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Carillion liquidation: Private sector contracts could be terminated in 48 hours - live Carillion liquidation: Private sector contracts could be terminated in 48 hours - live
(35 minutes later)
It’s official: Carillion haven’t cut any staff today.
Liquidator confirms no one has been dismissed from Carillion. “Everyone is still on the payroll”. Including, it would appear, former CEO Richard Howson. Howson left last year but company is still paying his salary (£660,000) and benefits (£28,000) until October.
That’s the end of David Lidington’s lengthy statement on Carillion.
Here are the key points:
The government has promised that Carillion’s public sector contracts will continue to operate, under the Official Receiver’s control, following this morning’s liquidation.
But private sector contracts - which make up 60% of Carillion’s business are only guaranteed for 48 hours. After that, they could be terminated unless Carillion’s customers (perhaps a bank or a telecoms firm) agrees to keep making its payments, and cover any additional costs run up by the Receiver.
Lidington told MPs that the Receiver would examine the conduct of Carillion’s current and past directors. They could be sanctioned if they have acted badly. This may include the company’s controversial changes to its bonus rules, which make it harder to claw back payments to top bosses.
However, he did not promise to stop paying former CEO Richard Howson; he is receiving 12 months pay since his exit last autumn.
His opposite number, Labour’s Jon Trickett, said the government had been dangerously complacent, and missed several warning signs from Carillion.
Several Labour MPs argued that Carillion’s failure showed the folly of handing public sector work to private companies; especially under PFI deals that are meant to protect the taxpayer.
But Lidington insisted that Carillion isn’t being bailed out, as its creditors and shareholders have been hit.
Opposition MPs also called for a windfall tax on PFI operators, given Carillion has banked almost £1bn of PFI profits in recent years.
Conservative MPs pushed the government to rethink its HS2 rail link, which will whizz swiftly, and unpopularly, through several leafy Tory constituencies. Lidington, though, says the project will continue - other companies will pick up Carillion’s work.
Carillion is the most ‘appalling epitome of lemon socialism’, says Labour’s Paul Sweeney, as a failing company is being propped up.
Lidington firmly denies it, saying that Carillion’s creditors and shareholders have suffered financial losses.
Matt Western, Labour MP, says that Carillion was the most shorted stock on the London stock market in 2016 (meaning hedge funds were betting against it).
Why didn’t the government take notice? Was there a blind spot?
Lidington denies that the government was blind to Carillion’s challenges. That’s why they created joint ventures, so that other private sector companies would step in if Carillion failed.
Here’s a clip of Rachel Reeves’ question:
Carillion had debts of £900 million and a pension deficit of £600 million. Yet year after year they paid dividends to shareholders. Govt must do much more to prevent companies siphoning off money to the detriment of suppliers, workers and the British taxpayer. pic.twitter.com/vlA3hgkQUz
Diana Johnson MP says the ‘reward for failure’ at Carillion show that the government should crack down on executive pay.
David Lidington reiterates that the Official Receiver can take action against any directors who have acted unacceptably.
Labour MP Toby Perkins asks why the government allowed its ‘crown representative’ at Carillion to lapse this summer [as revealed earlier], just as the company filed its first profits warning.
Lidington says a new Crown Representative has been appointed, and will be named soon (isn’t it a bit late now?!).
Labour’s Kate Green asks if Carillion has been hit with penalties over its poor management of the prison service contract? (all those broken windows at Wandsworth....)Labour’s Kate Green asks if Carillion has been hit with penalties over its poor management of the prison service contract? (all those broken windows at Wandsworth....)
Lidington says he’ll ask the Justice department.Lidington says he’ll ask the Justice department.
Labour’s Stephen Kinnock says Carillion is a ‘sorry tale of the privatisation of profit and the nationalisation of risk’.Labour’s Stephen Kinnock says Carillion is a ‘sorry tale of the privatisation of profit and the nationalisation of risk’.
Q: Isn’t the case for a windfall tax on these companies now unanswerable?Q: Isn’t the case for a windfall tax on these companies now unanswerable?
