Item 6 on the agenda is the Member debate under Standing Order 11.21 on Carillion and Capita. I call on Lee Waters to move the motion. Lee.

Motion NDM6740 Lee Waters, Jane Hutt, Jenny Rathbone, Mick Antoniw, Mike Hedges, Simon Thomas, Vikki Howells 

To propose that the National Assembly for Wales:

1. Notes the report of the House of Commons' Business, Energy and Industrial Strategy and Work and Pensions Committees' joint inquiry on the lessons to be learned from the collapse of Carillion.

2. Acknowledges the National Audit Office report on NHS England's management of the primary care support services contract with Capita.

3. Calls on the Welsh Government to publish an analysis on the lessons for Wales from these two reports.

Motion moved.

Diolch, Dirprwy Lywydd. I wanted to bring to the attention of the Assembly these two reports, published in quick succession, at a juncture where I believe Wales has some critical choices to make. The first, published jointly by the House of Commons Business, Energy and Industrial Strategy Committee and the Work and Pensions Committee on 6 May this year, opens with this stark paragraph:

'Carillion’s rise and spectacular fall was a story of recklessness, hubris and greed. Its business model was a relentless dash for cash, driven by acquisitions, rising debt, expansion into new markets and exploitation of suppliers. It presented accounts that misrepresented the reality of the business, and increased its dividend every year, come what may. Long term obligations, such as adequately funding its pension schemes, were treated with contempt. Even as the company very publicly began to unravel, the board was concerned with increasing and protecting generous executive bonuses. Carillion was unsustainable. The mystery is not that it collapsed, but that it lasted so long.'

Published the very next day after this Carillion inquiry, the second report I have sought to bring to the Assembly’s attention is by the National Audit Office, and chronicles a complete failure of understanding, both by NHS England and Capita, of the services they were attempting to transform. In one of its starkest conclusions, the report states that in this botched delivery of back-office NHS functions, lives could have been put at risk, and it was lucky that they weren't. In Wales, we have proactively staved off deep private sector involvement in our public services, but we've been pragmatic. After all, we are not hostile to the private sector—there is much that public services can learn from their drive and innovation—but we are clear that public services are there to serve the public, and not shareholders. These values are central to why they were created, and what they seek to achieve.

Devolution has been referred to as a policy laboratory, allowing different parts of the UK to pursue different policy directions and to learn from each other. In that spirit, today’s motion calls upon the Welsh Government to publish an analysis of the lessons for Wales from these two reports. Starting first with the Carillion report, what struck me wasn’t just the rotten corporate culture, but the utter failure of both internal and external checks and balances, supposedly designed to prevent malpractice of this magnitude. From KPMG, Deloitte and Ernst & Young—three of the big four accountancy firms, who together monopolise the audit market and each of whom were paid 'lucrative fees', in the phrasing of the report, in return for their 'badges of credibility'—to the individual actions of the chair, the finance director, the chief executive, the Pensions Regulator and Financial Reporting Council, as the report itself says,

'Carillion became a giant and unsustainable corporate time bomb in a regulatory and legal environment still in existence today.'

We must proactively address an environment in which firms like Carillion and Capita have been able to proliferate. Likewise, the report on the delivery of primary care support services by Capita marks out the recklessness of a cost-driven, rather than outcome-driven, centralisation of services—services that were outsourced before any of their complexities were fully understood. Clearly, in a bid to save money, the NHS in England jumped too soon into a delivery model that was inherently unsuitable, and then put the operation into the hands of a private contractor. When it comes to something as important as health, the consequences could have been dire. Fortunately, in this case, the worst possible fallout appears to have been avoided, but the residual ramifications are still being mopped up. We need to be wise to both of these issues: how acute pressure of budgets may mean decisions are made in haste and without clear forethought, and the need to address the inadequacy of our procurement system that has allowed these monolithic companies to dominate. And we must do this as we navigate through some of the biggest challenges of our generation: Brexit and automation.

