Carillion collapse raises concern over Government risk assessments

The Public Accounts Committee published Government risk assessments of its suppliers, taking into account stock market performance and financial statements.

Wolverhampton-based Carillion had been given a risk rating of amber for months owing to performance on contracts with the Ministry of Defence and Ministry of Justice, but it was not until after the company issued a profit warning in July 2017 that the Government downgraded it to red, said the committee.

"It appears the Government was not aware of Carillion's financial distress until this point," said the report.

"In November 2017, officials recommended a provisional black rating for Carillion. However, following representations from the company, the Cabinet Office did not confirm the designation. Carillion collapsed less than two months later."

Meg Hillier, who chairs the committee, said secrecy surrounded large Government contracts to deliver public projects and services.

"The strategic supplier risk assessments provide an insight into the relationship between Government and suppliers and give rise to many questions we want to pursue.

"We recognise there are commercial sensitivities around that relationship. We are also alert to the potential impact on jobs and small businesses should certain information be made public.

"We have been mindful of the workers and businesses who could lose out through no fault of their own if certain information is in the public domain.

"But equally we are concerned about the lack of transparency and its potential to create an environment where poor practice takes root.

"Taxpayers deserve to know where their money is going, that their investment is being managed wisely and that Government is providing effective oversight.

"The Carillion papers identify clear and compelling problems with the business in the months leading to its collapse. Government had the opportunity to deal with them.

"Taxpayers, service users and people and businesses plunged into financial difficulty by Carillion's demise deserve to know what happened.

"We want to look wider and better understand the relationship between strategic suppliers and Government.

"When a contract breaks down, Government is the provider of last resort. While it did not bail out Carillion – the company went in liquidation – it did inherit responsibilities and costs, ultimately borne by taxpayers, that would otherwise not be met.

"Failure of essential services is not an option so we need to understand the potential risks to the taxpayer.

"The fallout from Carillion's collapse and the resulting burden on the public purse is still not clear.

"We will be seeking clarity on these critical matters and probing suppliers and Government about what they are doing to ensure such a catastrophic failure is not repeated."

The committee said it will hold an inquiry into concerns raised by the papers relating to suppliers with a risk rating of amber, red or black.

Thousands of jobs have been lost since Carillion went into liquidation in January.