Union calls for Carillion criminal investigation one year on

17 January 2019 Consultancy.uk

Following a succession of additional scandals worsening the blow of the Carillion scandal, one of the UK’s leading workers’ rights organisation has called on the Government to take more stringent action to avoid similar occurrences. Unite has argued the case for a criminal investigation into the case, with KPMG still being investigated by the Financial Reporting Council for its role as auditor at Carillion.

Carillion, a British professional services firm which provided facilities management and construction services to the UK public sector, entered compulsory liquidation at the start of 2018, threatening thousands of jobs and jeopardising the delivery of a number of keystone services. The company, headquartered in Wolverhampton, United Kingdom, ran into trouble after losing money on big contracts, as well as running up unsustainable debts totalling around £1.5 billion. Its failure forced the Government to provide funding to maintain the public services formerly supplied by Carillion.

In the fallout, the Government and the professional services world have both been pilloried by Parliament and the public for their seemingly oblivious approach to the ailing company’s future. Carillion issued three profit warnings over 2017, yet continued to receive new contracts from the Government to provide keystone services. Meanwhile, Big Four firm KPMG is still part of a lengthy probe from the Financial Reporting Council regarding its auditing work, with suggestions that failures to adhere to ethical and technical industry criteria had caused a lack of transparency regarding Carillion’s health.

Union calls for Carillion criminal investigation one year on

The severity of the Carillion scandal eventually led the Government to pilot a scheme requiring its outsourcers to draw up so-called ‘living wills’, late last year. The IT cheat-sheets were understood to be for the use of the Government in the event of those firms entering administration, with Capita, Serco and Sopra Steria the first to have created such measures. 

However, critics believe that not enough has been done to hold those behind Carillion’s collapse to account. According to Unite, the UK’s second largest trade union, the collapse of construction giant Carillion should be subject to a criminal investigation, with the labour rights body also accusing the Government of failing to take sufficient action to ensure there is not another “corporate meltdown”, on the first anniversary of the group going out of business.

Despite the scale of Carillion’s collapse, no action has yet been taken or recommended against any of Carillion’s directors or senior managers. Meanwhile, the Government’s only recommendation for change remains the pilot policy on living wills, and the Government’s pension regulator has failed to deliver any recommendations from its investigation into the £800 million shortfall left in the firm’s pension, which leaves thousands of former employees facing a funding shortage at the end of their careers.

Unite’s Assistant General Secretary Gail Cartmail said, “It is staggering that a year after the biggest corporate failure in modern UK history the government has carried on as though it is business as normal… The fact that no one involved in Carillion has yet had any form of action taken against them, demonstrates either that the regulators are failing to do their jobs or that existing laws are too weak. If it is the latter then we need better stronger laws… A year on from Carillion’s collapse the government needs to stop prevaricating and start taking effective action.”

Experts believe that Carillion could have been trading while insolvent for several years prior to its collapse, when 3,000 staff were made redundant. The effects of the liquidation were by no means isolated, however, sending shock-waves down the supply chain. Many of Carillion’s subcontractors were subsequently also forced out of business, making trade unions especially keen to avert a similar crisis in the future.

Elsewhere, general union GMB joined Unite's calls for the Government to learn from the Carillion debacle. According to GMB, the lifetime value of outsourcing contracts awarded “rocketed” from £62 billion to £95 billion in the year since Carillion's collapse. The union pointed to almost £2 billion in contracts awarded to Capita and Interserve alone, despite both issuing profit warnings, as being endemic of the 53% rise, and suggested it showed the Government was “hell-bent” on privatisation of public services, regardless of the impact on users.

GMB's National Secretary, Rehana Azam, added, “What other explanation can there be for this huge increase on outsourced contracts in the year Carillion went bust and when other outsourcing giants look like they’re on life support?”

 

Profile

More news on

×

Manchester Mayor criticised for £250,000 consulting spend

19 March 2019 Consultancy.uk

The Mayor of Greater Manchester has been criticised for splurging hundreds of thousands of pounds on consulting fees before determining that the region’s fire brigade must slash its budget by millions. Andy Burnham put more than £250,000 towards work from ten consulting firms as part of a review into the region’s emergency services.

Despite the continued argument that projects like the Northern Powerhouse initiative are helping to address the North-South divide in the UK, statistics still show that the North has borne the brunt of austerity in England. Northern English cities have been disproportionately affected, with their spending cut on average by a fifth since 2010, while cities in the south and east of England had average losses of 9%.

The impact of spending cuts has been keenly felt in Greater Manchester in particular, where local government spending has fallen by as much as £650 per person since 2009 in some parts of the region. As the area looks to find further savings, while the Central Government continues to fail to deliver on its pledge to end austerity, it has been announced that the fire brigade for Greater Manchester faces a reduction of up to £10 million from its budget.

The swingeing cuts to hit the emergency service would likely see its fleet of fire engines reduced from 56 to 47, while six fire stations face closure, and 113 support staff could suffer the axe. The news follows an investigation from Mayor Andy Burnham, which was triggered in part by the admission of Chief Fire Officer, Jim Wallace, that since 2015 the service has failed to deliver “its own efficiency plan”.

Greater Manchester Mayor Andy Burnham spent £268,300 to review the city’s fire service

The review itself has been far from inexpensive, however, and it has led some to accuse Burnham of hypocrisy. During the review of the fire service, which has delivered demands for the service to find major efficiency savings, the Greater Manchester Mayor reportedly splurged £268,300 in public funds on consulting work for his root-and-branch review.

According to local newspaper Manchester Evening News, Burnham tasked ten different consultancies with helping to compile the review, receiving payments ranging from £101,000 to £7,000. The largest amount was handed to Leicester headquartered P. Cooper & Associates for the expertise of a “senior change and transformation programme specialist,” while it was reported that another of the consultants gave “guidance on leadership and culture”.

A Greater Manchester Fire and Rescue Service (GMFRS) spokesman said of the spending: “The Programme for Change programme has required input from specialists who are expert in areas such as organisational transformation, operating models for fire safety and estates.”

Manchester’s fire brigade was criticised in 2017 when, in the wake of the Manchester Arena bombing, a report by Lord Kerslake noted crews had been held back from helping. Contrary to helping deliver a more efficient service, Unison has told the press that it believes the proposed cuts will make the residents of Greater Manchester “less safe”. With the expenditure of the review on private sector consultants now public, meanwhile, the union has slammed the report for throwing away public funds while jeopardising vital public sector work.

Unison represents the 113 staff who may lose their jobs, and a spokesperson for the union told Manchester Evening News, "It's disappointing that when finances are clearly tight, priority has been given to hiring external consultants rather than engaging with the workforce. This will be a shock to our members who were only told on Monday their jobs were at risk."

In recent years, a succession of local authorities have come under fire from officials and the general public for their consulting spending in the UK. Earlier in 2019, a freedom of information request by The Times revealed that local councils across the UK have spent around £400 million on consulting firms in the last year alone. According to the report, this represents a rise of more than a fifth since 2014, with critics using the figures to call into question the value added by engaging external expertise.

Commenting on the criticism many councils face, Tamzen Isacsson Chief Executive, Management Consultancies Association, said, “Consultants play a vital role in the public sector, [providing] transformational impacts, innovation and increased efficiency… Vital front line services continue to operate uninterrupted [while] consultants often help local authorities get better results with less money. As the MCA awards this year demonstrate consultants are delivering social benefits across the UK – from work on getting better outcomes for children in care to finding better processes for finding homes for vulnerable families in London these examples offer a true reflection of the consulting excellence that operates across the UK to the benefit of councils and the wider society.”