I have spoken on a number of occasions about the financial pressures councils face and the lure this will present to private sector firms, all too quick to offer ways of automating jobs and services in order to free up resources, without understanding the complex nature of the services provided, and with scant consideration of the consequences if things go wrong. We can already see that happening in some parts of Wales. Capita, for example, already delivers contact centre and control room operations for South Wales Police, employing automated services, ostensibly to, I quote,

'help speed up the decision making process for call handlers and therefore improve overall response times to incidents.'

I can’t help but think this is PR speak for cost cuts. If we continue to allow automation to be driven by private sector profits, there's only one possible end in sight. If we allow this approach to take hold, all talk of automation will be seen by the workforce as being driven by cuts, and it needn't be. If we harness automation, we can use new labour-saving devices to free up staff to work on the front line, to improve public services. That's the debate we need to have. And Government needs to mobilise, right across its whole breadth, to face up to how we can use these new technologies to help us with the problems that we know we have to tackle.

The second lesson from these reports we must speak of is that, while we haven’t let Carillion and Capita hoover up public service delivery contracts to the same extent as England, we are all well aware that our procurement processes need transformation. The drive to reduce administrative costs, coupled with a shortage of procurement skills, has limited Welsh local government ability to restructure procurement practice, and has led to the domination of large-scale, privatised companies. However, transforming procurement strategy will require public institutions to shift away from the conventional transactional approach towards capacity building. They will need to become partners in procurement practice, not just one-off purchasers of goods and services. Participants on both sides of this new style of contracting will require significant support. Action to bolster the foundational economy and efforts to use procurement policy to support local producers will help redress this domination. The recently published economic strategy is disappointing in this regard.

Although the economic impact of Brexit is likely to be profound—and this mustn’t be underestimated—it could end our obligations to follow EU procurement rules, depending on the terms of future trade deals. This could present the ideal opportunity to fashion our own rulebook on the public purchase of goods and services that will allow us to break up impenetrably large contracts and better support local firms.

These reports are clear warnings of the dangers of relying on too-big-to-fail corporate monoliths that put profit before public interest. Devolution does allow us to learn the lessons from each other, so let us learn that. Diolch.

Can I commend Lee Waters's opening salvo in this debate and also commend him for being the prime mover in bringing this debate before us? I was going to concentrate on the performance, or otherwise, of Capita when it comes to that report from the National Audit Office in England about the outsourcing of the primary care support services, or NHS shared services partnerships, as we call them here in Wales.

Now, general practice is an amazingly complex entity that is difficult for anyone who is not a GP to understand what's going on, and it's difficult for GPs to explain to anyone else how it works. So, here goes—but that was one of the problems with the Capita contract: they failed to understand the complexity of the whole issue, because GPs, by and large, are independent contractors who are basically contracted only with the NHS. So, GP practices, put simply, are paid by the NHS according to the number of patients they have, and basically what they tend to do to these patients, what services they provide for them, how many are immunised and stuff. They're agreed by various complicated quality outcome frameworks—QOF—guidelines, providing services with regard to chronic cancer, diabetes, heart disease. All that sort of service provision is counted minutely, patient by patient, totted up. It's amazingly complex, and it goes back to the local primary care support, or the NHS shared services partnership, who deal with that contractual obligation. So, they then give the individual general practice a fairly large dollop of money. From that money that arrives in the practice, the independent, contracted GPs then employ a practice manager to run the practice. They employ receptionists, they employ other salaried GPs and practice nurses and, after all that employment, then split the remainder as the so-called net salary for each GP practice principal. It is amazingly complex, and that is all handled by the primary care support services, dealing directly with individual practices. 

There are hundreds of GPs, all our patients are individually monitored, individual patient registrations, leaving and going—it's amazingly complex, but it doesn't stop with just GP practices. They perform the same detailed analysis for pharmacists, for opticians and for dentists. So, the business support, if you like, for primary care practice is amazingly complex. It has evolved over generations and the people in shared services partnerships, the business support of primary care in Wales, are amazingly experienced, have usually been there an awfully long time and they know the businesses inside out. That's general practice, that's pharmacy, that's optometry and dentistry—they all have their individual complexities. You cannot just package it together into a little package that's nice and simple to be outsourced and joined together with other similar practices, because all GP practices or pharmacists—they're individual entities with different people, different needs.

