Carillion and Other Parasites
Lorna Finlayson
Until very recently, most of us hadn’t heard of Carillion. Not having heard of a particular company wouldn’t usually be surprising or unsettling. But this is more like not having heard of the people who have been making alterations to your house, building your neighbour’s and – in an odd display of versatility – delivering lunches to your children. Because it turns out that Carillion is – or was, until its sudden but entirely predictable liquidation on Monday – pretty much everywhere. As a result, several projects, including the building of two hospitals, a high-speed railway and a bypass in Aberdeen, now hang in the balance, along with the jobs of around 20,000 UK workers.
A certain subterfuge was always a built-in feature of the ‘public-private partnerships’ (PPPs) and ‘private finance initiatives’ (PFIs) of which Tony Blair was so enthusiastic a pioneer. In classic Third Way fudgethink, these initiatives were presented not as all-out privatisation but as a ‘best of both worlds’ solution, a series of discreet injections of what a creaking public sector badly needed: the fabled private-sector virtue of ‘efficiency’, and hard cash (which would come out of the public purse sooner or later, but could be kept off the public balance sheet in the meantime). Companies such as Carillion are not like supermarket chains, loudly competing for customers. They snaffle up public-sector contracts on the quiet, and the public hears about it only when things go so badly wrong that the government can no longer mop up the mess.
In Carillion’s case, the government tried to save the struggling firm by awarding £2 billion worth of new contracts to it even as a series of profit warnings were issued. That didn’t work; and now we hear about it. At this point, however, why the government continued to award contracts to a high risk outfit may not be the first question to ask (the answer may or may not have anything to do with the fact that Carillion’s chairman is a prominent adviser to and supporter of the Conservative Party). It may also be beside the point to focus on the various instances of Carillion’s unsavoury corporate behaviour, such as tweaking the rules to protect bosses’ bonuses, or blacklisting employees who raised concerns about safety. In so doing, we fail to question the principle of private-sector ‘delivery’ of public services, despite the abundant and mounting evidence – from the NHS to academy chains – that the relationship of these companies to their host institutions in the public sector is not symbiosis but parasitism, and that this is no accident but part of the essential nature of the profit-making beast.
Comments
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17 January 2018
at
5:03pm
rm1
says:
As I recall John Major initiated PFI not Blair who was a later practioner.
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17 January 2018
at
11:33pm
thebears
says:
@
rm1
This is true, but it was Labour that really went to town - as a way to spend money without up front borrowing. A terrible economy in the medium term alas.
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17 January 2018
at
5:05pm
rm1
says:
Practitioner.
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18 January 2018
at
2:47pm
Graucho
says:
It has been reported that many of our hospitals are paying an effective interest rate of 15% on some of these PFI contracts. As HMG appears to be bereft of ideas on how to provide additional funds for the NHS, a punitive tax on these returns to the PFI providers would be a start.
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19 January 2018
at
7:50am
RobotBoy
says:
My sense is that in the US, private firms from the first had a far greater role in the public sector than they did in the UK. Reagan of course accelerated this.
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22 January 2018
at
8:45pm
Lashenden
says:
There's a lot of self-righteous hindsight about PFI and PPP currently. Those who unthinkingly rehearse the tedious narrative of 'Third Way fudgethink' would do well to remember that in 1997 the Blair government inherited a public sector estate in a truly parlous condition of decay. I can speak from experience to the situation in state education: For instance, no architectural practice in the UK had built a public-sector school in the previous 20 years - the knowledge of how to do so had effectively been lost through the deliberate destruction of local government capacity with which we're all familiar. I personally attended workshops where no-one in the procurement chain - teachers, heads, governing bodies or local authority managers - were able to imagine any working environment other than a slightly-less-derelict replication of the Victorian or 1950s classrooms that had already outlived their design life by several multiples - when asked about the 'school of the future' the debate sometimes never went further than views regarding the acceptable ratio of broken to unbroken plastic chairs in a classroom; recent reports about Liverpool Prison are genuinely reminiscent of the state of many UK secondary schools in the year 2000. PPP and PFI were in part an emergency response to this appalling situation. That almost no contemporary parent, teacher or student has to contemplate education in the slum conditions that were widespread in the public sector at the millennium is in large measure due to the resources made available by PPP/PFI. With hindsight the state should probably have paid for more of this restoration of public services directly, but if public funding had been the only source of revenue, many of our children would even now be sharing their chilly classrooms with damp, mould, broken furniture and the occasional cockroach.
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23 January 2018
at
12:19pm
XopherO
says:
@
Lashenden
In the 1960s the Leicestershire Plan built entirely new comprehensive schools (under a Tory administration) which were very forward looking (including the unfairly maligned Countesthorpe). It was the only county to grasp that comprehensive education required different kinds of schools and buildings. I presume they did this by borrowing. The whole comprehensivisation of schools elsewhere suffered because there was no plan and old buildings were used and old methods. So comprehensive schools quickly gained a negative reputation. Much like today, where there is lots of ideology (eg randomly-placed so-called 'free schools') and little planning. But I suppose this is modern Britain, all ad hoc and on the cheap (except for pay at the top!)
