Surge in outsourcing after Carillion collapse ‘staggering’, unions say | Business

Trade unions have accused the government of failing to learn lessons from the collapse of Carillion, instead pumping even more money into outsourcing companies, a year on from the firm’s high-profile demise.

The lifetime value of outsourcing contracts awarded in 2017-18 “rocketed” by 53% from £62bn to £95bn in the past year, according to the GMB union, which pointed to nearly £2bn in contracts awarded to Capita and Interserve despite both issuing profit warnings.

The GMB said this showed a government “hell-bent” on privatisation, despite the warning signs given by the collapse of Carillion, which managed public sector contracts to provide services such as prison maintenance and school dinners.

The GMB national secretary, Rehana Azam, said: “What other explanation can there be for this huge increase on outsourced contracts in the year Carillion went bust and when other outsourcing giants look like they’re on life support?”

The GMB’s criticism comes on the first anniversary of Carillion’s failure, which has cost the taxpayer an estimated £150m and has caused major delays to two multi-million pound hospital construction projects in Liverpool and Birmingham.

Unite, Britain’s largest trade union, bemoaned a lack of action taken against former Carillion directors, who were accused by a committee of MPs of “recklessness, hubris and greed”, reiterating calls for a criminal investigation.

The Unite assistant general secretary, Gail Cartmail, said: “It is staggering that a year after the biggest corporate failure in modern UK history the government has carried on as though it is business as normal.

“The fact that no one involved in Carillion has yet had any form of action taken against them, demonstrates either that the regulators are failing to do their jobs or that existing laws are too weak. If it is the latter then we need better, stronger laws.

A year on from Carillion’s collapse the government needs to stop prevaricating and start taking effective action to drive bandit capitalism out of the UK.”

The government has introduced measures to make companies in charge of major public sector contracts draw up “living wills” to ensure the smooth operation of the services they provide in the event of financial failure.

But Unite said the measures did not go far enough to reform the system of public procurement.

A spokeswoman for the Cabinet Office, which manages the outsourcing of public sector contracts and faced criticism over its role in the administration of the bust of Carillion, said the government had put in place measures to prevent a repeat.

She said: “This government has taken great strides to improve how we work with the private sector, including requiring companies to demonstrate prompt payment to suppliers and piloting ‘living wills’ for critical contracts, allowing contingency plans to be quickly put into place if needed.”

The accounting watchdog Financial Reporting Council (FRC), which was criticised by MPs for being “chronically passive” over the audits of Carillion by firms including KPMG, is still investigating the circumstances of its failure.

The Insolvency Service, an arm of the department for business, energy and industrial strategy, is also investigating the affair and began interviewing former directors of the company last year.

Source link