Sunday wth Niall Paterson Interview with Liz Truss Chief Secretary to the Treasury
ANY QUOTES USED MUST BE ATTRIBUTED TO SUNDAY WITH NIALL PATERSON, SKY NEWS
NIALL PATERSON: The collapse of Carillion could cost taxpayers hundreds of millions of pounds and has led to some people questioning the government’s love affair with PFI. Liz Truss is Chief Secretary to the Treasury and she joins us now from Westminster. Ms Truss, many thanks for being with us. With the demise of Carillion, capitalism’s future in the United Kingdom is rather less certain than ever before isn’t it?
LIZ TRUSS: Well I don’t agree with that. We’ve had one company which has gone wrong and the directors are now being investigated and we have taken the steps we need to keep the public services they were supplying running but we have had a huge success story over the last hundreds of years of being a country that believes in enterprise, that believes in people being able to start up a business. We saw a record number of new businesses set up this year so I think it’s very important not to tar every private sector company with the same brush.
NP: So in terms of Carillion itself, its collapse, how much is it going to end up costing us?
LIZ TRUSS: Well we’re still assessing that at the moment and the key priority has been making sure those public services can continue to work, making sure we transfer over contracts either to other private companies or indeed to government departments and that will all depend on what gives the best value for money for the taxpayer.
NP: So we presumably don’t have the final figure but we do have the administrators estimates of exactly how much Carillion’s demise will cost. What’s their estimate?
LIZ TRUSS: Well there’s two different numbers. There’s one which is for the administrator to announce which is what the total figure for the company is. If you remember, the vast majority of the company is actually entirely in the private sector, and then there are the consequences for the government and the public sector and that’s what we need to look at but the first priority is making sure those public services continue to work, that those hospitals and schools continue to get built, that those dinners get provided to children, etc, etc and that’s what we’ve been focusing on this week.
NP: In what way has the government not been entirely incompetent in all of this? In six months the market cap for Carillion went from in excess of a billion pounds to less than a hundred million pounds, now you don’t even need to know what market cap means to think, do you know what, maybe we should do a bit more due diligence before signing billions of contracts with this company.
LIZ TRUSS: We did due diligence for every contract the government signs and the recent contracts that were signed with Carillion were joint ventures so that means that the other companies would assume the liability if something were to go wrong with Carillion and every contract we look at, we assess what is the value for money of this, what is the risk of things going wrong. I would point out that before we started having these PFIs and involvement of the private sector, it took eight years to build a school. Before we privatised the telecoms companies it took months to get your phone installed so there has been huge improvement delivered and yes, there have been problems with Carillion, that’s why the directors are under investigation by the authorities, that’s why the government has had to take action on these public service contracts but again, we shouldn’t look at one company and read across to the entire private sector. 80% of people in this country work in the private sector, most of them doing a fantastic job.
NP: But just in terms of the risk assessment that was carried out as regards Carillion, I mean it’s not just the collapse in the market value of this particular company that should have been ringing alarm bells, the idea for example that they were able to make profits of 4% compared to an industry average of 2% but we were throwing money at this company when the stock marketing were shorting it on a massive scale, to the extent that it wasn’t even possible in the final days of this company to take that particular option. Why were you not aware of any of that?
LIZ TRUSS: Well of course we monitor the financial health of all of the companies that we deal with …
NP: Did you look closely at it?
LIZ TRUSS: … that’s why we took steps within those contracts but the alternative, for those who are saying we should renationalise industry, that we should not have any of these private sector contracts, is very, very stark. It would mean the taxpayer paying for any losses that occurred, anything that went wrong it would immediately all fall to the taxpayer, we’d end up with huge amounts more debt. So today there has been a new report out showing that if Labour nationalise the industries as they propose to do, that would cost £176 billion, £4000 for every household in this country. People have got to answer the question, do they really think we would be in a better position if all of those services we have been talking about, all of those building programmes like Cross Rail, the Docklands Light Railway, were run by politicians, is that what they want? I don't think that’s a good way at all to …
NP: The Prime Minister’s line this week, somewhat perplexingly, was that we the government are a customer and not a manager of Carillion, which appears to say to me that I have better protection when I make a purchase on my credit card than the government does when it signs a contract worth billions of pounds.
