The demise of Carillion matters to us all

Written by Mandy Rhodes on 23 January 2018 in Comment

Private companies are there to make a profit and governments are there to ensure they're protecting the public and the public purse. On all counts, both have failed

The 2008 Financial Crisis was the worst economic disaster since the Great Depression, sparking a global recession and an extended era of biting austerity that hit the most vulnerable hardest and from which we are still reeling from today.

But amid all the hand wringing, it was also meant to be a watershed moment that marked the nadir of corporate greed and put an end to a boardroom immorality that put profit before people. But with this week’s collapse of Carillion we are entitled to ask what lessons have truly been learnt.

Carillion was a construction and outsourcing company that few would have heard of until it hit last week’s news, but with 45,000 employees – at home and abroad - and up until recently, worth billions of pounds, its collapse matters to us all.

Carillion was a private business operating in the public sector. It was awarded multi-billion pounds worth of government contracts ranging in size from building hospitals to repairing roads and was part of a consortium to build the Aberdeen Peripheral bypass.

But it was also a provider of a diverse range of public services including the provision of school meals, managing prisons and up until recently looking after the National Museum of Scotland.

 It was a major employer with many thousands of workers, including Modern Apprentices, operating across all sectors and had staff based in almost every constituency in Scotland.

Carillion was a private business ostensibly being paid from the public purse and last week was taken into liquidation with cash of just £29m sitting in the bank while it owed £1.3bn. And its seemingly overnight collapse has shone a light on a little understood sector that provides much of our public infrastructure and many of our vital public services by companies that are hardly household names.

Its demise has raised many questions - not just about greed.

It may be convenient to simply blame the directors of Carillion for banking exorbitant salaries and bonuses – Richard Howson, the former chief executive, for example, took home £1.6m in 2016 – while the company teetered on the brink, but why, when there was so much public money flying the company’s way, did politicians take such little interest in how it was being used?

I’m not just talking about why the UK government had seemingly ignored the most recent series of Carillion profit warnings and continued to award it £2bn worth of business or why ministers had not questioned the 90 per cent fall in the price of its shares or been concerned about the hedge funds circling. It’s more ingrained than that.

At every party conference that I have attended over the past few years, Carillion would have a stand – a very large one - and MPs, MSPs, ministers of state and local government representatives, would readily queue up to have their pictures taken and sign a book to say they’d been there.

There was no shame in that because Carillion mattered. It employed their constituents, built hospitals, repaired roads and delivered local services. Its tentacles were everywhere. And no one stopped to question the sense in that.

Private companies are there to make a profit and governments are there to ensure they're protecting the public and the public purse. On all counts, both have failed. And while public private partnerships can work, politicians should not become so enamoured by riches that they abdicate responsibility for scrutiny. This truly should be a watershed moment to reassess what works best for all and to put the ‘public’ back into public services.

This article was first published in the Sunday Post on 21st January 2018

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