So, it's amazingly complicated, every practice is different. Decades of experience then is swept away then, when in England it was decided to outsource that sort of business support element—outsourced to Capita, and as we've heard from Lee Waters, with predicable, disastrous results. I'm quoting from the report now,

'a long way below an acceptable standard.'

Because if only a little bit of detail goes wrong, it upsets the smooth running of many practices or it can totally undermine, for a couple of days, the running of that individual practice, just by something going wrong. And, again, as the report says, both parties, NHS England and Capita, misjudged the scale and the nature of the risk in outsourcing primary care support services. Yes, they did, as does everybody who doesn't understand the immense complexity that is primary care in the United Kingdom. So, I say: keep the NHS in all its forms public. Private outsourcing of a complex public service only ends in tears. Support the motion.

I had intended to speak about Capita, but the mere mention of the name reminds me of the meeting that Jane Hutt and I had this morning with victims of, mainly, vaginal mesh implants, who, unprompted, were absolutely apoplectic about Capita's role on behalf of Department for Work and Pensions in assessing these people as to whether or not they were still eligible for attendance allowances as well as other disability benefits, and Capita's refusal to allow people to have the dignity of an assessment at their home. These are people who are suffering from incontinence, and many of them walk with crutches because they have additional problems with their back and their mobility. And because they then struggled into a meeting in Cardiff city centre with Capita, they were then deemed not eligible for mobility allowances. Incredible. This is absolutely outwith the public service that we have here in Wales.

Anyway, my main remarks I wanted to make are about who audits the auditors, because it is rarely asked, and in the context of Carillion, it needs to be asked. Because the good audits are the bedrock of fair and transparent financial markets and good business decisions, and this system of auditing public spending dates back more than a century. Why should we have to read between the lines to work out what auditors are really thinking? They have developed this code for enabling the people on the inside, in the know, to realise that there may be something dodgy going on, but not for the ordinary potential investor, and this is completely unacceptable. We have to make auditors more accountable for their actions because of the spectacular failure of Carillion, where, frankly, their published works turned out to be works of fiction. 

Extraordinarily, KPMG tried to argue that its independence was not impaired by 19 years of auditing Carillion. I think that that is beyond credibility and needs to change. One of the immediate sources of conflicts of interest is that auditors are paid by the company that they are auditing—the people they are meant to be policing. That in itself is a potential conflict of interest. The work and pensions and business committees in the House of Commons's joint inquiry into Carillion recommends that the Government refers the audit market to the Competition and Markets Authority, because the big four are effectively operating a cosy cartel where their audit work takes second stage to their much more lucrative business of advising companies, and as we have seen with Carillion, they are in many ways directly in conflict—these two activities. 

So, we either have to break up the big four into more audit firms, or we have to detach the audit arms from those lucrative consultancy services that have come to dominate these accountancy firms, into which all the big four have branched out in recent years. Non-audit work now makes up £4 in every £5-worth of fee income garnered by the big four. So, you can see that there's already a total imbalance. This will, I hope, find favour in view of the lack of competition in the market, particularly for the big companies. Of the top 350 companies in Britain, 97 per cent are audited by the big four. The situation is getting worse, because the fifth-largest company, Grant Thornton, has said they're no longer going to tender for audit for the FTSE 100 companies because the cost of bidding for work they are unlikely to get is just too great.

Now, the Competition Commission, which preceded the CMA, did investigate the lack of competition in audit between 2011 and 2013, but ruled out breaking up the big four. One of the reasons they gave was that, because auditors carry unlimited liability for their recommendations, they therefore need to be big. But the fees available are unlikely to be worth enough to make small audit firms want to take on the risk of a large audit account.

We have seen in the past that being large does not make organisations immune to collapse. Remember that there did in fact used to be the big five, and Arthur Andersen collapsed because of their failure to properly audit Enron. I think that there are huge dangers for the Welsh Government in doing nothing, because let us recall that Abellio was one of the approved shortlisted companies that could have been awarded the contract to run the Wales and the borders franchise, had the Carillion collapse not occurred earlier, taking them out of the market. I think in general terms—

Are you winding up, please?

