THE high-profile collapse of Carillion in January exposed a company with mounting debts.
Excessive executive pay and dividends to shareholders were prioritised above workers and their pensions.
In Scotland, as across the UK, it lays wide open a decaying model of public service provision based on financialisation, outsourcing and PFI.
While Carillion’s chief executive’s pay increased 8 per cent over 2015-16 and taxable benefits increased by 40 per cent, the average for all other UK employees of Carillion was a 2 per cent pay increase and nil on taxable benefits.
As its profits decreased due to low margins, Carillion took on more debt. It did so not to invest, but to meet its day-to-day running costs.
It stockpiled contracts from government to meet its debt-servicing costs. Yet the Westminster government continued to issue contracts when the company was in known financial difficulty.
Carillion directly employed only 20,000 workers in the whole of the UK, and only just over 1,000 workers in Scotland. In 2016 public contracts accounted for more than £2 billion of Carillon’s £5.2bn revenues across the UK.
This shows the degree to which further outsourcing and agency labour was used to deliver public contracts.
As the House of Commons public accounts committee concluded in 2014, there was “an absence of real competition has led to the evolution of privately owned public monopolies which have become too big to fail.”
Carillion’s collapse highlights this form of procurement does not transfer risk or insulate the public purse. Instead, when things go wrong, it is the taxpayer who picks up the tab.
The Cole report reminds the public sector that it cannot delegate to others the duty that it ultimately owes to the public to ensure the provision of a safe environment for the delivery of services to its communities.
There is general agreement that, in some sectors, Scotland has less exposure to the private sector in some cases.
This is due to some union success in arguing against outsourcing.
However, unions in Scotland have long reported concerns with a model of outsourcing for construction and maintenance projects that has led to poor results across many publicly funded contracts.
A clear example of which remains the Edinburgh schools debacle.
The outsourcing model has a clear knock-on effect on the nature and quality of work in the sector.
There is systematic use of bogus self-employment; umbrella contracts; a serious lack of health and safety standards; and anti-union tactics. Legislative change has not prevented contracts being awarded to blacklisting companies.
As a result of these ongoing issues Unite has developed a Construction Charter for local authorities to support procurement within the construction industry.
This charter emphasises the need for health and safety regulations to be met. It calls for all workers onsite to hold the appropriate qualifications, for all materials to meet building standards and for the industry to provide training opportunities through apprenticeships.
On existing PFI/NPD contracts, Unison Scotland has highlighted the potential for buyouts, calculating that up to £12bn could be saved in Scotland if this action was taken.
Unison also estimates that £250 million could be saved over the next 10 years if rigorous monitoring is undertaken.
This monitoring is likely to identify potential savings and breaches of contract leading to the potential to renegotiate and restructure contracts.
However, in the longer term a more sustained solution is required.
From a worker perspective this means ensuring the maximum level of union density within the construction sector and an all-out attack on the employment models which are being used to exploit workers.
From the wider public perspective, public ownership is the key.
In other European countries there are examples of publicly owned companies that support the delivery of public infrastructure projects.
In Sweden, Svevia is a publicly owned construction company specialising in roads construction and maintenance. Formed in 2009 as a result of incorporation of the production element of the Roads Administration Unit, it is the largest roads infrastructure and maintenance company with a market share of around 30 per cent of the country’s road network. It is the fourth-largest construction company in Sweden.
There is therefore a strong case that a publicly owned operator in Scotland could disrupt the current market.
As well as delivering some projects directly, in-house expertise should be developed on infrastructure delivery.
As a first step the Scottish government must commit to ending PFI/NPD and work with other public bodies to minimise costs on existing projects including through buying out schemes where appropriate.
It should outline how the Scottish National Investment Bank can support a national investment strategy alongside a just transition to a low-carbon economy.
It should then work alongside unions to establish a publicly owned construction company to take forward key public infrastructure and investment projects. This will not be easy. The murky world of outsourcing is tangled and interconnected.
Nevertheless there is clear evidence that, along with their support for other forms of public ownership, workers and the general public would support a move. It’s to get it moving.
Dave Moxham is deputy general secretary of the Scottish Trades Union Congress.
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