‘Hubris and greed’

Carillion’s “shyster” bosses bear responsibility for the outsourcing giant’s devastating collapse, but the Tories lacked “the decisiveness or bravery” to reign in the corporate excess that allowed the disaster to happen, MPs said today (May 16).

In the scathing final report into Carillion’s implosion, the Work and Pensions and BEIS Committees called on the government implement an “ambitious and wide-ranging set of reforms” to reset corporate accountability, warning that “Carillion could happen again, and soon”.

Unite demanded the full adoption of the joint select committee’s recommendations and urged the government to do far more to prevent future corporate failures.

The committees’ report said Carillion’s board presided over a “rotten corporate culture” and are both “responsible and culpable for the company’s failure”.

There should be “careful consideration” of whether they should be recommended for disqualification as directors, MPs concluded.

‘Unsustainable’

Despite the board presenting themselves in Parliament as “self-pitying victims of a maelstrom of coincidental and unforeseeable mishaps”, the report stated “recklessness, hubris and greed” typified the running of the firm.

The business model was based on “the exploitation of suppliers” and aggressive accounting practises that saw “accounting for revenue on work that had not even been agreed”.

The report said, “Long term obligations, such as adequately funding its pension schemes, were treated with contempt. Even as the company very publicly began to unravel, the board was concerned with increasing and protecting generous executive bonuses.

“Carillion was unsustainable. The mystery is not that it collapsed, but that it lasted so long.”

More than 1,000 Unite members were spread between Carillion’s construction division, where many of them were employed in the supply chain, and on outsourced contracts in both the public and private sector.

Many of these workers have lost their jobs while others still face an uncertain future.

The Pension Protection Fund has been left with an ÂŁ800m liability following the collapse, its largest to date, while 30,000 contractors and suppliers are owed ÂŁ2bn they are unlikely to receive.

The total cost to the taxpayer will be at least ÂŁ150m and work on two major hospitals in Liverpool and Birmingham has been held off indefinitely.

The report is highly critical of the government which “lacked the decisiveness or bravery” to tackle the failure of the corporate regulations that allowed the company to effectively falsify its accounts and create an untrue trading position.

Successive government’s “nurtured” a service delivery model which made a “collapse like Carillion almost inevitable”.

Work and pension committee chair Frank Field said, “This is a disgraceful example of how much of our capitalism is allowed to operate, waved through by a cosy club of auditors, conflicted at every turn.

“Government urgently needs to come to Parliament with radical reforms to our creaking system of corporate accountability. British industry is too important to be left in the hands of the likes of the shysters at the top of Carillion.”

Unite assistant general secretary Gail Cartmail, picking up on the report’s warning that a similar disaster “could happen again, and soon”, said the fall of Carillion “was the inevitable outcome of a business model that embodies a ‘race to the bottom’ on bidding for contracts.”

“The public sector can change that. National and local government have the power to transform outsourcing disasters by bringing services in house where profit is no longer the ideological master and for service contracts that are let to apply standards on quality and workforce concerns,” Cartmail said.

“Earlier this week we learned about rising concerns about the potential wholesale collapse of care homes as a direct result of councils cutting costs as their budgets are cut by government.

“The real victims of the ‘race to the bottom’ are service users, the workforce and suppliers. At the heart of all of this is the political choice of the Conservative government.”