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If the failings of businesses in general reflect badly on Conservative governments, the failures of business hired by such governments to deliver public services reflect even more harshly.

You only need to look at the instant fallout from the collapse of Carillion to see the danger it poses politically.

At best, the sight of a major public sector contractor collapsing raises concerns about efficiency, competence and potential cost to taxpayers. Who will now fulfil the firm’s responsibilities on time and on budget? In the public sector, David Lidington says, the taxpayer will ensure continuity in the short-term and replacement contractors will be sought in the medium-term, while in the private sector no-one knows. Will ministers resist demands for a bailout? Yes, Lidington assures the House, though Labour claim otherwise. Who will bear the cost? Appropriately, shareholders and creditors bear the brunt, by losing their cash, but it’s still completely unclear how much extra the taxpayer will have to stump up to keep key services running or to re-tender contracts that had been awarded to Carillion.

So far, so awkward: a mixture of unknowns, definite inconveniences, and probable costs. And that’s without considering the knock-on effects on sub-contractors, employees, and Carillion’s various private sector customers – and thereby on the wider economy.

I did write ‘at best’, though. Believe it or not, it can get worse than the above list of difficult questions – and it almost certainly will. There are wider issues here, not least in terms of corporate governance and public sector due diligence.

The Institute of Directors is already asking whether “the board and shareholders have exercised appropriate oversight prior to the collapse”, arguing that “…the relaxation of clawback conditions for executive bonuses in 2016 appears in retrospect to be highly inappropriate.” Reports of hefty executive pay and bonuses being dished out during the company’s foundering, as well as shortly before (and potentially even after) its outright collapse, are going to bring the topic of corporate irresponsibility back to the fore. Ministers have for years talked about eliminating short-termism, more responsible business, and so on and so on – observers not unreasonably wonder what happened to all that in practice, if the Carillion story is as it seems.

And then there’s the question of why the public sector is so bound up with such a troubled company, and why some departments handed it new contracts even after it was reported to be in financial trouble.

Thus far, the attention is primarily on its involvement with HS2 (a controversy fed by the existing row involving Chris Grayling and the bailout of the East Coast mainline) but that could easily spread. Pointing to the history – that this is one of those firms which Labour as well as the Conservatives have done a great deal of business with, that it won plenty of PFI contracts in the Blair years, too – achieves almost nothing. So what? This government is meant to be better than the Blair and Brown years with taxpayers’ money, that was the basis of their fiscal pitch. Whataboutery underscores, if anything, the fact that there appears to be a systemic problem with reliance on big companies which aren’t always very good or very reliable.

As I’ve previously argued, as “the Party of business”, Conservatives have an even bigger problem than anyone else when businesses do bad things, or mess up, on their watch. The price of being thought business-minded is that Tory ministers have to work twice as hard to demonstrate they aren’t over-indulgent (or worse) in their dealings with the private sector.

Corbyn’s Labour Party, of course, is on hand to sling all sorts of innuendo about what has happened, and will try to use the crisis to present a variety of unwise policy proposals as the supposedly obvious solutions. Touting nationalisation, or (even more bizarrely) windfall taxes as the answer is incorrect and dangerous, but this rhetoric will gain ground if there isn’t a plausible Conservative answer instead. As a first step, ministers must very publicly demonstrate they can be trusted to be tough when business gets it wrong, not just full of praise when it gets it right.

72 comments for: Carillion’s collapse would be tough for any government – but for the Party of business it is twice as dangerous

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