The great and the good were being lightly grilled – or, in some cases, roasted – at Westminster yesterday as they answered questions from MPs and peers on subjects ranging from the collapse of Carillion to the mistreatment of small businesses by RBS and the Bank of England’s unreliable growth forecasts.
MPs from the business and work and pensions committees held the first in a series of hearings into Carillion, which collapsed into insolvency earlier this month putting the jobs of its 20,000 UK employees at risk along with thousands more in the construction company’s supply chain.
New figures from the construction research firm Barbour ABI released yesterday showed that, on the day it collapsed, Carillion was the main contractor on 57 construction projects, which were together worth £5.7 billion. These included two new hospitals as well as large road and rail projects and a number of school improvement projects.
Some of the harshest words of the session were reserved for Stephen Haddrill, who heads the UK’s accountancy watchdog, the Financial Reporting Council, and who was accused of “closing the stable door after the horse had bolted” .
Under questioning from MPs, Haddrill admitted that the FRC had been monitoring Carillion for the six months before its collapse but had chosen not to make this fact public, even as the government continued to hand more contracts to the company.
Citing “confidentiality requirements” Haddrill said the move to monitor Carillion had to stay secret. In defending the FRC, which he denied was “toothless”, the FRC chief turned the heat on the firms he regulates – the accountants.
They should be subject to more competition, he said, raising the prospect of a break-up of the industry’s “Big Four” firms – KPMG, PwC, Deloitte and EY.
Knockabout stuff
It was KPMG, of course, which signed off Carillion’s accounts last March, just a few months before the outsourcing and services firm issued the first in a series of profits warnings. KPMG had served as Carillion’s auditor for almost two decades. The FRC has already opened its own investigation into KPMG’s auditing of Carillion.
The knockabout stuff between the inquisitors and those being grilled is always entertaining, as are their sometimes less than subtle attempts to win the war of the sound bite during these televised hearings.
But often it’s the detail that emerges from the evidence sessions that proves so compelling. In Carillion’s case, one such moment was the revelation from the head of the Insolvency Service, Sarah Albon, that Carillion’s record keeping was so poor, it was actually having trouble tracking down past and present directors.
As many as 169 directors of the company will be investigated for potential misconduct, Albon revealed, and could ultimately be disqualified or prosecuted. The probe covers 16 companies within Carillion, she said.
At RBS, chief executive Ross McEwan and chairman Sir Howard Davies listened uncomfortably and apologised as MPs detailed the misdeeds of the bank’s controversial Global Restructuring Group (GRG) unit in the aftermath of the financial crisis.
GRG, which was ostensibly there to help turn round struggling small businesses, is accused of putting fees before profit and of aggressive and insensitive behaviour towards many of RBS’s small business clients.
Compelling reading
MPs detailed one internal memo – entitled “Just Hit Budget!”– which included the damning phrase: “Sometimes you need to let customers hang themselves.”
The City regulator has now, finally, agreed to publish the full report into GRG, which will undoubtedly make compelling reading, although no timeframe has been given for the release of the report.
Meanwhile a light grilling was administered to Bank of England governor Mark Carney, who was also giving evidence at Westminster, but at the rather more genteel House of Lords rather than the Commons.
The Lords economic affairs committee had a long list of questions for Carney, including why the Bank’s dire forecasts for the UK economy around the time of the Brexit vote turned out to be “substantially different from the reality.”
Repeating his view that a disorderly Brexit is highly unlikely, Carney doubled down with some new forecasts, or at least a heavy hint that its numbers would be upgraded in next month’s inflation report. “All things being equal”, the governor told peers, he expects to see a pick-up in the economy in 2019.
Next week MPs will get their chance to question former directors of Carillion, who carried on taking their bonuses and handing generous dividends to shareholders even as the company slithered towards collapse. It’s likely to be a brutal session.
Fiona Walsh is business editor of the guardian.com
