The real Carillion scandal

Select committees and regulators are going to be kept busy for years poring over the detritus left by the insolvency of carillion two weeks ago.

the Financial Reporting council has added a probe of auditors KPMG to the list of inquiries.

the lack of attention by the Pensions Regulator, the trustees and the company to the £990m plus black hole in the retirement fund is deplorable.

Similarly, the use of over-optimistic accounting by the company and the failure of auditors KPMG to blow the whistle loud enough is disgraceful.

But as the inquiries warm up and the vultures start to pick at the carcass of carillion, there are more fundamental questions to answer.

Many of them should be aimed at theresa May’s feeble government, the board of carillion, shareholders and the banks.

Allowing a company with some 450 private-public partnership contracts, 43,000 employees and 30,000 sub-contractors to tip into insolvency without a meaningful effort to save the group was a huge dereliction. A more determined and decisive administration would have forced through a rescue plan saving the taxpayers hundreds of millions of pounds over the long term. the first step would have been to draft in an experienced turnaround specialist such as Stephen Hester (now at RSA) or leo Quinn, chief executive of Balfour Beatty, to lead the reorganisation.

Big lenders Royal Bank of Scotland and Santander UK should have been required to convert some of the £900m of debt into equity and to extend existing loans – if necessary with a government guarantee.

Major shareholders should have been encouraged to subscribe to a rights issue long before the final days. Hugely diluted shares would have been better than no value at all.

the choice of putting the company into insolvency rather than administration, which would have kept businesses running, was a stupid error. Indeed, there was a strong case for some kind of government rescue. Injection of £500m in the shape of bonds, or even equity, would have been minor league compared to the £45bn injected into RBS at the time of the financial crisis.

Keeping carillion alive as a going concern would have been far less disruptive.

So who do we blame for the debacle? Much of what has happened must be laid squarely on the shoulders of ministers.

Instead of signing a death warrant the Business Secretary Greg clark should have fought tooth and nail to save a company vital to infrastructure and public services.

the suspicion must be that the cowardice among ministers and in Whitehall stems from the appalling way in which the rescue of the east coast line was mishandled.

Former infrastructure minister lord Adonis was right to point out that allowing Virgin Rail and Stagecoach to hand back a franchise without penalty was a scandal.

the real falsehood was the failure to spell out to Parliament and the public what had been done by burying the costly scheme beneath a wedge of verbiage.

No one with a commitment to free markets can be sanguine about government interventions. But sometimes the broader public interest is in keeping services such as school meals going and making sure that new-build hospitals, such as the Royal liverpool, are up and running. the US government felt sufficiently committed to America’s car industry to temporarily nationalise General Motors after the Great Recession. After some brutal cost cutting it rapidly returned to the public markets and the taxpayer made a profit.

there is definitely a place for a time-limited rescue of a company as core to the national interest as carillion.

But to do so would have required willpower and political courage, both of which are in short supply.

Bart back

THE consumer group JAB Holdings is best known in the UK for its shareholding in Reckitt Benckiser.

Under the leadership of former Reckitt chief executive Bart Becht, the privately owned Reimann family enterprise has sought to become a coffee champion in the US buying up brands such as Keurig Green Mountain, as well as Krispy Kreme.

It has now moved back into the public arena with an audacious £14.9bn bid for fizzy drinks firm Dr Pepper Snapple, once part of cadbury. Becht will become chairman of the enlarged quoted firm.

Quite a journey from cillit Bang, Nurofen and other hygiene products to the sweet toothed American market.