Carillion: Lessons learned - NHS funding awarded to private companies?

Des Powe

Carillion went bankrupt in January 2018. It’s now a matter of history that Nottingham University Hospital prematurely terminated the 5 year £250m Estates and Facilities (E&F) contract with Carillion on April Fools Day, 2017. This turned out to be a wise move for the Trust and patients alike. The full facts behind NUH’s decision (including due diligence) in awarding the contract were not given at the time, but a significant factor would have been based on costs. Unite Nottinghamshire Health highlighted unsafe working practices and staff shortages putting employees and patients at risk.

Carillion was a massive firm – some thought it too large to fail - it was the second largest construction firm in the UK and had successfully been awarded the most amount, bar one, of public funding in its sector. It has now come to light that Carillion carried massive debts. The full facts behind its demise will emerge over coming months but one question that needs answering is why the government continued awarding more public funding to Carillion? Carillion went bust with debts of £1.5 billion pounds and an estimated £990 million pensions’ deficit (Work & Pensions Committee)

Carillion’s toxic business ethos

Previously, Unite Nottinghamshire Health’s Newsletter (Summer 16) reported on Carillion’s toxic business practices and lack of regard for its employees. It was one of several large companies that were found guilty of unlawfully ‘blacklisting’ workers, inducing long term hardship.

In contrast, the now liquidated company had a succession of short-term directors whose priority was to award themselves large salary packages and to pay shareholder dividends in preference to reducing its own pension deficit, and securing the future of its employees. It treated its suppliers and subcontractors with contempt too. It has emerged that it was not uncommon for the company to withhold payments for 4 months.

Employee casualties

The true casualties in this sorry mess are the tens of thousands’ of workers and subcontractors, who have lost their livelihoods, and Unite has been at the forefront in seeking government intervention and support in the immediate aftermath. But going forward, the focus will change to why and how it happened? Lessons need to be learned. Carillion placed high risk unrealistic tenders and in the case of NUH, undercutting the in-house bid. We may never know the true state of Carillion’s viability in 2014 when they won the NUH contract, against the protests of NUH staff and its Staff Side. It’s now known that the company worked on paper thin margins and cite unpredicted overspend as the primary reason for their demise. But this explanation may prove too simplistic. Knowledge and experience should mitigate for unpredictability, and in citing this as a reason, are Carillion not admitting to not having a grounded understanding of the public sector in which they operated? Eventually Carillion ran out of corners to cut.

What cost goodwill?

NUH terminated the Carillion contract early and this will undoubtedly have minimised its financial losses. But it’s harder to quantify the cost of goodwill that was lost with the TUPE transfer of staff over to Carillion. The NHS is rightly nationally treasured and there has long been a tradition among her staff of going the extra mile to achieve the core objective of delivering good healthcare to those in need. Staff proudly feel a sense of ownership. But over many decades it came to be expected that this would continue, but with the increasing introduction of privatisation into the NHS and the emphasis it places on profit some staff feel the culture has changed, and not for the better.

Uncertain future

Will this years’ 70th anniversary of the NHS be remembered for all the wrong reasons? The NHS is underfunded. There needs to be an honest debate about the future of the NHS: one that should not be left to the presiding government of the day. Private companies operating in the NHS are draining the NHS of vital resources. Chief among these include the Private Finance Initiatives (PFI), currently costing the taxpayer £10.3 billion annually in the public sector, amounting to £199 billion by termination of current contracts in the 2040s. It’s an expense that is draining the NHS of essential resources and worse still, the National Audit Office was scathing in its recent report (January 2018) saying that there is little evidence that handing public contracts to private organisations delivers value for money. To many this will be no surprise. Locally, it costs Sherwood Forest Hospital £3.5 million per month to meet its PFI commitment, including interest payments: money that could be better spent on patients rather than paying dividends to shareholders and extravagant salaries and bonuses to board directors.

Unite will campaign to reverse privatisation in the NHS including cancelling PFI contracts, to return outsourced workers back into the NHS, and to properly fund the NHS.

31-1-18

Health Sector Campaigns

Information about National Health Sector Campaigns are available online at:

http://www.unitetheunion.org/how-we-help/list-of-sectors/healthsector/healthsectorcampaigns/

Details about local Nottinghamshire Health Branch campaigns are available direct from the Branch Secretary, this website, or better still by attending a monthly Branch meeting (held every 3rd Tuesday (Except August), Unite’s Nottingham Office).