has happened to me in this Chamber—clearly, I must have had my Shredded Wheat for breakfast. I will have to revisit my breakfast diet, it is fair to say.

I am delighted to hear that the hon. Gentleman has no ideological objection to the private sector having a role; he might want to have a chat with his Front Benchers. We often hear the idea that somehow the private sector cannot play a role but the third sector certainly can. I find that very hard to understand given that they are often supplying exactly the same things. We have areas of social enterprise that sit across the two, for example.

I recognise the point that the hon. Gentleman is trying to make. He is a very diligent Member of Parliament, as Mr Speaker often observes. I look forward to future round robin parliamentary questions from him that will test the mettle of Government Departments yet further.

It seems that no matter what the specific wrongdoing or general incompetence of a private sector supplier, with a few warm words from the chief executive of the day, they have access to billions of pounds of contracts. Will the Minister put in place an analysis of the costs of private sector provision in terms of tendering, legal wrangling, profiteering and loss of skills versus the benefits of public sector provision? It seems as though it is simply public sector bad, private sector good.

It is never a case of “public sector bad, private sector good”. As I have just pointed out to Opposition Members, a broad range of potential providers—including many in the third sector, such as social enterprises—have a very important role to play in the justice system. [Interruption.] If the hon. Lady listened to the answer I am trying to give her, rather than speaking from a sedentary position, she would get an answer to her question. I never appreciate sedentary chuntering; it reflects badly on the Member conducting it.

The private sector continues to have a role to play, but as a Department we are very careful in inspecting what individual suppliers are doing through the Crown representative system and the work that our commercial officials in the Department do, to ensure that issues like this do not occur again. The hon. Lady acts as though it was all warm words back in 2013-14. It most certainly was not. As I pointed out in my response to the first question, there has been an entire leadership change at Serco. I often hear from the hon. Member for Leeds East (Richard Burgon) that in his own party, it is a case of new times, new management. It is the same with Serco.

In the Public Accounts Committee, my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) and I have seen all too often good work by the Government, but only after an event has taken place. The Minister mentioned the Crown representative system. Is it not time for that system to be overhauled, so that Government are better at preventing these problems in the first place, rather than learning the lessons after? What is his Department doing across Government to lead on that work?

I am grateful to the hon. Gentleman for his question. The role of the Crown representative is relatively new, having been introduced under this Government. It continues to take shape. It looks different in different companies. When I was a rail Minister, I worked with a number of Crown representatives who performed very different roles in the companies that they were involved in. I understand the point, and I will mention it to the Cabinet Office, which has responsibility for this wider policy area.

I thank the Minister for his responses to questions. Can he outline what discussions he has had with the Ministry of Defence, to ensure that the MOD will get service provision at an appropriate price and only for services that are required, to prevent a repeat of this?

The hon. Gentleman makes a perfectly valid point. I personally have had no contact with the MOD. However, I know that the chief executive of the civil service has contacted all Government Departments to ask them to review the contracts with the most “criticality”—that is the word used; it is not a word I like because it does not really exist. He is ensuring that all Departments are taking careful note of this issue.