It is also a failure of Government. The Government has something called the Crown Commercial Service, which is part of the Cabinet Office, which is charged specifically with looking at major suppliers to Government like Carillion where a collapse might pose a systemic risk. It's not clear why nothing was done by that organisation in this particular instance to try to stave off the possibility of disaster. It was only after the last profits warning a £1.34 billion contract in relation to HS2 was granted by the Government to Carillion. So, a lot was wrong at governmental level as well. 

The problem with the Government sanitising by granting such contracts to companies like Carillion in the circumstances in which its collapse occurred is that smaller suppliers, who don't have the means to do proper due diligence on the companies they are intending to contract with, take that as a kind of by-appointment sign, and therefore the Government is, in effect, impliedly encouraging people to do business with them in spite of its own failure to do the due diligence that others can't afford to do. 

It is, thirdly, of course, a failure on the part of the regulators. This isn't new, and the banking crisis occurred, which was a much, much more systemic problem than the failure of this one company, in spite of the failure of the Bank of England, the failure of Her Majesty's Treasury and anybody else who was responsible for regulating the system. The idea that third-rate regulators will be successful in controlling second-rate bankers or businessmen is, of course, a fantasy. The whole private finance initiative racket, which was developed under the Blair administration substantially, is another example in point of people who simply don't understand what they're doing in letting contracts that are so complex, very often—so big, as Dai Lloyd pointed out a moment ago very well—and therefore the failure is on both sides.

I certainly totally approve of and agree with what Jenny Rathbone's just said about the audit racket, where four large firms now effectively control the whole business for big companies like Carillion. This is not a new problem either. When I was the corporate affairs Minister a quarter of a century ago, Terry Smith, who subsequently has become celebrated as a highly successful private sector fund manager and has been described as the English Warren Buffett, wrote a book called Accounting for Growth, which was a pun, because at the time many companies were reporting large profitability, but actually had very, very poor cash flow. The result was massive bankruptcies like Polly Peck and British and Commonwealth Holdings, both of which were cases I had to deal with when I was corporate affairs Minister. So, these problems are of longstanding and go back a long way. 

Carillion increased its size rapidly through a spending spree through debt, as is referred to on page 14 of the business committee's report, but the largest item on the company's balance sheet was goodwill, which is, of course, in effect, how much they've overpaid for the assets of companies that they purchased. The goodwill amounted to £1.57 billion. The actual equity in the company was only £700 million, so the goodwill was twice the size of the actual cash in the business that had been invested by shareholders. So, clearly, that fundamental point ought to have raised alarm bells right from the start. 

The big problem that we face here is that Governments have marketised services, but they haven't actually created markets. Most privatised utilities have become regional monopolies or oligopolies. A genuine market, of course, has customers spending their own money from a choice of providers, like when we go to the supermarket and choose what we want to buy. Companies, similarly, will choose their suppliers of goods, money is paid, profit is made. But what happens in marketised public services is different—this is the last point that I shall make.

A charity or company is often selected from a limited sphere of options, as in this case here where Carillion provides it, and taxpayers' money is handed over. The private sector providers make a profit from it, but throughout the taxpayer is on the hook. If something goes wrong, the taxpayer pays. These are fake markets and they proliferate in Britain's social state. There is no genuine market mechanism here, and market sectors spring up purely to suck at the Government teat. And very often these providers demand assurances from the Government that there will be more contracts to come; otherwise it's not worth their while even to bid in the first place.

So, there's a systemic failure here that needs to be addressed at all levels, both at the corporate level and at the regulatory level, both in the public sector and in the private sector. So, I think this is a very timely debate, and I hope that lessons will be learned from it.