THE COLLAPSE OF Carillion is more than just one private company failing – and the Labour Party has been combining several strands of attack to make the Government wake up to the problem.
Since the construction and related services company went into liquidation at the start of this week, Labour has pinpointed three main issues which need government action.
•What will happen to those Carillion employees who work on public sector projects, and to the services they deliver?
•What will happen to those Carillion employees who work on private sector projects?•What will happen to all the small and medium sized businesses (SMEs) which supplied Carillion with goods and services and which face not getting paid?
The Party has called on the Government to set up a task force, where all those affected can work together to find the best answers to these questions as quickly as possible. So far, Prime Minister Theresa May has played a straight bat and insisted everything is in hand.
Other issues are now also coming into the frame.
•What is the situation with pensions?
If Carillion cannot meet its current and future commitments, it is those who worked for Carillion (and its predecessor companies) who will lose out. Most of them are, or will be, on low fixed incomes: these are likely to fall, through no fault of the pensioners themselves. The company is so huge that this will have some effect on domestic demand and, therefore, the economic “recovery”.
•Why did the Government award public sector contracts to Carillion after the company issued profit warnings?
“Given £2 billion worth of government contracts were awarded in the time three profit warnings were given by Carillion, a serious investigation needs to be launched into the Government’s handling of this matter,” said Labour’s Shadow Minister for the Cabinet Office, Jon Trickett MP.
Theresa May doesn’t look like she wants to launch an investigation of that sort any time soon. On the face of it, either the Government didn’t care about the liquidity of Carillion, or it was aware there was a problem and was trying to find ways of pumping public money into keeping Carillion afloat.
•Why were shareholders awarded dividends when the company was in such trouble?
This may have been a business decision. If Carillion had stopped paying dividends, or reduced them, this may have reduced confidence in the company. On the other hand, why should shareholders receive money from the company rather than pensioners and SME suppliers? “It is vital that shareholders and creditors are not allowed to walk away with the rewards from profitable contracts while the taxpayer bails out loss-making parts of the business,” said Trickett.
•Should we stop outsourcing and privatising public services to private companies? For years successive governments have favoured privatisation. They have argued that private companies can deliver services at a lower cost (in other words, they pay their workers less). They have argued that private companies can manage risk better (in other words, they don’t manage risk at all, knowing that the public sector will have to step in and take over running public services if the private sector fails).
This was the ground covered by the questions which Labour’s Jeremy Corbyn put to Theresa May at Prime Minister’s Questions today. Corbyn suggested that the Government had been negligent – which the Prime Minister denied, saying that she had been responsible because she had not put taxpayers’ money into bailing out Carillion. The point was not whether she had done this after the company went into liquidation but whether this had, in effect, been done before the company collapsed – prolonging the agony. It also ignored the public money that will be spent on the liquidation process, making (partly) good pension deficits, redundancy payments and officer time in making alternative arrangements.
Other Labour MPs also spoke out.
•Catherine McKinnell MP asked who will look after Carillion’s 1,400 apprentices. Theresa May promised to look at the issue “very carefully”.
•Andy McDonald, Labour’s Shadow Transport Secretary, called on his opposite number to take over Carillion’s contracts on the railways.
Dealing with the Carillion collapse will take months of work – much of it paid for by the taxpayer. It is only right that as well as dealing with the fallout from this failure, there is a public debate on whether we can afford to keep chanelling so much public work, and money, into private hands.