What the collapse of Carillion can tell us

05 March 2018

(Article by Chris Proctor, as featured in the ASLEF Journal 2018)

When MPs were bellowing at each other about Carillion, Jeremy Corbyn asked Theresa May the traditional Labour question: ‘What about the workers?’ The Prime Minister took off her spectacles, did her celebrated owl impression, and affixed the superior smirk copyrighted by Severus Snape.

‘We were a customer of Carillion, not the manager,’ she declared. ‘And that’s a very important difference.’ And – this is a difficult sentence to write – she was right!

The government no longer manages public services. Upright firms like Carillion do that. So how do all those government ministers pass their days? Do they just hand out contracts and file the number of customer complaints? And, if that’s all they do, wouldn’t you think they’d at least have a close look at the people they are letting manage our public services? Couldn’t they get one of their accountant wallahs to look over the company records? That sort of thing...

If so, these hawk-eyed mathematical genii failed to spot some fairly glaring failings. Blind Pew with a blindfold could have seen that there was something the matter with Carillion. Or, in his case, sniffed something out.

The company had issued three profit warnings. Its share price was falling like a chimney with Fred Dibnah on the button. They dropped 90% between July and the end of last year. You couldn’t flog shares worth 240p at the start of January for 14p by December.

When Carillon expired, it had £29 million in cash. And it owed more than £1.3 billion to its banks. With bonding facilities and invoice finance it was in hock to the tune of £2 billion.

But, what is worse, a Parliament report shows that in the five years from 2012 to 2016, Carillion paid out £217 million more in dividends than it generated in cash from its operations!

This must be deemed a tad suspicious, unless, I suppose, you’re a shareholder; an accountant getting paid by the other side; or St Francis of Assisi. 

But what did the Tory government conclude? They stuck the telescope to Blind Pew’s bad eye and declared, ‘Seems in good shape to us.’ They wanted to keep it going to avoid being embarrassed if their top manager was exposed as a trickster.

Otherwise, they would have reviewed the other public services Carillion was ‘managing’ for them. But they didn’t. So when that firm breathed its last it left more than £2 billion worth of unfulfilled promises in the NHS (200 operating theatres, more than 11,000 beds, providing patient meals, answering helpdesks and carrying out engineering maintenance); building motorways; building schools; servicing prisons; constructing substations and installing overhead cabling for the National Grid; building Crossrail and HS2.

Call me alarmist, but it’s not exactly comforting to hear that the government isn’t managing any of our public services. And that it can’t see a dead duck.

CarillionThen there was the marvellous spectacle of Greg Clark stepping forward with his own powerful solutions. He was concerned, he said, about the 30,000 small firms plunged into financial crisis by the collapse of Carillion. So what measures did the Secretary of State for Business, Energy and Industrial Strategy take to alleviate the situation? He ‘issued a plea’ to banks not to pull the plug on these victim companies. That’s right. He ‘issued a plea.’

Have you tried issuing a plea to a bank?

It’s no wonder ministers go mad. They have nothing else to do. Look at our own Transport Minister. He might have a leather chair and a ministry car, but now his leader has exposed his job as a ‘customer’. And his shop owner is a man with a ‘fly-tourists-to-the-edge-of-space’ habit to support.

Who’s going to come out of that one best?

There used to be a shorthand view of political parties where Labour was for the working man and the Tories were smart with money. We assumed that was the case, because they had it all.

But when they can’t see financial conglomerates collapsing in front of their eyes, and let charlatans manage our services, and hand out bonuses for failures, you do start to wonder.

Politics has become an off-shoot of the Magic Circle. You have a national debt, and your instinctive reaction is to hide it. So John Major’s Conservative government came up with a wheeze called Private Finance Initiatives that stuffed the up front costs down the back of the sofa. The Tories loved it – and so did New Labour, who under first Tony Blair and then Gordon Brown expanded what is effectively a Ponzi scheme – while the national debt stayed the same.

I don’t know about you, but I don’t lose much sleep over the national debt. I’m more concerned with how to get Chris Grayling’s job. A hundred grand a year for being a customer. He’ll soon be able to afford to be a tourist at the edge of outer space. In some ways he’s already there.

Meanwhile, planning and work on HS2 and Crossrail are slightly numbed; uncertainty isn’t the best incentive. Emergency measures are needed to pick up Carillion’s service work. People worry about their jobs. Workers in the 30,000 firms dependent on Carillion contracts are unsettled or out of a job. Real human hardships result from the cold calculations of accountants, politicians and financiers. But they don’t care. Because, as Theresa May admitted, they’re just a ‘customer’.




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