Yes, I'll wind up to say that I think this, in conjunction with the failure to control the obscenely high salaries of the very large companies, may undermine the whole process of large companies' business and it now needs reforming substantially.

I commend Lee Waters for bringing this motion before the Assembly this afternoon and for the succinctness and accuracy of his speech and its diagnosis. I agreed with everything that he said. This is a grotesque case. Carillion, which is what I want to concentrate on in particular, is a company that on its collapse has left £7 billion in liabilities, £2 billion of that to suppliers and £2.5 billion to the pension fund. I think it's important to recognise that this case is an example of failure at all levels. First and most obviously, of course, failure of management of those who had responsibility for running the company, as the report of the business committee in the House of Commons makes clear, and the non-executive directors failed to scrutinise the accounts, failed to challenge the corporate executives and utterly failed in all their duties. The top corporate executives utterly failed to manage the company with any degree of competence, and possibly honesty. That remains yet to be investigated. 

It is also a failure of Government. The Government has something called the Crown Commercial Service, which is part of the Cabinet Office, which is charged specifically with looking at major suppliers to Government like Carillion where a collapse might pose a systemic risk. It's not clear why nothing was done by that organisation in this particular instance to try to stave off the possibility of disaster. It was only after the last profits warning a £1.34 billion contract in relation to HS2 was granted by the Government to Carillion. So, a lot was wrong at governmental level as well. 

The problem with the Government sanitising by granting such contracts to companies like Carillion in the circumstances in which its collapse occurred is that smaller suppliers, who don't have the means to do proper due diligence on the companies they are intending to contract with, take that as a kind of by-appointment sign, and therefore the Government is, in effect, impliedly encouraging people to do business with them in spite of its own failure to do the due diligence that others can't afford to do. 

It is, thirdly, of course, a failure on the part of the regulators. This isn't new, and the banking crisis occurred, which was a much, much more systemic problem than the failure of this one company, in spite of the failure of the Bank of England, the failure of Her Majesty's Treasury and anybody else who was responsible for regulating the system. The idea that third-rate regulators will be successful in controlling second-rate bankers or businessmen is, of course, a fantasy. The whole private finance initiative racket, which was developed under the Blair administration substantially, is another example in point of people who simply don't understand what they're doing in letting contracts that are so complex, very often—so big, as Dai Lloyd pointed out a moment ago very well—and therefore the failure is on both sides.

I certainly totally approve of and agree with what Jenny Rathbone's just said about the audit racket, where four large firms now effectively control the whole business for big companies like Carillion. This is not a new problem either. When I was the corporate affairs Minister a quarter of a century ago, Terry Smith, who subsequently has become celebrated as a highly successful private sector fund manager and has been described as the English Warren Buffett, wrote a book called Accounting for Growth, which was a pun, because at the time many companies were reporting large profitability, but actually had very, very poor cash flow. The result was massive bankruptcies like Polly Peck and British and Commonwealth Holdings, both of which were cases I had to deal with when I was corporate affairs Minister. So, these problems are of longstanding and go back a long way. 

Carillion increased its size rapidly through a spending spree through debt, as is referred to on page 14 of the business committee's report, but the largest item on the company's balance sheet was goodwill, which is, of course, in effect, how much they've overpaid for the assets of companies that they purchased. The goodwill amounted to £1.57 billion. The actual equity in the company was only £700 million, so the goodwill was twice the size of the actual cash in the business that had been invested by shareholders. So, clearly, that fundamental point ought to have raised alarm bells right from the start. 

The big problem that we face here is that Governments have marketised services, but they haven't actually created markets. Most privatised utilities have become regional monopolies or oligopolies. A genuine market, of course, has customers spending their own money from a choice of providers, like when we go to the supermarket and choose what we want to buy. Companies, similarly, will choose their suppliers of goods, money is paid, profit is made. But what happens in marketised public services is different—this is the last point that I shall make.

A charity or company is often selected from a limited sphere of options, as in this case here where Carillion provides it, and taxpayers' money is handed over. The private sector providers make a profit from it, but throughout the taxpayer is on the hook. If something goes wrong, the taxpayer pays. These are fake markets and they proliferate in Britain's social state. There is no genuine market mechanism here, and market sectors spring up purely to suck at the Government teat. And very often these providers demand assurances from the Government that there will be more contracts to come; otherwise it's not worth their while even to bid in the first place.

