Tories refused to force Carillion Directors accept plan that could have saved UK taxpayers £362m after firm's collapse

The Conservative government were aware of a plan that could have saved UK taxpayers £364m from the collapse of private outsourcing company Carillion, but refused to force the Directors of the now-collapsed company to implement the measures, it has been reported.

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The contingency plan would have limited the amount of money taxpayers like you and me were forced to stump up because of Carillion’s collapse by breaking the company up, selling off the profitable parts, and liquidating the rest – thus ‘avoiding an involuntary collapse’.

However, multiple sources have reportedly told The Guardian that the Cabinet Office – the government department responsible for the oversight of private government contractors – ‘did not apply any pressure on Carillion’s Directors to adopt the proposals’ – measures that could have saved hardworking British taxpayers over £300m.

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The detailed contingency plan was drawn up by accountacy firm EY, and was reportedly rejected after being communicated to the Cabinet Office.

EY believed that the scheme would have raised £364m, with plans to inject £218m of the money into the firm’s pension fund in order to prevent some of the schemes entering into the Pension Protection Fund (PPF) – a scheme that will reduce the amount Carillion pension holders will now receive in retirement.

However, a spokesperson for Carillion’s Directors confessed last week that they had rejected EY’s plans on the basis that they believed the company could still be saved by somehow convincing banks to swap debt for soon-to-be worthless shares in the firm.

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A Guardian source who was present at discussions between the Tories, Carillion and the firm’s pension trustees, said that the government:


thought that if they could get to the end of January, they could find new finance and the company would survive, maybe in a different structure.

Adding that:

I don’t think they [the goverment] thought it would go bang.

Labour’s Shadow Minister for Business and the Cabinet Office, Jon Trickett, was scathing of the government’s inaction, telling The Guardian:

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This is astonishing. They [the government] were asleep on the job, the question is why.

 

The first explanation is a blind ideological commitment to outsourcing, that private is always better than public even when it’s blindingly obvious that the public sector needs to intervene. The second is that they’re preoccupied with infighting over Brexit.

 

The public purse, the staff, recipients of Carillion’s services and the pension fund are all suffering as a consequence of public failure.

Whilst the Assistant General Secretary of Unite, Gail Catrmail, said of the Tories’ decision:

The government’s catalogue of failures with regards to Carillion is growing by the day. By failing to ensure an orderly break up of Carillion they have cost the taxpayer millions of pounds in insolvency costs and redundancy payments.

 

It also meant that sub-contractors continued to provide goods and services to Carillion which they will never be paid for which has resulted in workers losing their jobs and companies going to the wall.

 

This is yet another reason why we need a full public inquiry into Carillion’s collapse so that all the relevant information is placed in the open and those responsible for this terrible mess are named and shamed.”

The government have set aside £150m of taxpayer’s money to deal with the collapse of Carillion – of which, £50m has already been spent.

And whilst there is no certainly that EY’s plans would have been successful in raising the exact amount projected by their proposal, had the government implemented the plans before Carillion’s shares became worthless, the taxpayer burden would almost certainly have been significantly less than it now is.

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