LIZ TRUSS: Well we do have protection but any consumer will …
NP: So you are ruling out any financial liability being picked up by the taxpayer, director or indirect?
LIZ TRUSS: We have said that we will not bail out Carillion, that’s why the company went into liquidation.
NP: That’s not exactly what I said though is it, I’m asking for a guarantee that taxpayers will not be asked to foot the bill in any shape or form, directly or indirectly. Clearly they are.
LIZ TRUSS: Well Niall, what I have said is there will be a cost for this for the public purse, there is no doubt about that and we are assessing what that is but we have taken the best possible option available to us at this time. What I’m also saying is that people shouldn’t think there’s some magic alternative. If politicians end up running companies, as John McDonnell is proposing, that would mean huge liabilities on the public balance sheet, it would mean that those losses would all come to the taxpayer and I don't think we want to live in a country where politicians run major companies and all of the impact that that would have.
NP: Once again we’ve heard promises of action from the Prime Minister, she is again shaking her fist at big business. Now we’re led to believe that the directors will face huge fines from the Pensions Regulator in cases of clear wrongdoing but of course that wouldn’t apply to Carillion would it because if there had been clear wrongdoing you wouldn’t have signed those contracts over the past twelve months.
LIZ TRUSS: Well we’ve going to consult on this shortly but what she’s essentially saying is it’s wrong for company directors to be emptying company pension pots when they are not able to pay out the pensions that those workers in the company have been promised and we need to look at that …
NP: So this isn’t a situation that applies to Carillion, it is just a happy coincidence that the Prime Minister chose to announce it today?
LIZ TRUSS: Well what we need to make sure is that corporate law keeps up with what’s happening in the real world and that company directors are held to account for what they do, that they are accountable and transparent but we shouldn’t let one company that’s gone wrong besmirch the reputations of all the fantastic companies we’ve got in this country, all the new businesses that opening up, the great future we’ve got ahead of us.
NP: The CBI have made a dramatic, if pretty predictable, intervention today calling on the UK to remain in any form of customs union after we leave the European Union. Given the volume of trade that the UK does with the EU, that seems eminently sensible doesn’t it?
LIZ TRUSS: We want the best possible deal with the EU, so we want frictionless trade where we can carry on doing business but it is important …
NP: Does that involve 10% of a customs union [over form]?
LIZ TRUSS: Well it doesn’t involve membership of the EU customs union because that would prevent us doing the best possible trade deal with the US and the Far East which could add billions to Britain’s …
NP: So it couldn’t involve membership of a customs union is what you’re saying?
LIZ TRUSS: No, I’m not, I’m saying that we will want to have good customs arrangements with the EU, we’ve put some ideas in place for that with the negotiations but what we can’t have is being part of the customs union because that would prevent a good trade deal with the US and it would also prevent us doing other trade deals around the world and one of the reasons people voted to leave the EU …
NP: I want to nail down on this point about a customs union and membership of it while we have you here, Liz Truss. We had David Lidington yesterday suggesting that it could be a possibility, we know that the Chancellor is keen on it so why do you say that it’s not a possibility?
LIZ TRUSS: Well we have said that we are going to leave the EU customs union and we want to have our own independent trade body where we can do deals with the rest of the world. Now do we want close customs arrangements with the EU so that we can have frictionless trade and so that companies don’t have to go through huge hassle and paperwork while they trade goods across the border? Yes, we do and we are in discussions with the EU about getting those best possible arrangements but that is not being part of the customs union.
NP: Liz Truss, Chief Secretary to the Treasury, many thanks for joining us, we’ll see you again.
LIZ TRUSS: Thank you.
