Should Tameside Council have gone to 'Specsavers' to prevent Carillion debacle?

The 'Rashomon effect' describes a situation when the same event is given contradictory interpretations by different individuals involved. It hinges on the idea of competing realities, the point of view that everything depends on your point view. In an age of post-truth and alternative facts, it seems particularly endemic amongst the political-class, where truth has fallen out of favour. But as the American sociologist and politician, Daniel Patrick Moynihan, once remarked: "Everyone is entitled to his own opinion, but not his own facts."

In Tameside, Greater Manchester, the Labour controlled council  seem quite adept at presenting alternative facts and competing realities. For example, public services don't get closed, they get 'redesigned' or 'reconfigured'. 

In 2011 the council transferred jobs and services in two departments - 'estates' and 'facilities management', to the construction giant Carillion. The council told the public that the transfer of council employees to Carillion would "safeguard jobs and services and cut costs."  Councillor David Sweeton, the executive member for business and community development at the time of the transfer, said:

"This is a landmark decision for the council and will help to ensure that in future we can meet our savings targets, protects jobs and continue to deliver high quality value for money services....It's also important to stress that any staff transferring to the partnership (Tameside Investment Partnership) will have their pay, conditions, Trade Union and pension rights fully protected."

Apart from estate and management facilities, Carillion also provided school meals in Tameside and were responsible for building the new Shared Services Centre part of the 'Vision Tameside' development at cost of over £38m. They also sponsored two primary schools in Tameside and built other schools.

The council expected that the new service centre, the council HQ,  would be open for business in September 2018. But building work stopped in January of this year when Carillion went into liquidation. When Carillion went bump on Monday 15th January 2018, Tameside Council issued a statement stating that it was "business as usual" despite Carillion's troubles and the cessation of work on the new services centre building in Ashton-under-Lyne. Two weeks later, a Labour councillor, told me:

"It's a right mess. The council are negotiating with PWC the liquidator. They have to pay a fee for negotiating with their 16 sub-contractors and every phone call they make to them." As Carillion went into voluntary liquidation, the legal position, was that all former council employees who were transferred to Carillion, lost their TUPE protection. Many of the sub-contractors were also faced with losing money or going bust.

Although Tameside Council seemed to have been taken by surprise by the demise of Carillion, all the warning signs seem to have been there long ago. Certainly, the smart money appeared to know  that there was something wrong. In April 2016, Gazelle Pension Advisory Service, advisers to the trustees of the Carillion pension scheme, highlighted that city speculators were betting that Carillion was in trouble by short-selling Carillion shares - Blackstone, the private equity firm, made £40m. In May 2017, a final report warned that Carillion's debts had reached a level that meant it could not "counter material financial shocks or disappointments" and pointed out that its pensions deficit was now equivalent to the company's entire stock market value. Carillion issued a profit warning in July 2017, which sent shares tumbling 39% and led to the resignation of CEO Richard Howson. In 2016, Howson was paid £1.5m in pay and bonuses, when the company had debts of £900m and a stock-market  value of £61m. The pension fund with 28,000 members had a £990m deficit primarily because the firm had been diverting money to dividends and debt interest rather than into its retirement schemes.

When Carillion went bust in January, a Labour councillor told me that many councillor's were unaware of the details in the contracts between Carillion and Tameside Council because it was all done by a small group of people "behind closed doors." In August 2017, Tameside Tory leader John Bell, told Tameside Reporter journalist Nigel Pivaro that there had been a complete lack of scrutiny involving Tameside Council's relationship with Carillion. He told the newspaper:

"The problem with this deal is it cannot be monitored because there is no scrutiny committee holding it to account. Therefore there is no way to ensure we are getting value for money and Carillion are delivering efficiently. Where is the accountability? We are including back bench Labour councillors here, they do not know anything (more than the opposition). Due to a lack of transparency we get to know nothing."

