Where does Carillion’s collapse leave our country? The failure of the services giant couldn’t have come at a worse moment. A stagnant economy, uncertainty over Brexit and arguments raging over the scale and shape of the government’s response to the crises in both housing and our NHS.
Yet the demise of the company speaks volumes about our society as 2018 dawns. No longer can the labyrinthine structure of contracting and sub-contracting be regarded as a suitable foundation on which to rest our public services.
As another outsourcing behemoth, Interserve, trembles as the City speculators swoop, enough is enough. No longer should government be handing over public money to companies that head to the casino intent on gambling on the fate of our public services.
And surely, too, this has to be the last time we learn more about directors rewarded for failure in a spectacular style while members of Unite and other unions try frantically to help their members understand how they are going to make the next mortgage payment?
In parliament yesterday, Theresa May squirmed and rightly so. Not only has her government been asleep on the watch, she is now the head of a party that is a solitary voice in defending the spivvery infecting our public services.
So what is to be done? Well, the banks, themselves recipients of public cash when in (self-inflicted) dire straits must act against type. They have to offer a sympathetic ear to thousands of small firms and the workers who by no fault of their own have fallen victims to Carillion.
Business secretary Greg Clark’s move to ensure banks limit the impact of the firm’s liquidation on SMEs is to be welcomed. It’s the much needed temporary relief for the many firms in Carillion’s supply chain that Unite demanded.
But more needs to be done to help the hundreds of companies owed months’ worth of money by Carillion and now facing getting back just one penny in every pound.
Without longer term financial assistance, a great many sub-contractors and suppliers will go under, robbing workers of their livelihoods and communities of the companies that are their lifeblood.
That is why we are seeking a national task force. This would be mechanism to provide the practical support urgently needed to safeguard jobs and businesses, to keep services supplied and building sites ticking over. There should be no delay in setting this task force to work.
But what we also need is for the government to arrive at the same conclusion as the people: big business values are not compatible with public service values.
A public inquiry is needed to get to the bottom of how a company that ran up huge debts, issued three profit warnings in five months, undercut competitors with unsustainable bids, hoovered up vats of public money, and repeatedly alerted the government to its own financial shortcomings got its hands on so much of the public sector and taxpayers’ cash.
The Tories are meant to be the party of the City – so why were they content to dish out our money when the city was telling them not to, five years ago, betting against Carillion which to their thinking was over-stretched, debt-leveraged and unsustainable.
For 30 long years, trade unions have been a lone voice warning that the private sector was not the best fit with our public services. We weren’t listened to but we need to be now.
When firefighters are put on standby to serve children their lunches after the collapse of the private sector company that ran their school, we know that big business has no business in our NHS, education system, prisons, infrastructure and other public services.
Of course, the Conservative party and the right-wing economic outriders will have to be dragged screaming and kicking to reach anything approaching such a conclusion. But their case that Carillion is not pure capitalism – if it was it would have been allowed to fail – is laughable.
The reason Carillion is heading for history’s dustbin is the same as it ever was: greed.
The firm built its business on reckless expansion, fuelled by debt and undercutting, wafer-thin profit margins, based on minimum pay for largely female workforces in many sectors, and the blacklisting of workers.
Its failing directors have now had their bonuses and severance payments stopped, which is the least that could have been done. But, as with a long line of pantomime boardroom villains, this has to be forced upon them rather than as a result of a rightly uneasy conscience.
And it’s unlikely they will have trouble keeping food on their tables as a result.
With an estimated cost to the economy of at least £600m, the idea that the private sector saves us money is now dead.
Conservative government’s failure
But let’s also be clear – it was this Conservative government’s failure to manage its contractor that has caused this. So there must be no attempt by this government to make ordinary working people and their communities pay for this financial fiasco with further austerity. The government that has cut corporation tax and tax for high earners has to look elsewhere to fill their budget hole.
This may be a forlorn hope. As shadow chancellor John McDonnell says, the Tories still can’t see the utter failure of outsourcing. That’s because without their blind faith in the unregulated market, what else are they for?
Well let me help them – and those in our own party who would not listen to union concerns – understand this: public services ought to be just that, services provided for the good of the people. They are not to be monetised by boardrooms and subject to short-selling by the speculators.
All those who brought down Carillion now need to face the consequences. The investigation by the official receiver has to be broadened to previous directors, and fast-tracked. The actions of the auditors KPMG (which gave Carillion a clean bill of health just four months before a massive profit warning) and the shareholders must be scrutinised. Ministers must answer why there was no overview of Carillion’s use of billions of pounds of taxpayers’ money.
We need to know how a catastrophe of capitalism of this level can have been permitted. Above all, we need to know it will not happen ever again.
This comment first appeared in Labour List, January 18