Bosses at Carillion are set for a heated showdown with MPs after the Commons work and pensions committee accused the failed outsourcer of attempting to “wriggle out” of its pension obligations for the past decade.
The committee released details of the way the company’s pension deficit and its cash problems were handled over several years. This week MPs will be questioning former Carillion executives and regulators as part of a joint inquiry into the company’s collapse with the business, energy and industrial strategy committee.
Carillion has been falling short of the expectations of its pension fund trustees since 2008, the MPs said. It cited cashflow problems for failing to increase its contributions in 2011 and 2013. During both those periods it paid more than £70 million in dividends to shareholders.
A letter from Robin Ellison, chairman of trustees of Carillion’s pension scheme, showed that the trustees failed to agree with the company over valuations of the schemes in 2008 and 2011 because they were “seeking to take a more prudent approach to funding than the company considered it could afford”, the committee said.
Carillion was one of Britain’s biggest providers of public services, ranging from building hospitals to managing prisons, but its failure with £2.4 billion of liabilities, including a £587 million pension deficit, has put about 20,000 jobs at risk.
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Frank Field, chairman of the work and pensions committee, said: “It’s clear that Carillion has been trying to wriggle out of its obligations to its pensioners for the last ten years. The purported cashflow problems did of course not prevent them shelling out dividends and handsome pay packets for those at the top. This culminated in negotiating deficit contributions away entirely last autumn to enable more borrowing.”
Filings show Carillion paid out dividends worth more than $1 billion since it was created almost two decades ago.
Mr Field added that “once again”, the Pensions Regulator, whose responsibilities include monitoring the health of company pension schemes, has “questions to answer”.
“They have been sniffing around Carillion — at the trustees’ behest — since at least 2008, though it is not apparent to what effect. When ten years later the company collapses with £29 million in the bank and £2 billion in pension liabilities [on a buyout basis] it doesn’t look good for them.”
A spokesman for the Pensions Regulator said it had been in “contact with Carillion and the pension scheme trustees for a number of years about the funding of the pension schemes as part of our role to protect member benefits”. But he said: “Carillion’s recovery plans, and its payment of dividends, did not highlight sufficient concern to justify the use of our powers based on the group’s trading strength as presented at the time in their audited accounts”.
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The spokesman said regulations seek to “balance the needs of a scheme and its members with the needs of an employer to invest in their ongoing business — this should be reflected in the length and structure of the recovery plan.”
