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Public Works is UNISON Scotland's campaign for jobs, services, fair taxation and the Living Wage. This blog will provide news and analysis on the delivery of public services in Scotland. We welcome comments and if you would like to contribute to this blog, please contact Kay Sillars k.sillars@unison.co.uk - For other information on what's happening in UNISON Scotland please visit our website.

Wednesday, 16 May 2018

Private Sector Fails and the Public Sector Pays Again

Carillion’s board are accused of presiding over a “rotten corporate culture” in a report by two parliamentary committees. The company collapsed earlier this year with £1.5bn of debt leaving the public sector to pick up various public contracts. Rachel Reeves MP said the directors “drove the company off a cliff.”

The joint report, by the Work and Pensions and the Business, Energy and Industrial Strategy select committees, also criticises the UK government concluding that they lacked the decisiveness or bravery” to address the failures in regulation that allowed Carillion to become a “giant and unsustainable corporate time bomb”.

The bulk of the criticism is pointed at the company’s board who are clearly responsible for the company’s spectacular failure, despite the directors attempt to portray themselves as “victims of a maelstrom of coincidental and unforeseeable mishaps”.

The report calls out the directors’ “recklessness, hubris and greed and describes a business model that was “a relentless dash for cash, driven by acquisitions, rising debt and exploitation of suppliers”. It als suggests that their accounting practices “misrepresented the reality of the business”.
The report also raises questions for the company’s auditors: All of the big four accounting firms (KPMG, Deloitte, Ernst and Young and PWC) had done work for the company and had clearly not provide the degree of independent challenge needed to prevent the problems highlighted in teh report.

The report states that that by failing to question Carillion’s financial judgements and information KPMG complicit in the companies questionable accounting practices. They are accused of “complacently signing off its directors”. “Deloitte was paid over £10m to act as internal auditor but were either ‘unable or unwilling’ to identify ‘terminal failings’. They report also indicates that the lack of completion in the audit market creates conflicts of interests at every turn

This collapse illustrates the risks of outsourcing vital service to the private sector. The risk remains with the public sector who then have to pick up the tab for private sector failures.

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