Scandal of Carillion

29 January 2018

Not a good start to the year for the government. Just as the dust settled on the East Coast debacle came the botched reshuffle and then Carillion, one of the biggest beneficiaries of public-private finance initiatives, goes into administration. In line with policy, and regardless of party, we have campaigned against PFI and PPP and other money-making vehicles which mean private profits at public expense and poor value for the taxpayer. It’s utterly wrong that such schemes offer profligate profits for private companies in the good times but need public bailouts when they fail.

 

Our first thoughts are with all those workers, in the public and private sectors, and their families who are fearful for their futures. How could the company pay massive bonuses to the directors despite a series of profit warnings and why did government departments – including the DfT – continue to dole out contracts worth billions of pounds like confetti without due diligence? There must be an urgent public inquiry into this scandal. Outsourced public contracts must come back in-house and stay in-house, as Rebecca Long-Bailey has demanded. The government model – taxpayers fund the infrastructure, profits are privatised but losses are nationalised – is broken. I recently asked a group to name one privatisation that had worked for the benefit of the taxpayer, the consumer, or the passenger – and not just the City – and they couldn’t.

 

Chris Grayling kept awarding contracts to Carillion despite the profit warnings and hedge funds betting on the collapse of the company – they made £600 million gambling on its failure – and then on fare rise day says, from Qatar, it’s the fault of the unions for not using CPI instead of RPI in pay negotiations. I think it may be the failing model and would be happy to do a comparison with directors’ pay over the same period, including bonuses, stock options, and performance-related monies.

 

Finally, I would urge you to read the National Audit Office report on GTR (see page 4) to understand the role of the DfT and a company that bid to break our agreements. Apparently, and despite spending millions on bidding, no one knew how many drivers were needed? Not even a company already operating those services? And the DfT contracted services that Network Rail and GTR knew they couldn’t deliver? And set up the franchise so revenue was taken by the DfT so GTR had less incentive to avoid strikes and was protected by ‘force majeure’ meaning the company couldn’t be held responsible for the resulting poor performance? Sometimes, words are not enough.

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