Realist, not conformist analysis of the latest financial, business and political news

Interserve’s Bankruptcy Would Be A Delicious Gift To Taxpayers

Interserve is the latest of the outsourcing companies – like Carillion – to face financial difficulties. Quite why it’s so difficult to take guaranteed payments from Government and to make a profit therefrom is unknown but there it is – bad management would be the likely cause. Interserve isn’t as badly off as some of the others, this is true, it’s facing difficulties, not already bust. However, let’s just follow the story where it might lead – imagine, and this is imagine of course, that it does go bust. This is the most delicious gift to taxpayers of course:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Interserve, the struggling outsourcing group, is drawing up plans to hand its £250m building materials unit to its lenders as part of an ambitious plan to secure the company’s future. Sky News has learnt that Interserve and its advisers are examining the option of spinning off RMD Kwikform, one of its most profitable businesses, to the holders of hundreds of millions of pounds of its debt. If it pursued the proposal, it would leave the remainder of ‎Interserve as a more focused support services business. [/perfectpullquote]

Think this through for a moment. The shareholders have put in some amount of capital. That then being used to underpin the provision of various services to government and thus to us, the taxpayers. OK. Sure, we can argue about how efficient this is, is it a good idea and all that. Everyone will follow the arguments which best exemplify their prejudices on the subject obviously enough.

Now the company is in economic difficulties. The shareholders are thus losing money. Actually, the company is losing money. The people who lent money to the company are highly likely to lose money as well as the shareholders doing so.

So, what’s the effect of this? We’ve had the transfer of some to all of the shareholders’ capital to the provision of public services. Without having to pay it back. We’ve had the transfer of some or all of the lenders’ money to the provision of public services. Without having to pay it back. We’ve had the transfer of private money, the transfer of money from the capitalist pigdogs to the public sector, into the provision of public services. This is a grand deal for the taxpayer, isn’t it?

Quite, the failure to make a profit, the bankruptcy of outsourcing providers, is, by the very amount of the losses, a private sector subsidy of public services. This is a great deal for the taxpayer, isn’t it? Anyone arguing the opposite isn’t thinking.

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Jonathan Harston
Jonathan Harston
5 years ago

Oh dear. I did contract work for Carillion and for Interserve. Most recently for Sodexo who are having wobbles themselves. Should I be worried?

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