Newspaper article The Journal (Newcastle, England)

Columnist

Newspaper article The Journal (Newcastle, England)

Columnist

Article excerpt

Byline: DAVID TAYLOR-GOOBY

THE collapse of Carillion should give us all pause for thought.

Most of us probably thought of it as a building firm, but in fact is was a vast conglomerate with services which nearly all of us used. They may have used different brands, but Carillion also served school meals, maintained railway lines cleaned trains and ran prisons.

But they were still run like a building firm. Many of you have probably bought a house at some stage in your life, and you will know that developers do not release a new tranche of housing until the first one is sold. This is because they operate on tight margins, and do not have enough money to progress until they have a sufficient amount coming in.

Factor into this that a large company also has to pay shareholders and large bonuses to directors, and you can see what happens if the contracts do not keep coming.

There was no "core" company with reserves. It depended entirely on shareholders and investment funds.

There was no company loyalty. Investors only came up with the cash if the dividends were high enough.

This is probably why the Government, and particularly the totally impractical and ideologically blinkered Secretary of State for Transport Chris Grayling, kept giving them contracts to simply keep the show on the road when they knew that the company was in trouble.

Otherwise he might have had to admit he was wrong and fanatical privatisation did not work.

We need to think carefully about the problem, and in particular what a future Labour government might do. It is difficult for small organisations to maintain a workforce to do all the things they are responsible for. Private contractors used to empty the bins when I was a young boy. Local Government Direct Labour Organisations were often nepotistic and inefficient.

Employees also did not like small ones since opportunities for promotion were few. If they became part of a bigger organisation there were more opportunities for advancement. It is therefore understandable why smaller councils were happy to contract out their refuse collection or council house maintenance. …

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