Don’t compare Capita with collapsed firm, says Minister
Minister complacent over Capita
A MINISTER has insisted that Capita is in a very different position to the collapsed outsourcing firm Carillion.
Oliver Dowden told MPs the two major public service providers had different business models and that Capita had taken swift action to address its problems.
His comments came as one council with major contracts with Capita committed to review its contingency plans for outsourced services.
Senior Labour MP Rachel Reeves, who represents Leeds West, accused Cabinet Office Minister Mr Dowden of a “woeful response” and of “muddled and complacent” thinking on the issue.
“We do not believe that Capita is in any way in a comparable position to Carillion,” Mr Dowden told MPs yesterday.
“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 overseas. By contrast, Capita is primarily a services business, and 92 per cent of Capita’s revenues come from within the United Kingdom.”
Outsourcing giant Capita saw its shares plunge to a 15-year low after warning over profits and announcing an investor cash-call as part of a major overhaul.
New chief executive Jonathan Lewis, who took up the role on December 1, admitted the group had become “far too complex” and said “significant change” was needed to get Capita back on track.
Mr Dowden told MPs the announcement by Capita was primarily a balance sheet-strengthening exercise and not just a profit warning, while the company had significant cash reserves.
Ms Reeves, who asked the urgent question, said there were “more similarities than differences” between Capita and Carillion.
She said both had debts of more than £1bn, pension deficits in the hundreds of millions and relied on the public sector for half of their contracts.
THE BEST and worst of Parliament was self-evident when Leeds West MP Rachel Reeves tabled an urgent question over the finances of public service provider Capita in the wake of the collapse of rival outsourcing firm Carillion.
As an economist, and respected chairman of the influential all-party Business, Energy and Industrial Strategy Select Committee, she was perfectly within her rights to ask a number of forensic questions.
What was unacceptable, however, was the indifference of Oliver Dowden CBE – the newly appointed Cabinet Office Minister is a former deputy chief of staff to expremier David Cameron – as he accused Labour of opportunism.
What is at issue here is the livelihoods of thousands of staff, sub-contractors and the provision of key services run by supposed privatesector giants because of the efficiencies they promise. It’s just a shame that Mr Dowden did not recognise this. For, while an emerging debate is unfolding about the scale of private-sector involvement in the building of new schools, hospitals and so on, or the provision of maintenance and other services, the concerns expressed by Ms Reeves were in the public interest and voters do expect senior MPs like her to provide expert scrutiny without fear or favour.
After all, the financial cost of the Government’s decision to continue awarding contracts to Carillion, including a HS2 deal that was signed off by Transport Secretary Chris Grayling after a profits warning had been issued, is still to emerge. And, while Capita is looking to take immediate action to shore up the company’s finances, it will be the taxpayer who ultimately foots the bill if the firm is unable, for whatever reason, to fulfil its obligations like, for example, the running of London’s congestion charge. The sooner Mr Dowden realises this, the better, or his Ministerial career will be very short-lived indeed.