Chris Grayling faces fresh pressure after Tory minister admits Carillion's prison maintenance deal was 'completely unsustainable'

Mr Grayling was justice secretary between 2012 and 2015, when the £200m contract was awarded

Under-fire cabinet minister Chris Grayling faces fresh criticism after it emerged the construction giant Carillion underbid by £15m on prison maintenance contracts on his watch.

Mr Grayling, who was justice secretary between 2012 and 2015, presided over the award of £200m outsourcing contract to Carillion, which collapsed at the beginning of the year.

Prisons minister Rory Stewart told MPs the firm's offer to save taxpayers £15m was "completely unsustainable" and it was a "real, real lesson" for the Ministry of Justice (MoJ) for future contracts.

It comes amid mounting pressure on Mr Grayling, who is now the transport secretary, following weeks of rail chaos due to a botched timetabling overhaul on Northern Rail and Govia Thameslink Rail (GTR) services.

Carillion's collapse means ministers are now spending £65m on prisons maintenance through a government-owned firm - an extra £15m to the construction giant's bid - to achieve the right standards, MPs heard.

Mr Stewart told the Justice Committee: “What effectively happened there, I believe, is we had a contractor come in to us - and this is something that is a vulnerability with all private sector contractors - who effectively offered, at their own risk, to do our maintenance for considerably less money than it would cost us to do. In effect £15m a year less.

"We signed up to that and in retrospect, more weight should have been given to saying, ‘Wait a second, what on earth is Carillion proposing here?

“They are basically proposing to do this and lose £15m a year.

"Is that really sustainable or are we going to end up back in a situation where we are paying for it?"

Pressed on the issue by MPs, he admitted: “We did not get the deal that Carillion was proposing to give us because it turned out that what Carillion was proposing to us was completely unsustainable in terms of their finances."

Mr Stewart said there was "a real, real lesson" which is we need to be absolutely clear about what people’s costs are and we need to be more honest internally that something that looks like too good a deal may be too good a deal, and that realistically in terms of human nature if people are losing money on a contract then they are going to start disinvesting.”

In his appearance before MPs, Mr Stewart also said he did not believed prison numbers would go down as there was neither the political or public will.

Responding to his comments, shadow justice secretary, Richard Burgon, said: “From the crisis in prisons maintenance to the failings of our probation services, the Tories’ obsession with privatisation and outsourcing has caused widespread damage to our justice system – and it’s the public who’ve had to foot the bill.”

The MoJ has come under fire in the past over the outsourcing of contracts to private security firms such as Serco and G4S, the latter of which won a multi-million contract for electronic tagging of offenders despite being investigated for overcharging the government for similar services.