David Lidington denies this; Carillion isn’t being bailed out, and the risk remains with the private sector.David Lidington denies this; Carillion isn’t being bailed out, and the risk remains with the private sector.
Conservative MP Robert Coutts asks the government to guarantee that Oxford’s John Radcliffe hospital* won’t be hurt by Carillion’s collapse [Carillion has provided services at the JR since 2005]Conservative MP Robert Coutts asks the government to guarantee that Oxford’s John Radcliffe hospital* won’t be hurt by Carillion’s collapse [Carillion has provided services at the JR since 2005]
Lidington says there is not sign that the JR has been affected by Carillion’s problems.Lidington says there is not sign that the JR has been affected by Carillion’s problems.
Lidington denies that he is just providing a helpline - we are also guaranteeing that public sector contracts will continue.Lidington denies that he is just providing a helpline - we are also guaranteeing that public sector contracts will continue.
Lidington denies that Carillion’s demise reflects badly on the UK, saying that “there are few countries where companies don’t fail”.
Carillion’s collapse is a welcome reminder that “Capitalism without bankruptcy is like Christianity without hell,” says Conservative MP Andrew Bridgen.
“Without it - there’s nothing to keep us on the straight and narrow.”
Lidington won’t be lured into a theological debate, but agrees that the work contracted to Carillion should continue.
Does the government’s protection of Carillion’s public sector contracts include new commitments, or might early-stage projects be ditched, asks Labour’s Louise Haigh.
Lidington says the Official Receiver, and government departments, must examine each contract to see how to take them best forward.
Kevan Jones MP asks about Carillion’s habit of not paying suppliers for several weeks (120 days in some cases, apparently)
Q: What will the government do to help them?
Lidington says suppliers who have not been paid now become official creditors. And he suggests that the government will not bail out these companies -- taxpayers’ money should be used to protect public services.
How many profit warnings does a company have to issue before this government decides not to hand it any more business, asks Liberal Democrat MP Stephen Lloyd.
Lidington replies that profit warnings happen from time to time; shunning a company on this basis would only push it into deeper problems.
Conservative MP Kevin Foster asks what protections are being provided for Carillion pensioners.
Cabinet Office minister David Lidington says the Official Receiver must examine 12 separate pension funds. But the bottom line is that all existing pensioners will be protected.
Labour’s Liz McInnes asks if the Carillion crisis will exacerbate the NHS’s winter crisis.
Lidington says (again) that contingency plans are in place to protect health services.
Conservative MP Bob Neill asks how Carillion’s prison contracts will keep operating.
Lidington says the government has contingency plans - a new government company could be created to take over this work.
Sam Coates of The Times is stuck by the government’s warning that Carillion’s private sector contracts could be terminated on Wednesday, unless customers commit to keep paying up.
Carillion: Sub contractors involved in the firm’s public service worn will also be protected; those involved in private sector will not
Carillion - public sector employees’ wages will continue to be paid. Private sector employees will see fate decided in next 48 hours - Lidington
Former infrastructure tsar Lord Adonis isn’t impressed by Lidington’s comments:
NOT A GOOD LINE TO TAKE, MINISTERDavid Lidington accuses Labour of 'scaremongering' and 'political point scoring' over the collapse of Carillion - with 20,000 UK jobs and £ billions in state contracts on the line!
This is from The Sun’s Steve Hawkes:
Catching up with Carillion debate, but David Lidington completely side-stepped question of whether the ex-ceo should continue to get £660,000 'salary' this year (that's right, even tho he's already left)
Another Labour MP, Pat McFadden, asks about the new ‘jobcentre plus’ helpline which the government has set up today.
Q: Doesn’t that undermine his promise that they will keep being paid if they turn up to work?
Lidington says that all Carillion workers are protected for the next 48 hours, even those employed on contracts with the private sector [which is three-fifths of Carillion’s business].
But after 48 hours, either the private sector counter-party must agree to fund future provision including the fees of the Official Receiver, or those private sector contracts of Carillion will be terminated.
The new Jobcentre Plus helpline is meant to help those people in particular, Lidington adds.
[Reminder: workers on public sector contracts have greater protection; the Receiver will keep operating those contracts]