Carillion’s collapse should prompt better rules for PFI
Calls are mounting to make changes to the private finance initiative (PFI) following the collapse of Carillion.
Business Secretary Greg Clark is "trying to get on the front foot" after criticism of the government's handling of the Carillion crisis, says Jim Pickard in the Financial Times.
He wants to fast-track an investigation into the conduct of the firm's directors and has asked the Financial Conduct Authority to look into the preparation of Carillion's accounts. But it may be a bit late to step up now. The fact that ministers continued to award the firm contracts after its "financial woes were made public" last July promises to be politically very awkward.
Labour leader Jeremy Corbyn says the collapse proves that the private sector shouldn't be involved in running Britain's public services, say George Parker and Gemma Tetlow in the same paper. Even David Willetts, a former Treasury official and "key promoter" of the private finance initiative (PFI), concedes that the Carillion collapse shows the risk is not always genuinely transferred to the private sector, since the government has an obligation to maintain public services.
At least Carillion hasn't been bailed out, says Andrew Lilico in The Daily Telegraph. That shows that capitalism is working, by "weeding out inefficient and obsolete companies, management and working practices". We want it to be as easy as possible for PFI contract-holders to fail, so that owners run them with maximum efficiency.
That misses the point of what happened, says Simon Jenkins in The Guardian. Carillion's fate reveals "rampant indiscipline in the contracts". A combination of "favouritism, cost escalation, excessive risk, obscene remuneration and reckless indebtedness" led to the firm's demise. Finding the "ideal mix of public-sector loyalty and private-sector incentive" isn't easy, but there should be clear rules, limiting, for example, "market dominance, debt and remuneration". This debacle should prompt "a review of how privatisation is working".