Westminster Reflections: Bernard Jenkin MP says that the Carillion collapse eclipses Brexit – for a short while
In October, I wrote an article for this magazine entitled What’s happening to capitalism? This reflected on the declining levels of public confidence in banks, multinationals and global capitalism and called on business leaders to take steps to restore public trust by promoting the best attitudes and values, and by running their business in accordance with these values.
I revisit this because the Carillion crash is another blow to public confidence in the capitalist system. For many, it exemplifies the apparently cosy relationship between government, political parties and big business. They see lavish pay and benefits for top directors of companies, who in the end fail their employees and their pension fund beneficiaries. They let down their customers, default on their suppliers and lenders, and end up costing hard-pressed taxpayers. The public will not tolerate this behaviour. Nor will they tolerate public authorities continuing to contract with companies that seem to live like this.
As the Carillion crisis gathered pace, the Public Administration and Constitutional Affairs Committee (PACAC), which I Chair, was contemplating a new inquiry into the way government and the public sector make decisions about how to source the delivery of public services. On the day Carillion collapsed, we were ready and we launched under the title: Sourcing public services: lessons learned from the collapse of Carillion.
This inquiry will examine how Whitehall departments and government agencies let public services contracts and then manage them. It will include questions about how civil servants decide what to outsource, how they assess the real value of each bid, when the best price might be by no means the best value, and how civil servants assess the risks of letting a particular contract.
The government and private companies that do work for the public sector must learn lessons from Carillion’s collapse. So too must all major corporations. Carillion’s 2016 Annual Report says that its dividend increased in each of the 16 years since its formation as a company. In 2016, this occurred as its pension shortfall grew to over half a billion pounds. The Pension Protection Fund estimates it will have to take a hit of £900 million, its largest ever single bill. If the public thinks that this is what capitalism is always like, the whole system will lose consent.
Regulated capitalism is the foundation of our modern civilisation. It has enabled the investment and creativity that is feeding the world and raising millions of people out of poverty every year, offering employment and opportunities undreamed of by previous generations. It is funding research into new medicines and better healthcare the world over. Capitalism is transforming the lives of whole nations for the better. There is no evidence that state driven or socialist systems have ever achieved this or ever will. Now is not the time to let the carelessness and short-termism of a few business leaders put this at risk. Corporations must demonstrate that they can be trusted.
The failure of some businesses to take their corporate governance and social and environmental responsibilities as seriously as they should threatens everything. It is also short-sighted as the evidence suggests that businesses that prioritise the needs of all their stakeholders, not just their profits and shareholders, benefit from enhanced brand value, improved talent recruitment and retention, higher levels of employee engagement and more satisfied customers. This leads to better and more sustainable financial performance.
Just as with the Kids Company Inquiry, PACAC and other committees, who may well launch their own inquiries into Carillion’s collapse, will identify lessons, that can be learnt from this crisis, in this instance for company directors and government. Government and business leaders must take heed of these lessons and words must be matched by action if public trust is to be restored.
The Carillion crisis has taken over from the unending diet of Brexit politics. Don’t expect the respite from Brexit to be up to much! But this does lead me to reflect on how the Westminster world has treated the EU issue over the years.
I was always part of a large number of Conservative MPs who were euro-sceptic, but whenever we raised our concerns about a new treaty, or the advance of the single currency, we were always told that the public was not interested and we were indulging in a private obsession of our own. The mainstream media treated the EU as a minority issue. It was partly this dismissive arrogance which led to the defeat of the Remain campaign in the referendum. Nobody can now deny that the public, once engaged, were extremely interested in this subject, and we Conservative Euro-sceptics turned out to be those in the majority. We even nearly had a majority of Conservative MPs backing the Vote Leave campaign.
Now the issue is settled and we are leaving, but those who used to accuse us of being obsessed are now obsessed themselves, diverting hours of Parliamentary time to obscure legal discussions. The BBC, the Financial Times, etc are also obsessed. It is quite clear that many of them, exemplified by people like Tony Blair and Lord Adonis, really are trying to reverse the substance, if not the fact, of the referendum decision. Meanwhile, the public think it is a done deal: we are leaving the EU, and we will get the freedom to do free trade deals with other countries, end the UK subsidies for our EU competitors and take back control over our laws and borders.
Those who are starting to advocate some kind of second referendum on the basis of the exit deal on offer, or a chance to change their mind, are themselves now playing with political fire. This idea is a million miles from the premise of the decision offered in June 2016 which we should now be implementing. The last thing the public wants is to be put through the torture and political paralysis of another existential referendum, nor would most of those who voted Leave ever trust the political class again, were the elite to attempt to ‘take back control’ from the people in this way. Retarding Brexit is retarding UK progress.
And anyone who wants the EU to have a chance of recovering its authority in the other 27 member states, would not want the UK back in the EU on such shaky political consent. We were a disruptive enough member before all this. What might have worked once will never work again.