Trade unions have demanded that a taskforce be set up to help deal with the fallout from the Carillion collapse and accused ministers of failing to adequately prepare for the demise of the outsourcing firm.
Frances O’Grady, the TUC general secretary, told the business secretary, Greg Clark, on Tuesday night he needed to set up a body including representatives from unions and companies in Carillion’s supply chain in the next few days, to ensure knowledge was shared to establish exactly who was at risk.
The union leader said Clark was “in listening mode” at the meeting, which was attended by Len McCluskey, the general secretary of Unite. She added, however, that she was scheduled to speak to him again on Wednesday to see if progress could be made because “we have all seen warm words not backed up with action”.
Unions are worried about the impact on both sub-contractors and Carillion employees; O’Grady said half a dozen suppliers to the stricken company had already contacted the Insolvency Service because they were concerned about their futures.
“It is self evident that, had the government been prepared, we would not have been in this situation,” she said.
Ministers have repeatedly said they had been monitoring Carillion since the company issued a profits warning in July, although since then it had been awarded eight contracts, including joint-venture deals to help build the HS2 railway line. But it has emerged that a crown representative, whose job it is to monitor major suppliers to government, had been rotated off the company in the summer and not re-appointed until October.
Carillion relied on major contracts, some of which proved much less lucrative than it thought.
In 2018 it slashed the value of them by £845m, of which £375m related to major public-private partnerships (PPPs) such as Royal Liverpool University hospital.
As its contracts underperformed, its debts soared to £900m.
The company needed a £300m cash injection, but the banks that lent it money refused to put more in.
The government also refused to step in and bail the firm out.
That left the company unable to continue trading and forced it to go into liquidation.
Earlier on Tuesday, ministers asked the Insolvency Service – which is handling the liquidation of Carillion – to fast-track an investigation into the conduct of the directors who ran the outsourcing company. Former chief executive Richard Howson was reportedly being paid a £660,000 salary until October, despite quitting his post after a profit warning in the summer.
Clark said: “It is important we quickly get the full picture of the events which caused Carillion to enter liquidation, which is why I have asked the Insolvency Service to fast-track and broaden the scope of the Official Receiver’s investigation.
“In particular, I have asked that the investigation looks not only at the conduct of the directors at the point of its insolvency, but also of any individuals who were previously directors. Any evidence of misconduct will be taken very seriously.”
The Official Receiver has the power to investigate the circumstances that led to the collapse of Carillion, going back many years if it deems necessary.
Labour sought to press home the argument that the Carillion crisis proved that the idea of private finance initiatives was fundamentally flawed.
The shadow chancellor, John McDonnell, wrote on the Guardian: “Nothing has come to symbolise the worship of free market solutions – often against all the evidence – more than the persistent belief that key public services would be better provided by profit-seeking.”
The party has said the company’s contracts should be brought back into the public sector to contain the situation.
Michael Gove, however, said any failure was company specific. The environment secretary told the BBC the Insolvency Service needed to “look to the specific circumstances of this company’s operation”.
Ministers made clear after the cabinet meeting on Tuesday that no immediate nationalisations were on the table.
Theresa May told the cabinet that the “taxpayer could not be expected to bail out a private company”, her official spokesman said.
The prime minister argued that a lot of work had gone into trying to find suitable financing options but it had not proved possible.
The spokesman made clear that in the short term the government would ensure public services continued, paid for with money that would have gone to the company to provide those services, rather than pushing up the bill for taxpayers.
NHS
• Managed facilities including 200 operating theatres and 11,800 beds
• Made more than 18,500 patient meals per day
• Helpdesks dealt with 1.5m calls per year
• Engineering teams carrying out maintenance work
Transport
• Built 'smart motorways' – which ease congestion by monitoring traffic and adjusting lanes or speed limits – for the Highways Agency
• Major contractor on £56bn HS2 high-speed rail project
• Upgraded track and power lines for Network Rail
• Major contractor on London’s Crossrail project
• Roadbuilding and bridges
Defence
• Managed infrastructure and 50,000 homes for Ministry of Defence
Education
• Designed and built 150 schools
• Catering and cleaning contracts at 875 schools
Prisons
• Maintenance and repairs at about half of UK prisons
Libraries
• Managed several public libraries in England
Energy
• Built substations, overhead cables and other works for National Grid
Unions said the government’s decision only to provide support for public sector contracts meant some people who worked on the rail network were at risk of losing their jobs.
The RMT rail union wrote to the Cabinet Office minister, David Lidington, asking if 600 workers providing cleaning services for Arriva Rail North and track maintenance for Network Rail were part of contracts that qualified for ongoing public support.
The union said it had received no reply from the minister. “Our argument is that these are public sector contracts because they provide a public service,” a spokesman said.
