Rt Hon Chris Grayling MP, The Secretary of State for Transport (Epsom and Ewell, Conservative) speaking in the House of Commons Monday 11th Febraury 2019
'We’ve spent no money on this contract,' Chris Grayling told the House of Commons © Parliamentlive.tv

Transport secretary Chris Grayling ignored MPs’ calls to quit on Monday as the Whitehall spending watchdog said that hiring a ferry company with no ferries to deliver emergency supplies had been a “high-risk proposition” with potential “teething troubles”.

Mr Grayling on Saturday terminated a controversial £14m contract with Seaborne Freight, a start-up company, to transport emergency cross-Channel freight deliveries between Ramsgate and Ostend in the event of a no-deal Brexit.

The minister took the decision after the withdrawal of Arklow, an Irish ferry company, which had secretly promised to back the new venture.

Sources at Arklow told the Guardian on Monday that the group had only been a “prospective investor” in Seaborne. “We never had an agreement with Seaborne, so when it was reported that we were a backer, that was not the case,” said one. “There was nothing signed.”

But James Tyrrell, managing director of Arklow, wrote to Mr Grayling last month saying the companies had been working together for 12 months and Arklow intended to take an equity stake in Seaborne and provide equity finance to buy ships.

Andy McDonald, shadow transport secretary, said Mr Grayling was rewriting the textbook for ministerial incompetence: “What began as a debacle has now descended into a Whitehall farce.”

But Mr Grayling stressed in a statement to the Commons that taxpayers had not paid a penny to Seaborne: “We’ve spent no money on this contract,” he said.

A report by the National Audit Office, published on Monday, said the Department for Transport had identified “material risks” to using Seaborne given it was a new operation with no ships — and that the port of Ramsgate was not yet ready.

The procurement process began in November when the DfT assessed nine options for how to transport vital medicines and food supplies into the UK if the main Dover-Calais artery became choked.

Among those options was the use of military vehicles, although officials were deterred by a lack of spare capacity at the Ministry of Defence.

After deciding to create new freight capacity on new and existing routes, the DfT approached nine operators under non-disclosure agreements and invited them to submit bids by December 14.

But officials were disappointed to receive only three bids. According to the spending watchdog, those bids accounted for only 11 per cent of “normal flows” between Britain and the continent, against a target of 25 per cent.

It was in this context that the department promised to pay £103m to the companies: Seaborne, Brittany Ferries and DFDS of Denmark.

The NAO said the department’s accounting officer had recognised that the Seaborne plan was a “novel and exceptional proposition” given the company’s lack of a record.

But he concluded that a failure to act would mean the government would lose the ability to secure ferry capacity that could protect critical goods under a no-deal exit.

Meanwhile the companies that run the Channel tunnel have launched a lawsuit against the British government over its award of ferry contracts to handle freight shipments in a no-deal Brexit.

Channel Tunnel Group and France-Manche — which together form Eurotunnel — accused the government of a “secretive and flawed procurement exercise” for the back-up ferry service in the event of a no-deal Brexit.

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