The collapse of outsourcer Carillion will cost the taxpayer at least £148m, according to a report published today by the National Audit Office (NAO).
The liquidation of Carillion is currently expected to cost £522m which includes a £50m payment for big four accountancy firm PwC which is acting as special manager.
The net cost to the taxpayer is estimated to be £148m, although this could increase significantly and it could take years to establish the final bill.
Frank Field MP, chair of the work and pensions committee, said the report showed that Carillion had “hoodwinked” the government over its financial health.
“This invaluable report adds new weight to what we found: Carillion hoodwinked the government as they did many others who were so naive as to trust their published accounts... It is difficult to shake the impression that this was conscious cash-chasing, b*gger the long term consequences and b*gger the interests of suppliers, workers and pensioners.”
The report details how shocked the government was to discover Carillion’s dire financial state when it released a profit warning on 10 July which included an £845m provision for losses on its contracts.
“The scale of the losses announced on 10 July came as a surprise to the Cabinet Office as it contradicted previous discussions with Carillion and market expectations,” the report said.
On 29 September it increased its provisions to £1.05bn and on 17 November it said it expected to breach the terms of its loans.
The report also shows that big four accountancy firm PwC, which was appointed to advise on the liquidation, is in line for at least £50m of taxpayers money for its work since Carillion's collapse in January.
Rachel Reeves MP, chair of the business, energy & industrial strategy (BEIS) committee, said: “Carillion was the gift that kept on giving – for the big four, at least, as they raked in millions for their audit and other work.
"The collapse of Carillion was a catastrophe for those who lost their jobs and the small businesses, contractors and suppliers left fighting for survival. The company’s failure has left the taxpayer with a bloody nose too as we are all left on the hook for the vast sums needed to clean up this mess.”
A PwC spokesperson said: "The official receiver applied to the court to appoint PwC to resource a liquidation of exceptional size and complexity as quickly and effectively as possible. Since then our priority has been to keep public services, such as the maintenance of prisons, hospitals, roads and schools, running safely across the country - minimising the disruption caused by the collapse - while transferring contracts and saving thousands of jobs.
"We understand concerns over the cost of the liquidation, however, without this work the cost to UK jobs, the economy and the taxpayer would be considerably higher."