Carillion – Another Case Of Socialised Risk – Privatised Profit
By Political Concern: Major banks and credit insurers are calling on the government to ‘step in’, as Carillion’s debts soar and ‘huge write-downs’ are announced on the value of several old contracts.
Some – according to the Financial Times – are seeking a taxpayer guarantee for the company’s debt and assurances that Carillion will be allowed to compete for future contracts, despite the company’s troubled state. Oliver Dowden, newly promoted to the frontbench, says that the government is making contingency plans for Carillion folding.
If Carillion goes under, writes MP Jon Trickett, “We would effectively be paying for these services twice. This government has socialised the risk but privatised years’ worth of profit for shareholders . . . it is allowing firms with public contracts to pay millions to private shareholders as the public suffers from cuts to disability benefits, schools and the NHS”. He adds:
“They are in debt to the tune of £1.5bn, while being valued at less than £100m and are being investigated by the Financial Conduct Authority over financial statements issued in the run-up to July’s profit warning . . . and if they fold, Britain could face a huge bailout so that our schools, hospitals and train lines keep running”.
The government now relies on this contractor for a wide range of services. The Financial Times lists Carillion’s major contracts in the transport, defence/security and health sectors and points out that Labour’s Shadow Business Secretary has asked why ministers continued to sign off major contracts with the company even after it issued a profit warning in July 2017.
Theresa May’s new Cabinet ministers have – nevertheless – confirmed that they still intend to continue with the privatisation and outsourcing of public services to private firms which then make a profit at the expense of the taxpayer.
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Some politicians and party members have, through directorships, shareholdings or the employment of family and friends, a vested interest in these companies, many of which donate to Conservative party funds, hoping to ensure another Conservative government.
MP Jon Trickett, shadow minister for the cabinet office, whose principled political life is outlined here, presents the view of ‘Corbyn Labour’, that taxpayer-funded services should be conducted in an ethos of public service rather than for private advantage: “Whether that’s to run welfare payments to those receiving universal credit, running hospitals or administrating schools in huge academy chains . . . “
He points out that when these firms cannot make good on their obligations under these contracts the British public picks up the bill, citing the termination of Virgin’s contracts on the East Coast main line.
The MP adds: “I represent a former mining area, which hasn’t seen meaningful private investment in decades, and little public investment since the 2010 election. Some of the poorest people in the country, with some of the worst prospects due to years of Tory government, live there. They have seen private firms make profit out of their benefits, their schools and crisis-stricken NHS services”. He ends by giving an assurance:
“Labour would reverse the presumption in favour of outsourcing and provide more cost-effective services, treating workers better by running many services in-house”.