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Carillion collapse: Five urgent questions the Government must answer Carillion collapse: Five urgent questions the Government must answer
(35 minutes later)
The liquidation of the giant Government outsourcing and construction firm Carillion on Monday has put tens of thousands of jobs at risk, slashed the pension benefits of all employees, jeopardised the future of many smaller firms and cast a pall of uncertainty over many schools, hospitals and prisons that rely on the company.The liquidation of the giant Government outsourcing and construction firm Carillion on Monday has put tens of thousands of jobs at risk, slashed the pension benefits of all employees, jeopardised the future of many smaller firms and cast a pall of uncertainty over many schools, hospitals and prisons that rely on the company.
It has also raised hard questions for ministers.It has also raised hard questions for ministers.
Below we outline the five most pressing ones.Below we outline the five most pressing ones.
Why did ministers continue awarding Carillion government contracts when they knew the firm was in big trouble?Why did ministers continue awarding Carillion government contracts when they knew the firm was in big trouble?
The company’s difficulties were well-known in financial markets long before its disastrous July 2017 profit warning which led to a share price collapse.The company’s difficulties were well-known in financial markets long before its disastrous July 2017 profit warning which led to a share price collapse.
But the very same month the Government awarded Carillion a contract, with an estimated worth of £450m, to build part of the High Speed Two rail link, prompting a brief spike in its share price.But the very same month the Government awarded Carillion a contract, with an estimated worth of £450m, to build part of the High Speed Two rail link, prompting a brief spike in its share price.
At the time the Transport Secretary Chris Grayling said: “My wish is that Carillion get through their current problems but we’ve made sure that it’s not an issue for these contracts”.At the time the Transport Secretary Chris Grayling said: “My wish is that Carillion get through their current problems but we’ve made sure that it’s not an issue for these contracts”.
In light of its collapse, that now sounds rather complacent.In light of its collapse, that now sounds rather complacent.
Did ministers do enough – early enough – to safeguard public services from the fallout from what virtually everyone in the markets could see was a looming disaster?Did ministers do enough – early enough – to safeguard public services from the fallout from what virtually everyone in the markets could see was a looming disaster?
Why did the public sector become so reliant on a single company in the first place?Why did the public sector become so reliant on a single company in the first place?
Carillion received around £1.7bn in total revenues from the public purse in 2016.Carillion received around £1.7bn in total revenues from the public purse in 2016.
It manages around half of the UK prisons estate. Hundreds of schools and hospitals cannot function effectively without its services.It manages around half of the UK prisons estate. Hundreds of schools and hospitals cannot function effectively without its services.
The fact that the Government has been forced to step in to fund its public operations shows that – as an operator – it was effectively too big to fail.The fact that the Government has been forced to step in to fund its public operations shows that – as an operator – it was effectively too big to fail.
Ministers insist that if they had frozen Carillion out of government work after it got into financial difficulties it would merely have collapsed the company sooner.Ministers insist that if they had frozen Carillion out of government work after it got into financial difficulties it would merely have collapsed the company sooner.
But that merely shows it was too big for the Government to blacklist.But that merely shows it was too big for the Government to blacklist.
So was it irresponsible for ministers (including, to be fair, ministers from previous governments) to allow the public sector to become so dependent on one firm?So was it irresponsible for ministers (including, to be fair, ministers from previous governments) to allow the public sector to become so dependent on one firm?
Why was Carillion’s chair an adviser to the Prime Minister on corporate responsibility given its record of staff treatment and corporate governance?Why was Carillion’s chair an adviser to the Prime Minister on corporate responsibility given its record of staff treatment and corporate governance?
The unions claim Carillion has had an “abysmal” track record as an employer, having been one of the construction firms involved in the secret and illegal “blacklisting” of certain workers over many years. But Philip Green, Carillion’s chair, served as an advisor to David Cameron on corporate social responsibility.The unions claim Carillion has had an “abysmal” track record as an employer, having been one of the construction firms involved in the secret and illegal “blacklisting” of certain workers over many years. But Philip Green, Carillion’s chair, served as an advisor to David Cameron on corporate social responsibility.
The Daily Mail has also uncovered that Carillion quietly relaxed its rules on executive bonus “clawback” rules in 2016, something that has prompted harsh words from the Institute of Directors today over the firm’s corporate governance.The Daily Mail has also uncovered that Carillion quietly relaxed its rules on executive bonus “clawback” rules in 2016, something that has prompted harsh words from the Institute of Directors today over the firm’s corporate governance.
Doesn’t this show that the Government is not careful enough when taking ethical advice from large private companies?Doesn’t this show that the Government is not careful enough when taking ethical advice from large private companies?
Why have Carillion’s public contracts not simply been nationalised?Why have Carillion’s public contracts not simply been nationalised?
Lord Adonis, who until his resignation last month was chair of the Government’s own National Infrastructure Council, suggested today that the Government should nationalise Carillion’s public sector service contracts rather than seek to pass them to other private contractors since those firms will demand a “king’s ransom” to take them on. Lord Adonis, who until his resignation last month was chair of the Government’s own National Infrastructure Council, suggested today that the Government should nationalise Carillion’s public sector service contracts rather than seek to pass them to other private contractors as soon as possible since those firms will demand a “king’s ransom” to take them on.
This would, according to Lord Adonis, shortchange the UK taxpayer.This would, according to Lord Adonis, shortchange the UK taxpayer.
So are ministers going to put the principle of private ownership above taxpayer value for money?So are ministers going to put the principle of private ownership above taxpayer value for money?
Shouldn’t this force a wider re-think on the policy of privatisation?Shouldn’t this force a wider re-think on the policy of privatisation?
Over the past twenty years Carillion has been a huge beneficiary of the state’s drive to outsource and also the controversial use of “Private Finance Initiative” contracts to provide public services. Over the past twenty years Carillion has been a significant beneficiary of the state’s drive to outsource and also the controversial use of “Private Finance Initiative” contracts to provide public services.
The value for money of PFI contracts has been widely questioned by public finance experts. Meanwhile firms, including Carillion, have been paying millions of pounds of dividends to shareholders each year. The value for money of PFI contracts has been widely questioned by public finance experts. Meanwhile firms, including Carillion, have been paying millions of pounds of dividends to shareholders each year, prompting many to regard these arrangements as a taxpayer rip-off.
Shouldn’t Carillion’s ignominious collapse raise serious questions for ministers about whether this privatisation drive has gone too far, and that the state should be doing more of this kind of work in-house? Shouldn’t Carillion’s ignominious collapse raise questions for ministers about whether this privatisation and outsourcing drive has gone too far, and that the state should be doing more of this kind of work in-house?