Unite held a highly successful fringe meeting at Labour Party conference.
The meeting titled ‘Ending Bandit Capitalism – No More Carillions’, looked at why Carillion collapsed, examined how Carillion was not a one off, what a Labour government needs to do to prevent further scandals and heard from workers at the sharp end of bandit capitalism.
Prem Sikka is a professor of accounting at Sheffield University, served as an expert to the select committees that investigated Carillion’s collapse and is advising shadow chancellor John McDonnell MP, on a series of papers on how to improve the UK’s regulators and company and director laws.
‘Carillion – books not cooked – they were roasted’
Having advised the Carillion select committee he has seen a great deal of material that is not yet in the public domain and told the fringe meeting: “Carillion’s books weren’t cooked they were roasted.”
He added that Carillion, “had been trading while insolvent for several years.”
He is clear that the problems extend far further than just Carillion in our society when regulation is not effective, bandit capitalism is standard practice. It leads to: mis-selling of financial products, rip off practices on gas, water, electricity and mobile phones, selling horsemeat as beef, tax avoidance, and depresses wages.
Unlike other European countries the UK does not have a central enforcer of company law. The financial sector has 40 different regulators all of who are “timid, poorly controlled and ineffective.”
One of the key concerns about Carillion was that a company which was apparently making profits and had a very healthy bank balance, had in under 12 months collapsed into compulsory liquidation. Sikka emphasised that there are six regulators for the auditing/accountancy sector. Often, “company accounts are not worth the paper they are written on and auditors are asleep at the job.”
Shortly before Carillion revealed a multi-million black hole in its accounts last July , it had paid record dividends to its shareholders. Sikka is not surprised: “UK companies pay the highest proportion of dividends, more than even in the United States.”
While most other European Union companies have employees on boards who have the long term interests of the company, this is not the case in the UK. Not entirely coincidentally, long term investment and research and development funding are lower in the UK than EU averages and employees work longer than their European counterparts.
Sikka warns “there is no magic bullet” to end UK bandit capitalism but proposes a 10 point plan to curb the power of bandit capitalists:
- All large companies to have employee elected directors on boards
- Reforms to protect workers and long-term investors from hostile takeovers
- Curb the power of short-term shareholders (speculators)
- Revision of directors duties
- Shackle and reduce executive pay
- All companies with a pension scheme deficit must submit an annual plan to the pension regulator detailing how to eliminate it
- If a company collapses the pension scheme is a preferred creditor, paid before other parties
- Regulatory bodies must be reformed
- Tackle tax avoidance
- Curb destructive power of the City of London
Royal Liverpool Hospital – news
During the conference there was a great deal of attention on the fate of the unfinished Royal Liverpool Hospital, which was over 80 per cent complete when Carillion went bust in January. Cracks have now been found in the beams and the cladding was found to not pass fire safety tests.
Just prior to the meeting it was announced that the Private Finance Initiative (PFI) had been cancelled and the government would directly fund the project.
He said the cost of paying for PFI was “one of the reasons local government is suffering.” He gave the example of a school in Speke, south Liverpool, which was built under PFI 11 years ago. The school has been empty for 3 years and despite that Anderson has to pay over £2 million a year to the private financiers for the next 11 years.
Anderson criticised Labour’s “best value” policy which forced councils to sell off services. He said: “The public sector is best value. The public sector is always better than private greed.”
Long-Bailey: scathing response
The shadow secretary of state for business was scathing in her criticism of the government’s response to Carillion’s collapse.
She explained how despite three profit warnings the government “went on offering contract after contract to a company they knew was in trouble.”
Under a Labour government when companies bid for any public sector projects they must meet the following criteria.
- Full trade union recognition
- Pay rates where the highest paid worker is paid no more than 20 times the lowest paid
- All suppliers are paid in 30 days
- Training and apprenticeships to be undertaken
- Fully tax compliant
‘Out of control public sector’
Writer and commentator Owen Jones provided a barnstorming performance. He said, “Carillion is not a stand-alone injustice it is an indictment of the social order. It is just one example of an out of control private sector.”
He also pointed out that 35 per cent of public sector contracts are now undertaken by private companies.
Jones described what happened at Carillion as a symptom of neo-liberalism which needed to be swept away.
‘Constant erosion of workers’ rights’
Townsend is a waitress at TGI Fridays and has worked for the company for eight years, she been taking regular strike action since the company gave the workers just two days’ notice they were cutting 40 per cent of their card tips.
The cut in the tips is costing workers around £50 a month and the reduction has meant that some of those unable to work extra shifts have been forced to claim in work benefits for the first time.
Townsend described how since TGI Fridays was sold to venture capitalists there has been a constant attack on workers’ pay and conditions to increase profits. “They took away time and a half, they took away free food for breaks and the workload has doubled. And yet TGI describe themselves as a family.”
Bev and Gellie are employed by ESS a subsidiary of Compass Group, they work on outsourced Ministry of Defence contracts in Gosport, Hampshire.
They are on the minimum wage undertake cleaning and food preparation roles.
Last year the workers were told that their working year would be cut from the normal 52 to 50 weeks and if they protested they would be cut to 48 weeks.
The cut means that workers are about £50 a month worse off and Gellie described how it is now making it really difficult for her to run a car, which she has to have to get to work.
The Unite members are fighting back by taking an employment tribunal case for unfair deduction of earnings and have been protesting and campaigning to force the company to reverse the theft of working weeks.