THE BANKRUPTCY last January of Carillion, Britain’s largest construction company, is going to cost the working class more than £150 million on top of the thousands of jobs that were lost.
Following a Freedom of Information request by the Unite union into the projected cost to the taxpayer for the collapse of the construction giant, it was revealed that the Insolvency Service, which oversees the bankruptcy, has already paid out £50 million in redundancy payments to former Carillion workers with a further £15 million yet to be paid.
Lawyers and accountants handling the liquidation are in line for a whopping pay-out in excess of £70 million while other costs are estimated to exceed £20 million.
These tens of millions of pounds will be paid out of the public purse, that is by the working class, while the bosses who ran Carillion swan off with their millions in pay and bonuses intact.
Carillion was forced into compulsory liquidation with debts of over £1.3 billion and a pension deficit of nearly £1 billion; some pension experts estimate it could be as high as £2.6 billion. The workers pension scheme had been systematically looted by Carillion. Last year the company refused to make any of its employer’s contributions to the pension fund claiming that it was ‘deferring’ this payment until 2019 in order to shore up the company’s finances.
The desire to shore up the company’s finances didn’t stop Carillion from paying out millions in dividends to shareholders or paying Carillion bosses multi-million pound bonuses. Between 2011 and 2016, Carillion paid out £458.3 million to shareholders alone and the ex-chief executive pocketed a pay packet of £1.5 million in 2016.
The collapse of Carillion didn’t come out of the blue. It has been clear to everyone since at least July last year that Carillion was going down the drain when it issued the first of three profit warnings. This didn’t stop the Tory government from keeping rewarding Carillion with public sector contracts worth billions.
The Tories awarded Carillion the contract to help to build the new HS2 rail line in the north of England on July 17, a week after it issued a profit warning in which it noted a ‘deterioration’ in cash flows. The following day, Carillion won part of a £158 million Ministry of Defence contract to provide catering, hotel and mess services at 233 military facilities.
Carillion issued a second profit warning at the end of September and five weeks later was awarded a £62 million rail contract. When questioned in parliament about why they had issued multi-billion pound contracts to a company that was loaded with debt, unable to pay its suppliers and had stolen money from its pension fund to keep going, their excuse was that not to do so ‘could have accelerated the company’s collapse’.
What was crucial for the Tories was to keep Carillion staggering on regardless of the cost to workers. The fallout from the Carillion collapse has been massive with thousands of jobs lost and pension holders facing having their pensions cut. At the same time, the effect on the public services contracts that Carillion won has been catastrophic.
This week the Tories will be forced to announce that they are cancelling the Royal Liverpool Hospital (RLH) private finance initiative (PFI) deal and taking it into full public ownership, bailing-out the new £335m NHS hospital, after Carillion left the project in crisis. The Midland Metropolitan Hospital in Smethwick has already been taken into public control.
The working class will be expected to pick up the bill as the Tories claw back these billions through further austerity cuts. Carillion was not a one-off, rogue company; its collapse marked a decisive stage in the collapse of the entire bankrupt capitalist system that is only surviving through debt and then expecting the working class to pay the bill.
The working class must demand that the TUC call a general strike to kick out the Tories and go forward to a workers government that will kick out privateers like Carillion and place industry and the banks under the control of the working class as part of a socialist economy.