So, there's a systemic failure here that needs to be addressed at all levels, both at the corporate level and at the regulatory level, both in the public sector and in the private sector. So, I think this is a very timely debate, and I hope that lessons will be learned from it.

The Carillion debacle is the most recent example of the failure of market forces and of the policy of privatisation that fuelled the unbridled growth of companies like Carillion. The reports of the National Audit Office and the House of Commons joint select committee should be seen as more than an analysis of the failure of one company, but an exposé of the economic and political corruption at the heart of the so-called free market economy. For this reason, the debate is timely and of direct relevance to this Assembly if we are to plough a different economic and social pathway, one that promotes the policy of social partnership, recognises the importance of the public sector, and one that recognises the fundamental role of Government in the provision and promotion of social responsibility, ethical employment and social equality.

The 2017 Conservative manifesto declared,

'We do not believe in untrammelled free markets. We reject the cult of selfish individualism. We abhor social division, injustice, unfairness and inequality. We see rigid dogma and ideology not just as needless but dangerous.'

And just like the Tory manifesto commitment to railway electrification, just like the Tory commitment to the tidal lagoon, this is just another broken promise. It is just another election deceit and another election fraud.

In his book, The Corruption of Capitalism, Guy Standing explains how global capitalism has become a system rigged in favour of a plutocracy—an elite that enriches itself, not through the production of goods and services, but through the ownership of assets, including intellectual property, aided by subsidies, tax breaks, debt mechanisms and revolving doors between politics and business and the privatisation of public services.

Meanwhile, we see all around us wages stagnating as labour markets are transformed by outsourcing, automation and the on-demand economy. And the Carillion story is part of that ongoing story—a company living off public procurement and privatisation on an ever-downward spiral of delivery, standards and ethics under a Government that has sold its soul to the private market. We see the classic signs of this with the Tories' knee-jerk obsession with the privatisation of the failing rail franchises. We see it here with the Tories in Wales and their obsession with calls for the re-privatisation of Cardiff airport, which failed under privatisation.

As Carillion began to flounder, the directors continued to increase dividends and executive bonuses, treating the pension fund with contempt. The report, as has been said, is damning. The consequences are clear, with the taxpayer being left to foot so much of the bill for the Carillion clean-up operation, and the failure of the regulatory system compounded by what appears to be the complicity of regulators, accountants, Government, lawyers and directors, ultimately at the expense of everyone else. And the various auditors creamed off £72 million. The UK Government failed to back a plan that could have recovered £364 million from Carillion. The pension fund was starved and left with a pension liability of around £2.6 billion, thousands of workers were not paid, and small companies and suppliers were left with a bill of around £2 billion and 27,000 pensioners now live on reduced pensions.

Cabinet Secretary, my reason for endorsing this motion is not just to expose Carillion and companies of a similar ilk, but to expose the very system that has created monsters like Carillion and allowed them to flourish. As well as calling on the Welsh Government to publish analysis on the lessons for Wales, we must look to a different way of doing business, one that recognises the importance of the public sector, recognises the advantages in certain sectors of public ownership and co-operation, recognises that our economic policy and our £5 billion-or-so procurement should be based on ethical standards of business, ethical standards of employment, fair work, an end to the culture of minimum wage, an end to the culture of enforced self-employment and zero hours, a recognition of the important role of trade unionism in achieving these objectives, and an overriding operating framework of social justice, equality and prosperity for all.

In this new global economic system we are embracing—a system of hyper technology, automation and artificial intelligence—we must ensure that we learn the lessons from the past that a system that is based on the philosophy of greed and exploitation is doomed to failure. We must show that, in Wales, we can do things differently, that we can do things better, for business, for workers and for our communities.

Thank you. Can I now call the Cabinet Secretary for Finance, Mark Drakeford?

