Tory government faces furious demands for a public inquiry into why it gave stricken Carillion £1.6billion in contracts

The Tory government faces furious questions today over why it handed billions of pounds of public contracts to stricken company Carillion .

The British construction and public services giant, which employs 20,000 people, was plunged into liquidation this morning over financial woes.

Carillion runs massive railway building projects as well as being responsible for services at schools, prisons and NHS hospitals. It provides school dinners for more than 200 schools.

The government today announced it will continue to provide funding required by the Official Receiver to maintain public services.

Cabinet Office minister David Lidington stressed the only extra costs to taxpayers would be those of the Official Receiver, insisting staff should “keep coming to work” and “will continue to get paid”.

But there are growing questions about why his government kept rewarding Carillion with public sector work after it sounded profit warnings.

The firm, which has debts of £1.5billion, issued a profit warning in July. Yet days later it was given an HS2 rail contract worth £1.4billion and a £158million MoD deal.

Carillion issued a second profit warning in September. Weeks later it got a £62million rail contract.

The Cabinet manual says firms that issue profit warnings are “high risk”. The deals are likely to come under fire in the House of Commons today.

Carillion chairman Philip Green, who urged people in 2015 to vote Tory, was an adviser to then-Prime Minister David Cameron .

The firm has 450 government contracts that represent more than a third of its reported revenue in 2016.

Ministers held emergency talks with the firm and banks this weekend on a possible rescue deal.

Shadow business secretary Rebecca Long-Bailey demanded a “full and transparent investigation” not just into the company, but the government.

She warned there were “extreme concerns” about the government’s handling of the situation adding: “We expect the Government to step up now, take these contracts – the public sector contracts – back into public control.”

Lib Dem leader Sir Vince Cable added: “We urgently need a parliamentary inquiry into some of the very questionable decisions made in the past few months – not least the award of public contracts to a company that was clearly in danger of collapse.

“The issue of the former chief executive still being paid his salary, plus perks and bonus, is also a reward for failure that has to be looked into.”

Shadow Cabinet Office Minister Jon Trickett said: “Alarm bells have been ringing for over six months.

“The Government must [say] what due diligence measures were undertaken before awarding contracts to Carillion worth billions.”

Rail, Maritime and Transport union general secretary Mick Cash said: “This is disastrous news for the workforce and disastrous news for transport and public services in Britain.

“We have been warning since Thursday night that we thought the collapse of the company was imminent.

“The blame for this lies squarely with the Government who are obsessed with outsourcing key works to these high-risk private enterprises.”

Jim Kennedy, the Unite union’s national officer for local government, said a public inquiry was needed to answer questions about Carillion’s conduct and the Government’s decision to award it contracts.

GMB national secretary Rehana Azam said: “What’s happening with Carillion yet again shows the perils of allowing privatisation to run rampant in our schools, our hospitals and our prisons.”

Yet Tory minister Mr Lidington defended the private finance system as a whole, saying: “Since its inception in the 1990s private finance has helped to deliver around £60 billion of much-needed capital investment in infrastructure in the UK across a range of projects.

“We will continue to maintain partnerships with responsible firms in future.”

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