Carillon’s collapse, a flag ship of Tory and Labour governments’ policy of privatisation and ripping off workers, illustrates the devastation that privatisation is bringing. Pouring money into PFIs only means the fat cats getting fatter as for example Carillon paid more money in dividends than it did to the collapsing pension scheme, while paying huge management bonuses.
Governments since Margaret Thatcher’s have maintained that the PFI contracts are a way of transferring the risks arising from major projects to the private sector, and an efficient way of saving public money. Carillon shows a central reason for PFI is to transfer public finance into share-holder and private finance accounts.
We are witnessing the decay of British capitalism. The collapse of Carillon, and the end of other PFIs takes place at the same time as the collapse of NHS services as nurses and beds are in critical short supply.
The government allows all this to meet the demands of the City of London, and cares nothing about services or workers.
PFI firms victimise workers
Firms like Carillon are government favourites because they are extremely hostile to workers’ organisation. In May 2016, Carillion was one of a range of building firms who admitted to a high court in London, that since the late 1960s they had been “involved in secretly collecting, storing and distributing among themselves information about workers who had, or who were applying for, work in the construction industry”.
Contracts increased as Carillion teetered on the brink
Hedge funds and other financial speculators in the City of London made tens of millions of pounds by betting that Carillion would collapse. Short-sellers, who make money by gambling that a company’s share price will fall, targeted the company since early 2015, but the number of bets reached a peak just before the profit warning last July that signalled the scale of its problems and sent its shares tumbling.
Carillion issued its first profit warning on 10 July 2017, and its shares dropped 39 per cent. A week later a joint venture between Carillion, its construction rival Kier and the French civil engineer Eiffage won a £1.4bn contract to work on the HS2 high-speed rail link.
On 18 July 2017, Carillion won a £158m contract from the Ministry of Defence to provide “catering, retail and leisure, together with hotel and mess services” at 233 military facilities.
A second profit warning in September was followed five weeks later by the award from Network Rail of a contract to electrify the London-to-Corby rail line. A week afterwards the company put out a third profit warning, only to be awarded a £12m schools building contract three days later.
The Government continued to have “confidence” in Carillon, when the markets were betting on a collapse; Carillion chairman, Philip Green, is an adviser to the prime minister on corporate responsibility!
Tony Blair’s Labour government used PFI deals to give large profits to the private sector to build, finance and maintain infrastructure. Conservative and Labour governments signed more than 700 PFI deals, creating assets worth £57bn, according to Treasury figures.
The total value of the NHS buildings built under Labour under the scheme is £11.4bn. But the bill, which will also include fees for maintenance, cleaning and portering, will come to more than £70bn on current projections and will not be paid off until 2049.
Last August, John Laing agreed to hand back a lossmaking £3.8bn, 25-year PFI waste project in Greater Manchester for an undisclosed sum, it was one of the largest PFI schemes. Manchester council said it would save £20m a year immediately from access to cheaper loans and £37m a year from April 2019.
Given examples like this why do Labour councils continue to support PFI schemes and even vilify those who campaign against them?
Corbyn’s response not enough
Jeremy Corbyn announced in October that a Labour government would review all existing PFI contracts and now say they will perhaps nationalise some of the assets. Doe Corbyn have to wait for companies to collapse before taking them over?
The problem with this kind of statement also is the message: wait for a Labour Government. But there are huge problems with contracts like the Midland Metropolitan hospital and Royal Liverpool hospital. Subcontractors and workers are going without pay now, while profits are ripped out of public services.
The Labour leadership must demand of all Labour members that they stop supporting, and in the case of local councillors voting for, PFI schemes.
Workers and unions must mobilise for public ownership now
- All PFI schemes need to be brought under public ownership.
- Workers in PFI schemes need to discuss building a national struggle for their wages, jobs, conditions and pensions brought in-house.
- Build a national struggle against all PFIs and for public ownership of hospitals, schools, rail, roads and all public services that are privately run.
- We cannot wait for a Labour government mobilise on the streets now against PFIs.