Carillion collapse likely to cost taxpayers more than £150m
Taxpayers are on course to pay more than £150m following the collapse this year of Carillion after it was revealed the bill for redundancy payments is expected to hit £65m.
A freedom of information request by the Unite union showed an arm of the Insolvency Service has already made £50m of redundancy payments to former Carillion workers and expects to hand over another £15m.
The cost of lawyers and accountants handling the liquidation of the construction and services companies is expected to be more than £70m and other costs are expected to escalate above £20m, taking the total beyond £150m.
Earlier this year the National Audit Office said the cost would hit £148m, prompting condemnation from opposition MPs who accused the government of mishandling the company’s collapse and leaving taxpayers to foot the bill.
Considered one of the most spectacular corporate collapses of modern times, Carillion filed for bankruptcy in January after its stock market value slumped 90% on the news it had racked up debts of about £1bn and was struggling to fill a £600m hole in its pension fund.
At the time, the Wolverhampton-based company had more than 19,000 employees, many of them working on Whitehall-commissioned contracts to build roads, schools and hospitals.
Ministers were accused of realising too late that the company was in financial difficulties and then making matters worse by offering fresh contracts in an attempt to boost investor confidence.
Several contracts were taken over by rivals after the collapse, but the £335m Royal Liverpool hospital will be finished with government money, the hospital’s chief executive said on Tuesday, while the £550m Aberdeen bypass will be completed by the joint venture partners Balfour Beatty and Galliford Try.
Labour’s shadow cabinet spokesman, Jon Trickett, said he had received pledges from ministers in response to questions in the Commons that the costs associated with Carillion’s downfall would be met by shareholders.
“We were assured that shareholders, who have taken hundreds of millions out of the company over the years, would bear the burden, not the taxpayer,” he said. “Now it feels like the taxpayer has been skinned twice. First by contracts ministers signed with Carillion that were a bad deal and then by picking up the tab for the company’s failure.”
The Redundancy Payments Office said: “The total amount we may payout is approximately £65m, of which £50m has been paid so far based on actual claims received.”
Unite said ministers were to blame for allowing Carillion to file for compulsory liquidation with only £29m in the bank, rather than enter a managed form of administration.
It said the decision meant thousands of staff that transferred to other employers could not claim continued employment and fell outside the transfer of undertakings (protection of employment) regulations (Tupe) that protect a worker’s pay, terms and conditions.
“The lack of continuation of service means that the affected workers are considered new starters and have also lost many of their employment rights for a two-year period,” Unite said.
“The taxpayer will also have to pick up the bill for the work to complete several of Carillion’s key strategic projects including the Royal Liverpool hospital and the Midland Metropolitan hospital in Sandwell, West Midlands. The cost of concluding these projects is expected to be in excess of £100m.”
Speaking at Labour’s annual conference in Liverpool, Unite’s assistant general secretary, Gail Cartmail, said: “While the directors and senior executives of Carillion have largely slithered off into lucrative new roles, it is the taxpayers who have been left to pick up the pieces from their mess.
“These revelations further underline why the government must order a full public inquiry into Carillion’s collapse to not only understand who was responsible for the greatest corporate failure in UK history, but also the total cost to the taxpayer.”
A Cabinet Office spokesperson said: “Since Carillion’s insolvency, our approach has ensured the smooth continuation of public services and safeguarded over 13,000 jobs.
“This government is committed to getting the new Royal Liverpool hospital built as quickly as possible for the benefit of patients across Merseyside and we expect to have an update on the next steps shortly.”