Thank you very much, Dirprwy Lywydd. Can I thank all those Members who have brought forward this genuinely interesting debate this afternoon? We concentrate here, quite rightly, on reports produced by our own Assembly committees or by the Welsh Government. Sometimes, however, the issue at stake is so relevant to us that it is worthwhile debating reports prepared for others. Both Carillion and Capita have had a presence here in Wales. The accounts we've heard across the debate can leave no doubt that we should attend carefully to the lessons learned from experiences elsewhere.

Dirprwy Lywydd, I'll have less to say on Capita because the lessons to be drawn from that report have been very well explored here, particularly by Dr Dai Lloyd, who covered much of the ground I would have covered myself. I think we should say, in general, that the report teaches us to beware of the headlong pursuit of unrealisable savings and that the promises by those whose thirst for business outstrips their appetite for the truth should always be looked at very carefully.

Here was a company that, when it took over the contracts of real clinical sensitivity, had neither the staff, nor the knowledge, nor the basic systems in place to discharge their new obligations. Here was a Government that appeared to believe that outsourcing a service was also to absolve itself of its responsibilities to service users and citizens. Lee Waters suggested that it does not have to be that way, but Capita is a cautionary tale showing us how badly things can go wrong. 

Will you give way? 

Of course, Mark.

Thank you very much indeed, because I have lots of casework related to my cross-party group work and local work where people who should have had their personal independence payment at full rate haven't got it, but we know that an appeal to the DWP is somewhere between 60 and 80 per cent successful, particularly for those on the autism spectrum and those with sensory loss issues. The problem is a failure to understand and accept these conditions. But we also encounter the same problem with many public sector bodies, local authorities and health bodies. So, is it not the case that it's that lack of understanding we have to address, so that people in all sectors have the rights they have respected, and their needs met accordingly?

I began by beginning with the point that the Member made, and it echoed what Jenny Rathbone had said earlier, that Capita is an outsourcing company that has very significant responsibilities in many areas of UK Government responsibilities and it is not equipped to discharge those responsibilities. Where I disagree with Mark Isherwood is this: when public service organisations get things wrong—and of course they do—then those organisations are accountable for what they do and voters are able to change the way that those services are provided. They have a choice at the ballot box. Whoever was able to vote to get rid of Capita? That, surely, is the fundamental difference.

I'm very grateful for you taking the intervention, but what happens when there's a failure in public services? We can't vote out the management of the Betsi Cadwaladr health board, for example. So, if you accept that that's a principle that you want to employ in relation to private businesses that engage with the public sector, what about public sector organisations that engage with governments too?

Well, Llywydd, people vote for the individuals who are responsible here for the health service here in Wales. People are able to make different decisions if they don't think that that is being done successfully. Whenever did Capita put itself up for election? Whenever were people in north Wales, affected by the problems that Mark Isherwood pointed out, able to go to the ballot box to get rid of that company? That's the essential difference: that's why the comparison between private companies and public services is not a fair or relevant one.

I followed much of what Neil Hamilton said. His analysis, I thought, pointed to some very important issues. I draw a very different conclusion than he does from that analysis. He says that the problem with Capita and Carillion is that what we really need are more, and better, markets. My conclusion is much closer to Mick Antoniw's, that what Carillion and Capita demonstrate is the failure of the market model when it comes to delivering public services. They simply do not operate, and neither do those people who use them operate, in that economy-driven way.

I want to concentrate mostly, if I can, Dirprwy Lywydd, on Carillion, a behemoth, a super-charged company that aggressively chased complex Government and public sector contracts, always looking for the next deal to cover the costs of the last. It was propped up by a Government that continued to award it multi-million-pound contracts well after the writing was on the wall, causing the supply chain damage that others have pointed to this afternoon. And, when the house of cards finally fell, the Carillion collapse has left in its wake a depressingly familiar tale of untouchable directors, a devastated workforce, lost pensions and business failures by others who had depended upon Carillion for their livelihood. Dirprwy Lywydd, I am going to rattle, in less than 30 seconds each, through 10 lessons that I think are there to be drawn from this experience, as the motion suggests. First of all, while there are real personal failures vividly set out by Lee Waters, the real lessons of the reports are of institutional failure: failure by the company, failure by the many different regulatory regimes designed to prevent those failures from happening in the first instance. It's in looking at those institutional failures that we draw the real lessons.

