Tom Richmond: New questions for Chris Grayling on Carillion HS2 connection to add to his woes

Transport Secretary Chris Grayling is facing fresh questions this week over his decision-making.
Transport Secretary Chris Grayling is facing fresh questions this week over his decision-making.
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THE tricky questions keep mounting for Chris Grayling who is enduring another torrid week as Transport Secretary when, frankly, he should have resigned – or been sacked – long ago.

He should – at the very least – have asked if the train operators, subsidised by the public purse, actually had sufficient drivers before introducing new timetables this week. It’s not rocket science.

Now, in addition to the scrutiny that he already faces over rail electrification, the renationalisation of the East Coast Main Line which saw Mr Grayling accused of being “asleep at the wheel” during a censure motion in the Commons yesterday and his repeated snubs of the North, he’s now answerable to two Parliamentary select committees investigating the collapse of construction and outsourcing contractor Carillion shortly after it was awarded a HS2 contract worth £1.4bn.

If he cannot provide satisfactory answers – a Department for Transport spokeswoman says “we have received the letter and will respond in due course” – Mr Grayling’s position will be even more untenable than it was when The Yorkshire Post revealed earlier this month how he sought to mislead voters in last year’s election over planned electrification schemes in this region, which prompted Halifax MP Holly Lynch to use Prime Minister’s Questions to demand his resignation.

Yet the letter, from Leeds West MP Rachel Reeves who chairs the Business, Energy and Industrial Strategy Committee and the political veteran Frank Field, who heads the Work and Pensions Committee, goes to the heart of good governance and sound management of public finances.

The background is this. At the time last summer when Carillion’s finances were hitting the buffers, the firm landed a contract to start building HS2 – Britain’s high-speed rail line.

Mr Grayling confirms that HS2 Ltd asked EY – one of the big four accounting firms – on July 10 last year to carry out due diligence after Carillion issued a profits warning. Yet Ms Reeves and Mr Field point out that the same firm – EY – was appointed four days later by Carillion to “restructure the company” in a bid to stave off its financial collapse and they appear surprised that this “conflict of interest” was not challenged.

It also reveals that the accountancy firm billed £13m for restructuring advice and £10.8m was paid, including £2.5m “on the last working day before the company collapsed” in January with a reported £1.5bn debt pile. However, while these two committees continue to pursue the firm’s culpable executives, they have put their questions to Mr Grayling in the public domain because of their seriousness. They have asked him:

Were you aware that EY was simultaneously advising Carillion on its finances and HS2 Ltd on the state of Carillion’s finances?

If so, when were you first aware?

Do you consider it to be a conflict of interest?

What steps, if any, did you take to mitigate that conflict?

On what date did EY’s work for HS2 Ltd commence? And when was that work completed?

Was the work competitively tendered for?

They then reference Mr Grayling’s letter to Parliament in which he confirms that Carillion passed the relevant “due dilgence” tests for the HS2 contract – and EY charged £29,000 for this work. Their follow-up questions are:

What exactly were the due diligence tests?

How exactly did Carillion perform against them?

Were they solely dependent on published information?

Are you satisfied that £29,000 of due diligence was proportionate to the size of the contracts and Carillion’s financial circumstances?

Were the tests repeated following Carillion’s subsequent profit warnings?

Select committees represent the best of Parliament – they’re very effective at holding Ministers and civil servants, to account. At the same time, it would be remiss not to highlight Mr Grayling’s defence when Carillion went into liquidation in January. “It’s been clear for sometime that Carillion’s had issues, but many construction firms have had issues over the years,” he said.

“It’s not for Government and it’s not for HS2 to exclude firms, possibly pushing them under because of the impact on their business. (It’s) arguably illegal to do so, because there’s no legal reason to exclude them.”

Time will tell if Mr Grayling’s response will withstand the Parliamentary scrutiny – or whether further flaws will be exposed in his management of the Department for Transport which is bereft of public confidence following countless controversies in the past year.

Even if decisions were being taken by Mr Grayling’s officials, did the Minister and his aides challenge them? HS2 is Britain’s largest-ever infrastructure project and demands astute leadership if it is to be built on time and within its £55.7bn budget.

This, after all, is the same department that allowed Virgin and Stagecoach to acquire the East Coast Main Line on a flawed financial premise, hence the route returning to public control next month.

Yet, while this week’s timetable chaos and train cancellations are symptomatic of Chris Grayling’s running of the railways, his response over HS2 and Carillion will reveal if the rest of the Department for Transport is fit for purpose – or not.

tom.richmond@ypn.co.uk