The Carillion story so far…
Liquidated with debts of more than £7bn. ‘Catastrophic losses’ passed on to 30,000 subcontractors. Stalled work on more than a £1bn-worth of major projects. And an estimated £200m cost to the taxpayer.
MPs on the inquiry into the liquidation recommend an overhaul of the regulatory tools that let this happen, and suggest throwing the book at those responsible.
The government’s response…
A nine-page document published at 4:30pm on a sweltering Friday afternoon. This was the definition of sneaking something out.
As if attempting to bury its response on the eve of the school holidays wasn’t shameful enough, the content was scant and was effective only in passing all responsibility to the regulators.
For example, on the topic of director liability and punishment for failure, the government said the Financial Reporting Council, Insolvency Service and Financial Conduct Authority were working “to improve their current practices”.
On the committee’s recommendation that it should beef up the FRC’s powers, the government’s response was that a memorandum of understanding had been agreed between the three regulators.
But perhaps this should come as no surprise.
Our leaders in Whitehall were all too happy to offer bold statements about Carillion and how its failure exposed poor corporate governance and inadequate accountancy checks.
But when it comes to action? Well, apparently that’s for the financial watchdogs.
It’s unlikely that the £16.8m in wages that Carillion directors pocketed will ever be recovered, although the government has the power to do so.
But at the very least it could make an effort to stop another such fiasco happening again.
What Carillion exposed was that there is barely anything to stop executives of failing construction firms paying themselves huge bonuses.
Nor are there sufficient deterrents to the use of accountancy tricks to obscure huge debts – often affecting thousands of suppliers.
The government seems happy to close its eyes and hope nothing like this happens again.
It makes you think: what would it take for them to actually take action? Another Carillion? Another four Carillions?
On the evidence of Friday’s response, you could have a hundred Carillions and the politicians would still refer you to the FRC.