A senior government minister has described Carillion’s fall into liquidation as “the failure of a private sector company” and told MPs the contractor’s problems were “not from government contracts”.
Speaking to the House of Commons, Cabinet Office minister David Lidington said he was “disappointed” the company had collapsed.
However, he described it as a “failure of a private sector company”, adding that it was Carillion’s “lenders and shareholders that will bear the brunt of its losses”.
Mr Lidington addressed the government’s decision not to bail out Carillion by saying the public purse should not be used to rescue failed private firms.
“Taxpayers should not, and will not, bail out a private sector company for private sector losses, or allow rewards for failure,” he said.
The minister claimed that the collapsed contractor’s problems had not arisen from its government contracts, but from other areas of its operations.
“The cause of Carillion’s financial difficulties is not connected with its government contracts but with other parts of its business,” he said.
“Private sector contracts account for more than 60 per cent of the company’s revenue and the vast majority of problems the company has encountered come from these contracts.”
He also defended the much-debated award of contracts – such as phase one deals on HS2 – to the contractor after Carillion’s July profit warning.
Mr Lidington said the government had been preparing contingency measures since then and had only awarded work in the form of joint ventures, where other companies were “contractually bound to complete the work”.
The minister used the example of Kier, which has said it has contingency plans to ensure HS2 JV work continues.
A parliamentary inquiry into government sourcing practices following the collapse Carillion has also been announced.
Bernard Jenkin, chairman of the public administration and constitutional affairs committee, said: “We are going to conduct a new inquiry on sourcing public services: lessons to be learned from the collapse of Carillion,” adding that the inquiry would go beyond the failed contractor.