'Yorkshire families facing ruin: Incompetent government must make sure Carillion crisis never happens again'

Hundreds of workers and their families across Yorkshire are still reeling today after the collapse of Carillion, writes Yorkshire MP Rachel Reeves

'Making tomorrow a better place' says Carillion's slogan...

Some face losing their jobs and will have no idea how they will make ends meet. There will be others who run businesses or are sub-contractors who relied on Carillion and now risk going to the wall.

The one thing they all have in common is that they all have questions for both Carillion and the Government about how on earth this could have happened and what it will mean for jobs and public services in the region.

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In my role as both Leeds West MP and the chair of the Business, Energy and Industrial Strategy Committee at Westminster, I also have many questions about how things went so terribly wrong.

In the House of Commons on Monday, I asked the minister put up by the Government why Carillion kept paying out big dividends to shareholders while it ran up eye-watering debts and a £580m pensions black hole. I also asked whether the firm was still paying £600,000 to its former chief executive Richard Howson after he left in November. Inexplicably, he was due to get his huge salary – more than four times the Prime Minister’s pay – until November 2018. The non-answer from the side-stepping Cabinet Office Minister David Lidington sounded suspiciously like he was still getting the money.

This kind of reward for failure is completely unjustifiable and questions need to be asked of those who sanctioned the payments. It appears that the official receiver appointed to deal with the liquidation of the company has the power to impose severe penalties on Carillion bosses if he finds misconduct.

That is something I would welcome, especially if reports are correct that the board of directors introduced new rules in 2016 to make it harder to claw back bonuses from its executives if the firm ran into financial difficulties.

Even the Institute of Directors has questioned whether the board and shareholders exercised enough oversight over pay policies. The IoD called the relaxation of the clawback conditions “highly inappropriate”.

As the UK’s second biggest construction company, Carillion had its fingers in lots of pies – including the HS2 rail link between London and the North - before it ran up its stratospheric debts.

It also managed schools and prisons, as well as being the second biggest supplier of services to Network Rail – including in Leeds. The city council in Leeds is working hard to mitigate the impact.

Carillion won the contract for the East Leeds Orbital Road, but the final contract had not been awarded and the authority is now reviewing the process.

But it is not just those at Carillion that must answer for their conduct and their failings, the Government must come clean about its actions too. Why, even after Carillion issued profits warnings and was clearly in trouble, did Transport Secretary Chris Grayling keep dishing out contracts? Ministers were either asleep at the wheel or they were recklessly negligent with taxpayers’ cash. The Government always claims to understand how the City works. Did no one in Downing Street notice the hedge funds betting against Carillion last year?

There are plenty of other questions. But the Government’s first priority must be to help those across the region who depended on Carillion for their wages, public services or pensions.

Clearly, unlike the banks, Carillion was not too big to fail. But the Government needs to get a grip to prevent this happening to other companies.

It must also look at the way services are outsourced. No one forced Carillion to bid for the work or to push their borrowing and debt up to unsustainable levels.

But the sorry tale of Carillion is not just about a major business with 20,000 staff in the UK that ended up going bust. It is also about a weakened Government so obsessed with its own struggle to survive that it failed to spot the warning signs.

The Government must now change the rules so that companies cannot siphon off money to the detriment of workers, suppliers and, ultimately, the taxpayer.

It must help all those hit by the collapse. Then, it needs to explain what will happen to the public services and major infrastructure projects run by Carillion.

Ultimately, this incompetent Government has to get a grip and take responsibility instead of trying to land all the blame on the company. It needs to change the rules so what happened at Carillion never happens again.

Rachel Reeves is MP for Leeds West and chair of the Business, Energy and Industrial Strategy Committee