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25 January 2018
at
2:46am
judgefloyd
says:
@
Lashenden
Perhaps I'm missing something, but this comment seems to be about expertise rather than money. The experience of knowing how to build schools is equally available or hard to get for the state or the PPP/PFI businesses.
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28 January 2018
at
1:55pm
Lashenden
says:
@
judgefloyd
I wouldn't disagree with your comments regarding the party-political opportunities provided by PPP/PFI, especially in the context of 1997-2007, a time when the erotics of private sector managerialism fascinated a remarkably broad swathe of British society, whatever buyer's remorse may subsequently have emerged. I would disagree with your characterisation of expertise being 'equally unavailable' to the state and the private sector in the late 1990s. The overwhelming majority of British state schools were originally built within the systems of local government - a bureaucracy that had been substantially dismantled by 1997. Concurrently, it was apparent to DfES that future school provision would have to address 'revolutionised conditions of production' both in the exponentially increasing role of digital technologies and in new models of teaching and learning and it's absolutely true that these requirements reflected the development of the post-industrial workplace. It therefore seemed logical to combine the contemporary expertise of private sector firms in planning for on-going technological change and producing 'flexible' working spaces in corporate offices - knowledge that local government had never acquired anyway - with intensive engagement with communities and teaching professionals intended to promote more personalised learning, inclusivity and to 'design out' certain forms of physical and emotional abuse; problems such as bullying were widely thought to be facilitated by the design of circulation and social spaces in older schools. The ideological predispositions of this plan are of course, in hindsight, self-evident.
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23 January 2018
at
6:44am
rumtytum
says:
So many of these zombie theories march on , impervious to logic and to actual experience. They do so principally because those who make decisions about public works belong a fairly small club dedicated to looking after each other. The nonsense they mouth is, they know, nonsense, but it’s their rationale, not for good husbandry, but for continuing sacking of the public purse. None of the movers and shakers in the US actually believe that the tax cuts will flow through to the workforce but that’s the mantra that keeps the brigands safe from harm.
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23 January 2018
at
8:42am
elstonc@sky.com
says:
If these people were ripping-off the public, they clearly weren't very good at it - they went bust!
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24 January 2018
at
12:32am
Graucho
says:
@
elstonc@sky.com
The directors aren't bankrupt, which is all they cared about.
Read moreOne 'benefit' of such privatization in the U.S. to further weaken unions - public agencies had union workforces, while private-public contracts (at least federally) generally required union labor. However, a private corporation making a deal with another private corporation to build, say, a toll expressway (formerly known as a 'free' way), could more easily circumvent the labor requirements.
I'm curious as to whether the same held true for the UK. If so, there is dismal irony in having such a policy pursued by a labor party.
As for 'if public funding had been the only source of revenue', if the state borrows directly and builds things itself rather than through PFI, more resources are available because less interest is paid. The state is a large secure outfit which does not go broke. Consequently its borrowing costs are lower than those of private businesses.
I can't prove this, but suspect that the attractions of PFI/PPP to governments are that they put the responsibility at a second remove from elected officials, who get to join the public in being angry with the PFI/PPP enterprise when things go wrong, that the process enables various costs to be kept off the books and that PFI/PPP sprinkles the whole affair with the magical dust of the always efficient private sector.
Not being privy to the thinking within the Treasury at the time, I'm in no position to say whether traditional public sector borrowing and direct management by either a refurbished LEA system or a hugely expanded DfES could have produced a similar or better set of outcomes. It was certainly the case that PPP/PFI invitations to tender were generated at break-neck speed and that the learning curve for clients - DfES, LEAs, schools - was exceptionally steep. In some ways the situation was slightly Brexit-like - the working out of what was actually required and what would actually work on the ground struggled to keep up with the endless pressure for fast delivery. It was often asserted that New Labour would only have four years to make urgent repairs to the welfare state and that even if they won a second term, the huge scale of investment that was needed might well be blocked by a resurgent Conservative opposition. The attraction of 'keeping the borrowing off the books' in this context should be obvious.
I offer these comments not as a revisionist justification of PPP/PFI as an ethical strategy but to remind armchair cynics that the problems to which it was a solution were conceived somewhat differently to the current resentments of political discourse, and that the outcomes in education were generally successful given the precipitous plunge into big spending triggered by the expansion of PPP/PFI; the schools built under the 'Building Schools for the Future' programme have largely worked well and are therefore pretty invisible in current debate. The regrettable links between the first experimental academies and the subsequent wholesale privatisation by stealth of state education was not widely understood at the time.