Risk assessors recommended that Carillion receive the highest risk rating in November 2017 but after hearing from the company the Cabinet Office failed to take any action, the committee said in a report published this week.
Analysis of the government’s risk assessment documents on Carillion revealed that Carillion’s risk rating was not downgraded until the company issued a profit warning in July 2017.
PAC chair Meg Hillier said: “The Carillion papers identify clear and compelling problems with the business in the months leading to its collapse. Government had the opportunity to deal with them.”
The Cabinet Office uses a traffic light system to assess the finances of its strategic suppliers, with an additional ‘black’ rating given to high-risk companies.
Geoffrey Clifton-Brown, deputy chair of the PAC, called the system “slow and clunky.”
He said: “Profit warnings for Carillion were issued in July and September 2017 and yet a high-risk recommendation to ministers was not made until 29 November 2017.
“The City, in contrast, knew well before July 2017 that Carillion was in trouble.”
Hillier accepted that risk assessment documents contained commercial sensitivities but said the PAC is “concerned about the lack of transparency and its potential to create an environment where poor practice take root”.
She added: “Taxpayers deserve to know where their money is going, that their investment is being managed wisely and that government is providing effective oversight.”
A Cabinet Office spokesperson said: “Our priority has been continued, safe running of public services and to minimise the impact of Carillion’s insolvency.
“The plans we put in place have ensured this.
“We engaged closely with Carillion’s board members for number of years and this remained the case after the profits warning in July 2017.
“But it is not right for taxpayers to bail out a private sector company.”
