Carillion’s collapse must ring the changes

by
26 January 2018

It is time to rethink the relationship between private finance and public services, says Geoff Smith

A CARILLON is a set of 23 bells ar­­ranged in a chromatic sequence, so that they can play a melody, or, struck together, play a chord. Caril­­lion is possibly a misspelling of caril­lon, or a play on words; or it is possibly intended to have a signifi­cant meaning.

Carillion, the construction com­­pany, changed its name from Tar­mac in 1999, on the advice of an image consultant, a report published in Construction News states. A “com­p­any insider” was quoted as say­­­ing that it was meant to reflect the harmonious ringing of a carillon.

Well, the bells are ringing now.

The company, which employed 43,000 staff across the world, went into liquidation earlier this month after losing money on large contracts and running up £1.5 billion of debt. Thousands of jobs have been put at risk. Hospitals have been left un­­built, ring-roads left as bike tracks for local youngsters, and Carillion’s HS2 partners have been left to pick up the pieces.

 

THE basic stratagem of capitalist companies is always to privatise profit and socialise risk. There is no doubt that senior executives have pocketed some very large sums of money, while the shareholders, at least until recently, have also been well rewarded. Despite the com­­pany’s racking up levels of debt that went beyond risky, and burning money to service the debts, the bonuses continued to be paid (al­­­­though the Government last week announced that company directors would no longer receive bonus payments).

Certainly, the collapse of Carillion must herald the end of the Private Finance Initiative (PFI): the idea that private-sector operators, disciplined by the market, can invest to build, and the public sector then leases the output, whether it is a hospital, a road, or railway. It was sold as a “win-win”, but it was never a good idea: it privatised profits and social­ised risk, meaning that the only win­ners were the financiers.

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The collapse of Carillion might also signal the end of the market as king and queen, and moderator and play-maker; as the be-all and end-all of all things. The neoliberal market consensus of the Thatcher-Reagan years allowed that the market could be thought of as weather: it was something that existed in a self-regulating and benign way.

Carillion’s demise should surely now prompt a sensible and grown-up conversation about the market, especially about the privatisation of profit and the socialisation of risk.

Sadly, governments do not do grown-up: too often, they seek simple answers to complex ques­tions. PFI and “the market knows best” were both simple answers, but it is now clear that the question how we invest in and build infra­­structure is a much more complex question.

One of the lessons that must be learnt from the collapse of Carillion is the need to understand the dif­­ference between funding and finan­cing. Infrastructure is essential for the well-being and smooth run­­ning of society, and it needs to be both financed and funded.

An active agent with cash to in­­vest, such as a govern­­ment or a pen­­sion fund (public or private), could finance a toll road, for ex­­ample. Once built, the road is funded by people who pay the toll to use it. In the case of PFI, there is less clarity between finance and funding. Essen­tially, the private sec­tor fi­n­ances the hospital building, school, or ring road, and profits from leasing its use to the public sec­tor. As costs rise, the private sector makes more profit, and the taxpayer incurs more cost. When there is a crisis, as in the case of Carillion, it is the taxpayer who bears the cost, not the company.

 

IN MEDIEVAL times, church bells were first used as a way to notify people of services, and as a warning of such events as fires, storms, and wars.

In the Celtic eucharist at Carlisle Cathedral (but not only here), the bell is rung to signify the real pres­ence of Christ at the eucharist: it is rung twice, at the elevation of the host, and of the cup. As it rings, we are reminded that, in response to Christ’s presence, there must be change — in our lives, in our communities, in our societies, and in our politics. The prophets are ring­ing the bells of change. We should heed their warn­ings.

 

The Revd Geoffrey Smith is a retired priest who lives in the diocese of Carlisle.

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