Carillion and Public Sector Outsourcing

Emma Reynolds Excerpts

Wednesday 24th January 2018 Commons Chamber

[Emma Reynolds (Wolverhampton North East) (Lab)]

When the news broke last week that Carillion was going into liquidation, it was a dark day for the company’s 20,000 employees across the UK, including the 450 people at the company’s headquarters in Wolverhampton. Many others are affected across the west midlands region, including those who were working on the Midland Metropolitan hospital site, the many small businesses in the company’s vast supply chain and the many subcontractors who have not yet been paid and who probably will not be.

I welcome the assurances last week that the 450 people at the company’s headquarters will be paid until the end of January, but many of them are now worried about what will happen on Thursday next week. Perhaps the Minister will be able to give us some clarity about that. After all, those people have mortgages to pay, family budgets to plan and meals to put on the table.

The Government still have serious questions to answer about their handling of this matter. Why was the Government’s Crown representative absent from August to November last year? Surely that was a crucial period for the company, and the Crown representative should have been overseeing its 450 Government contracts. Why did the Government continue to award contracts after the company’s first profit warning? How many people will ultimately stand to lose their jobs? How much will the collapse of Carillion cost the taxpayer?

The directors of the company have serious questions to answer, too. It was clearly wrong that the senior management were being paid big salaries and bonuses while racking up debts of more than £2 billion. Only a year ago, the then chief executive, Richard Howson, received a pay package of £1.5 million a year. I was taken aback by the media reports that the remuneration arrangements were amended to prevent the clawback of salaries and bonuses. When I raised this matter with the Chancellor of the Duchy of Lancaster last week, he assured me that the official receiver had the power to impose penalties on the company’s directors. I hope that such penalties will be imposed.

Many experts believe that it would be difficult—and, possibly, legally expensive—to prove either “wrongful trading” or a breach in the duties of the directors. It seems more likely that Carillion’s senior management will be let off the hook, as so many directors of failed banks were following the financial crisis. Surely this has to change. We need stronger penalties for directors who breach their duties. I hope that lessons can be learned about public procurement, and that urgent reforms will be made to corporate governance to prevent those at the top of failing companies from lining their pockets and simply walking away when the companies collapse.