Carillion is no isolated failure, no fluke, no aberration. It is another symptom of a decaying social order that is anti-democratic, inefficient and places profit ahead of people’s needs, aspirations and even lives. That social order is neoliberalism, a term which I accept is probably not bandied around your local pub, and is invariably met with “hur hur” sniggers of performative ignorance among the commentariat. Being deprived of a term to describe how our society is structured and run is convenient for our masters. It stops us joining the dots, of understanding that Carillion is just one manifestation of a failing system: one which rolls back the public sphere everywhere in favour of the private sector, which slashes taxes on big corporations and wealthy people, and one which obsessively deregulates.
“A story of recklessness, hubris and greed” is the judgment of MPs on two select committees, published on Wednesday, on Carillion; it would be as a good an epitaph for neoliberalism as any. The business model of a company that built roads and hospitals, served children school meals and provided defence accommodation was “a relentless dash for cash”, the MPs declared. However profitable, it “increased its dividend every year, come what may”. Their accounts “were systematically manipulated”. As the company began collapsing, “the board was concerned with increasing and protecting generous executive bonuses”.
Appropriately enough, Carillion chair Philip Green advised both David Cameron and Theresa May on “corporate responsibility”. Regulators were toothless. The “big four” accounting firms – PwC, EY, Deloitte and KPMG – acted as a “cosy” club, approving “fantastical figures”, failing to identify or simply ignoring catastrophic internal problems. They pocketed vast sums of money in exchange for granting a disastrous taxpayer-fed company their seals of respectability. “Carillion could happen again, and soon,” the MPs concluded.
Damn right it could. The whole system of delivering essential public services through companies driven, by definition, for profit guarantees that it will. According to National Audit Office figures from 2016, the government spends around £225bn on private and voluntary providers – almost 30% of all government expenditure. It is worth noting the wider role of the big four accounting firms. They are seconded to government, help draw up the tax laws, then help their clients avoid the very laws they have helped to design.
Let us consider the multiple failures and scandals generated by our neoliberal social order. On the day MPs published their report into Carillion, the government announced the temporary renationalisation of the East Coast rail service after its operators confessed they could no longer afford to run it. The service was last renationalised in 2009 and, much to the embarrassment of neoliberal fanatics, proved a success story: it brought the exchequer hundreds of millions of pounds, was the most efficient franchise, and had the best passenger satisfaction of any long-distance franchise. After its privatisation, its new managers abolished many cheap advance tickets, de facto doubling some fares.
The whole privately run rail system is an inefficient, fragmented mess, enjoying far higher public subsidies than British Rail while offering some of the most expensive tickets in the western world. The entire rail system, not just East Coast, should be nationalised: but the Tories’ neoliberal dogma is at war with common sense, and they will flog the franchise off to another disastrous gang of profiteers as early as they can.
Transport secretary Chris Grayling’s decision was surprising given his vehement opposition to public control of rail. But he said the move was partly to expedite the planned east coast partnership, which would see a contract re-let to a private firm in 2020. However, several train companies face similar struggles to Stagecoach and Virgin after overbidding for franchises and events may yet force his hand again.
Will East Coast rail services remain nationalised?
It’s not the plan, but it’s possible. The pressure to avoid any further franchise collapse – or to see Stagecoach-Virgin emerge as operators again, with a diminishing market of bidders – could see the government struggle to get a new operator in place.
So who will now run the trains?
Control will pass in June to the “operator of last resort” – an Arup-led group contracted on the government’s behalf. The train service will be rebranded London North Eastern Railway.
What will the impact be for passengers?
In the short term, little or none. New British-assembled Hitachi trains are already on order, paid for by the government.
How much will it cost the public?
The Department for Transport assessment was that either immediate option, a fresh Virgin Trains contract or direct control, was broadly similar in cost. Analysis by rail regulators in 2013 found East Coast required less subsidy than any other line when in public hands, while it delivered more than £1bn to the Treasury. Stagecoach promised vastly more, £3.3bn by 2023, but found it impossible to pay up.
Remember Serco, which was charged with the electronic tagging of offenders. But Serco, driven by profit, overcharged the state more than £68m by invoicing for the tagging of offenders who were not being monitored, who were back behind bars, or were simply dead. And then there was G4S, offered the Olympics security contract. When it failed in its duties, the state had to march to the rescue in the shape of the British army. Even Philip Hammond – then then Tory defence secretary – admitted that he’d had a “prejudice that we have to look at the way the private sector does things to know how we should do things in government” but that the G4S incident “is quite informative.”
There are also scandals in local government,the NHS and the care sector.After non-urgent NHS transport services were privatised in Sussex in 2016, hundreds of cancer and kidney patients missed appointments after ambulances failed to arrive. In 2011, Southern Cross – owned by private equity group Blackstone – collapsed. Today, Four Seasons Health Care, the nation’s second biggest provider of care homes for older people, is hundreds of millions in debt and has closed or sold many homes.
The private finance initiative, conceived under John Major and massively expanded by New Labour, locks the government into contracts of up to three decades with private companies to build schools, hospitals and other infrastructure. There are now 700 projects in operation that can cost up to 40% more than if they had been financed by government borrowing.
From water privatisation – which has left English consumers paying more than £2.3bn more a year than nationalisation, with even the Financial Times calling it “an organised rip-off” – to the banking collapse, Carillion is no isolated scandal. This is not the story of one company’s obsession with profit over public service, it is the inevitable consequence of a fundamentally rotten system that is anti-democratic: the state is locked into generation-long contracts, however inefficient and poor they may be, while elected politicians have abdicated many of their core powers to the market.
Since the dawn of neoliberalism in the late 1970s, Britain has suffered its worst three slumps of the postwar era, as well as lower growth that has been less equitably distributed. In the past decade, workers have suffered the worst squeeze in wages in modern times. All of this is interlinked: from privatisation to deregulation to the shifting of power from workers to bosses. Carillion is a story of a system that favours profit, dividends and shareholders’ interests over the common good. That system is neoliberalism. Until we have a government that rips up these contracts and brings all these public services back in-house, there will be many more Carillions to come.
• Owen Jones is a Guardian columnist