And the second lesson from that is that, in terms of corporate governance, we need to reform directors' duties to make promoting the long-term success of the company a primary duty of those directors, not pursuing the short-term interests of only one group of relevance to that company—shareholders. The pursuit of shareholder value has surely been one of the most inhibiting factors in the way that British companies have been run over the last decade and more. It's for that reason that the TUC, and my party, argue that worker directors should be placed on the board of companies with more than 250 workers in order to demonstrate that there is more than one interest at stake in the way that those companies are operated.

In the fourth lesson, we say that investors' corporate governance rights should be subject to a minimum period of share ownership of at least two years, otherwise we are exposed to the sort of activity that we saw when GKN was taken over by a hostile bid from Melrose, a short-term asset stripper, where the people who voted to take GKN into that ownership were short-term shareholders piling in at the last minute, buying shares and voting for the takeover in the hope of speculative gains and lining their pockets from the profits of the deal. There has been a curious silence from the Conservative benches during this debate, Dirprwy Lywydd, but let me quote one of their number at Westminster, Robert Halfon, when he described it as 'robber baron capitalism at its worst'. And we can do better than that.

My fifth lesson is in the audit, accounting and reporting regimes, which Jenny Rathbone particularly highlighted. Audit companies should not be permitted to engage in contracts for other business services with their clients. It puts them in an entirely false position. Every one of the big four auditing companies worked for Carillion in some capacity at some point, and, as the Financial Times says, a system where we have too few companies to fail is simply not one that benefits the public.

The sixth and seventh lessons are to do with transparency and accountability. We believe that all providers of public services should be obliged to provide details of supply chains, company ownership and governance structures in order that the public can have an insight into what goes on.

We believe, seventhly, as Lee Waters said, that procurement approaches need to be informed by value, not simply price. In an eighth lesson, we need to rethink company law to address the limited liability that is provided to directors of limited companies. The Guardian has argued that just signalling such a step would 'send a shiver through boardrooms'—and a healthy and purposeful shiver too.

'Limited liability is supposed to encourage entrepreneurship. In Carillion's case it seems to have created moral hazard'.

It invited directors to act recklessly because they were able to avoid any personal consequences of their actions.

On to the final two lessons, and, very briefly, Dirprwy Lywydd, first of all, we need to deal with that fundamental difficulty that is caused when Governments outsource work only because it moves debt off the Government balance sheet. It is a cosmetic effort solely, and it really should be eliminated by changing Government contract accounting.

Finally, and most of all, Dirprwy Lywydd, the lesson that I think we draw from these experiences is the one that Lee Waters started with, that public services should be designed, funded, run and evaluated by the public sector, with democratic participation so that it is the public interest and not the pursuit of private profit that is at the heart of the way that our public services are run.

Thank you very much. I call on Mike Hedges to reply to the debate.

Thank you, Deputy Presiding Officer. I'm very pleased to reply to the debate and I'd like to thank everyone who has taken part in it.

I think that one of the weaknesses of the Assembly, one of the criticisms we've had, is that we tend to be very inward looking and not prepared to learn from outside. I think this is an example of where we are looking at what's happened, what's gone wrong, outside and learning the lessons from it, and I think that really is important, because, if we don't learn the lessons from what happens not just over the border, but throughout Europe as well, in some of these things, then we can end up repeating the mistakes.

Lee Waters—I'm very pleased that he brought the reports of the House of Commons on Carillion and Capita to the attention of the Assembly. I doubt if many people would have read them if he hadn't brought them to the attention of the Assembly, and I think that, in itself, is very helpful. And we need to learn lessons. We've seen two very large companies having problems, but why? Carillion seemed to engage in this 'dash for cash', as it was described by Lee Waters, and it was unsustainable. It had to be unsustainable when you were chasing capital from the next contract to pay for the current one.

Capita—well, I'll come to what Dai Lloyd said earlier, but I think Lee Waters summed it up with 'a lack of understanding', 'botched delivery'. We have to learn lessons from the report. Procurement is not just about putting out a contract, getting the lowest price coming in and then letting them have it and hoping it works. Because, a lot of the time, it doesn't and I think, with very large contracts, you end up being sucked into paying more and more money as the contract goes on, because you can't get out of it, because it's so important.