While Cllr Bell asserts that most councillors were kept in the dark over the deal with Carillion, it isn't strictly true that there was no scrutiny. Minutes of a meeting of the 'Strategic Planning Capital Monitoring Panel' held on 13 March 2017 state:

"On a project of this size strong and focused project management is required, facilitated in this case through the Vision Tameside steering group chaired by councillor Jim Fitzpatrick, and internal working groups...The working group chaired by the First Deputy (finance and performance) continues to meet monthly to oversee the development and delivery of the project."

As regards 'Financial Risk' - 'Affordability', 'Value for Money', 'Control Procedures', 'Costs', 'Income from subletting space', all five categories mentioned in the report were given a risk status of RED!

In his article 'Survival of Carillion crucial for Tameside' (August 2017), Nigel Pivaro looked at whether the Carillion deal was giving value for money and cutting costs. He pointed out that some of the work done on schools by Carillion was found to be 'unsatisfactory or problematic'. Russell Scott school in Denton, built by Carillion, had been beset with problems including sewage back flow and a once serviceable playing field, had been deemed unfit for purpose. Carillion were said by the governors of the school to owe the school £100,000 for energy costs incurred during the building of the new school. The provision of school meals as provided by Carillion, had come in at 26 pence per unit more than central government gave to council's to provide them, and 90 schools across Tameside, were having to meet the shortfall. Pivaro highlighted how Carillion's share price had plummeted and referred to its debts and huge pension deficit and asked:

"What then would it mean for the borough of Tameside being so entwined with the company should the worst happen and Carillion go into liquidation...The dilemma for Tameside now is should it begin to divest itself from its exclusive relationships with Carillion and ask itself is it wise going forward to have all the council's eggs in one basket with one firm on whom it depends too much."

When the council was asked if they had a contingency plan in place if Carillion went bump, they declined to respond.

So incestuous was the relationship between TMBC and Carillion that Steven Pleasant, the CEO of Tameside Council, was also a Director of 'InspiredSpaces Tameside Ltd', a company set up by Carillion and its joint venture partners to deliver educational transformation through the 'Building Schools for the Future' programme. The council also had a 10% stake in InspiredSpaces Tameside Ltd.

Following the death of the former Labour council leader and postman, Kieran Quinn in December 2017, who had close links with Carillion and spoke very highly of the company's reputation (despite being aware that Carillion had been expelled from the Labour Party conference in Brighton in 2013, for blacklisting union construction workers), he was succeeded by former tobacco worker (the fag-end of the Labour Party) Brenda Warrington. Although Quinn was hailed as a 'visionary' at the time of his death - a month before the collapse of Carillion - by his fellow Labour cronies, the council have had to cough up another £9m from its useable reserves to get the 'Vision Tameside' development completed by another contractor, Robertson Construction Group.

While the Carillion deal overseen by Quinn and his cabinet colleague Brenda Warrington, doesn't seem to have cut costs, safeguarded jobs or delivered "high quality value for money services" as promised, we are now being told by Ms Warrington that 'swift action' by the council, has prevented a 'potentially disastrous situation' and the Vision Tameside development becoming a 'white elephant', in spite of being told in January, it was "business as usual." According to the Labour leader, the whole project will now cost £62.7m as compared with the £48,673,794 overall costs of the Vision Tameside programme in February 2015. 

Although the close relationship between Tameside  Council and Carillion turned into a fiasco that put the council at risk, it appears the council had no contingency plan in place in the event of Carillion its 'preferred developer' going bust. As the journalist Nigel Pivaro pointed out in 2017, "Without any plans there are fears that the borough could be beset with chaos and increased expense at filling the gaps left by Carillion." And yet, while some could see the impending demise of Carillion and that it was  likely to go bust, as it did in January 2018, the former 'visionary' Labour council leader Kieran Quinn, was arguing as late as September 2017 in 'Construction News', for a more direct and involved relationship with contractors because "it de-risks it for them." What seems obvious to many people, is the lack of vision on Tameside Council and the necessary foresight required to see and avoid impending disasters.