The Government is facing calls for a public inquiry into why ministers handed out £1.6billion worth of contracts failed firm Carillion after it issued a profits warning.
The construction giant collapsed this morning sparking questions about the future of the 450 public sector contracts its has and the 20,000 people it employs.
But ministers are facing a major backlash after it emerged they handed Carillion a £1.4bn project to help build HS2 in July last year – just a week after the firm’s shares nosedived following a profit warning.
The Ministry of Defence also gave the now-failed construction giant two contracts for leisure and catering servies worth £158million as its shares tumbled and questions were asked about its future.
Critics accused the Government of presiding over a ‘shambles’ and said ministers should ‘hang their heads in shame’ over the collapse.
The construction giant Carillion collapsed this morning sparking questions about the future of the 450 public sector contracts its has and the 20,000 people it employs.
Under the MoD contracts, Carillion was to provide catering, retail and leisure services at more than 230 military sites across the north of England, Scotland and Northern Ireland.
Labour’s shadow business secretary Rebecca Long-Bailey demanded a ‘full and transparent investigation’into the company and the government.
She said there are ‘extreme concerns’ about the government’s handling of the situation adding: ‘We expect the Government to step up now, take these contracts – the public sector contracts – back into public control.’
Lib Dem leader Sir Vince Cable added: ‘We urgently need a parliamentary inquiry into some of the very questionable decisions made in the past few months – not least the award of public contracts to a company that was clearly in danger of collapse.
‘The issue of the former chief executive still being paid his salary, plus perks and bonus, is also a reward for failure that has to be looked into.’
While the GMB trade union called for an urgent review into the all the contracts awarded to private companies.
Tim Roache, GMB General Secretary said: ‘Despite months of profit warnings, ministers have failed to prepare for the collapse of Carillion, which has plunged workers into crisis today.
‘The Government has continued to spoon-feed the company taxpayers’ money by awarding them yet more contracts. Ministers should be hanging their heads in shame today – it’s a complete shambles.
‘Carillion is the tip of the iceberg. Continued privatisations have mortgaged our future and services that we all rely on to profiteering companies.
‘The minute jobs and services are secure, the Prime Minister must conduct a full and transparent inquiry into the provision of public services by private sector contractors with a view to taking them back under public control.
‘What is unfolding at Carillion must never be allowed to happen again.’
Transport Secretary Chris Grayling (pictured left outside No10 last week) is facing fierce criticism over why his department gave a £1.6bn contract for HS2 to Carillion after the firms issues a profit warning. While the Ministry of Defence (now headed by Defence Secretary Gavin Williamson, pictured right) also awarded the firm two lucrative contracts as their shares were tumbling
The Prime Minister’s official spokesman insisted the Government has been keeping a close eye on the firm since its shares fell last July.
He was unable to say exactly how many contracts had been awarded to the firm after July, when its future was first thrown into doubt.
He said: ‘It is regrettable that Carillion has not been able to find suitable financing options with its lenders.
‘But taxpayers cannot be expected to bail out a private sector company.
‘Since profit warnings were first issued in July government has been closely monitoring the situation and has been in constructive discussion with Carillion while its ought to refinance its business.
‘We remained hopeful that a solution could be found while putting robust contingency plans in place to prepare for every eventuality.
‘Our primary responsibility has always been to keep our essential public services running safely.’
He added: ‘If there are lessons to be learnt from this they will be.’
He said the HS2 contract was awarded as a joint venture which means that the other partners in – Eiffage and Kier -will now step in to cover the costs.
Asked directly why the Government would take the risk of entering into a contract with Carillion after the profit warning, the PM’s spokesman said: ‘This is the point of a joint venture contact – checks were carried out and undertakings were given but the whole point of a joint venture contract is it provides that legal certainty that services will be delivered’.