Dai Lloyd explained Capita and GP practices and the rest of primary care far better than I could, but I think that one thing he did explain is how amazingly complex it was, and people without experience of the complexity were bidding for contracts, winning contracts, and then saying, 'Oh dear'. Dai Lloyd knows because he was on the council, I think at the same time as me, or had just left it to come here—we had Capgemini coming in, who couldn't even produce a payroll system, as other Members here who lived in Swansea or worked for the council at the time can lay out. It couldn't produce a payroll system for our council, despite bidding for it.

We have outsources that are a predictable failure. These things go wrong with a level of regularity that you might think people might have learnt lessons from. NHS England and Capita—they misjudged the risk. Sometimes, people are bidding for things that they don't quite understand. I remember once seeing, in a computer book, that it said that somebody wanted a swing, and, after it had gone through all the different changes of the design process, it ended up with a swing that wouldn't swing, which was fixed and was unable to be sat on, but it had just gone through all the different design procedures. A lot of this seems to happen with the outsourced contracts.

Jenny Rathbone went through Capita and its role in assessing attendance allowances. Well, I'm sure that there's not a person in here who couldn't go through the problems they've had with Capita and the attendance allowances. But she went on, more importantly, to auditors and auditing. And there is a problem. There are three major companies for which auditing is only one part of their income; they do lots of best-value work and other benefits to the company. When it becomes that important to you as a company, because of the amount of money you're getting from the additional work you're doing, how keen are you on making sure that you pick up all the warts in the auditing system, when, if you get sacked as an auditor, then you're in serious problems? The same independent auditor for 19 years—I mean, that is ridiculous. Anybody who has been involved with charitable and voluntary organisations has been told, after having the same auditor, many of them local people they know, for three or five years, 'You need to change your auditor'. If that's what you tell small organisations dealing with relatively small sums of money, why a public company can have the same auditor for 19 years—. You've got to develop a cosy relationship.

I think Neil Hamilton came out with the failure of the Westminster Government, the failure of the regulator, leads—it's basically a systemic failure. It takes me back to thinking of PFI. The people who proved PFI was value for money—it took a genius to do that, because you were borrowing money at a higher and a higher level, you were paying out money for almost the rest of time, you had contracts that had payments for everything from £30 to change a lightbulb right the way through. But somebody would do a calculation, and, if it didn't come out with the right answer, you were sent back to try again. I think that, too often, we answer first and then we work back to what the question should be. And a lot of that has happened here.

Again, Carillion funding via debt—when the biggest part on your sheet is goodwill, which is twice as much as you've got in cash—. One of the things I did bring in, when I was working for the council—for some small organisations that were council run, I asked them, 'Can we have the cash flow?' In which case, I was told that it wasn't really helpful. 'You don't really want to see that; you want to see the accounts. The accounts give you a true and accurate record. You don't want to see cash flow, because that gives you an inaccurate—it varies.' Well, I said, 'Can I have it for every month for 12 months? Because it's bound to go up and down. It's bound to be right some of the time, and, after 12 months, it can't be that much out.' Because people put things into stock, and they value stock. There are all these little tricks that accountants know in order to make sure that money is not lost. 

Failure of privatisation—Mick Antoniw was absolutely right. Should we be promoting social partnership? It's too much about competition between you trying to get the best deal, and them trying. How about working together?

I think Mark Drakeford talked about learning lessons from elsewhere. Beware of a pursuit of something that is both unrealistic and unachievable in terms of savings, but somebody tells you they can do it. Capita is a cautionary tale. It was not equipped to achieve what it meant to. Carillion, aggressive at chasing contracts—I was very pleased with the 10 lessons Mark Drakeford put out. I would have thought they would be a very good Government statement, at some time, of the lessons that we need, or rules we need, or procurement rules or lessons we need to—. Because I think it is important that we get it right, we learn from what's gone wrong. We don't want to repeat it.

Thank you very much. The proposal is to agree the motion. Does any Member object? No. Therefore, the motion is agreed in accordance with Standing Order 12.36.

Motion agreed in accordance with Standing Order 12.36.