Tory minister defends performance of outsourcing companies as Capita shares slump further

'Frankly, why is it we use these contractors? Because we know they can deliver,' Cabinet Office minister, Oliver Dowden told the House of Commons

Ill-considered outsourcing effort has seen Capita incur double the losses it was predicting (PA)

A Tory minister defended the performance of outsourcing firms as he faced a grilling from MPs over struggling outsourcing giant Capita on Thursday.

Shares in Capita sunk by a further 11 per cent by 2pm, after almost halving in value on Wednesday.

Responding to urgent questions on the company in the House of Commons, Cabinet Office minister Oliver Dowden minister said: “Frankly, why is it we use these contractors? Because we know they can deliver”.

​MPs raised concerns about a string of Capita’s government contracts over which the outsourcing firm has faced serious criticism, including its handling of personal independence payments and back office services for GP surgeries.

Mr Dowden said the Labour Party was in “complete confusion” over the outsourcing issue. “Is it honestly Labour’s position that we will not use the private sector at all?” Mr Dowden asked. ”Is the state going to start building roads again? Where do we draw the line?”

Conservative MP Sir Patrick McLaughlin also defended Capita and accused the Labour Party of having “total contempt for the private sector”.

Senior Labour MP Rachel Reeves accused 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 said.

“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.”

Capita shocked the City on Wednesday by issuing a profit warning, suspending its dividend, announcing a plan to sell off parts of its business and raise an extra £700m from investors.

Shadow Cabinet Office minister Jon Trickett said Capita had been awarded 154 government contracts last year, and had also taken on some Carillion contracts.

“The minister’s response today has been marked, I believe the House will conclude, by indifference to corporate mismanagement, incompetence in office and complacency in the face of a crisis,” the Labour frontbencher added. “This Government is blinded to the corporate greed of these outsourcing companies.”