Contractor killers

Dave Whyte reports on the hidden human costs of sub-contracting in the construction and engineering industries
April 2004

You could be forgiven for not noticing it, but in Manchester a small group of electricians has been involved in a year-long battle with the construction giant Carillion. The story of this dispute, barely reported outside the northwest, concerns Carillion's recently completed city-centre regeneration project One Piccadilly Gardens. It is a story of corrupt union deals, of profiteering, slapdash firms, of a spineless local council, and a supine custodian of industrial health and safety standards. But most of all, it is about the hidden human costs of cowboy capitalism and sub-contracting.

Last April a dozen qualified electricians working on the Piccadilly Gardens site suspected that they were about to be replaced with unskilled labourers. The electricians were employed by sub-contractor Daf Electrical. The next month they were suddenly removed from the pay system. All 12 walked out in response. They were then sacked, apparently with the approval of a representative from the manufacturing, technical and skilled person's union Amicus.

The electricians immediately set up a picket that between 30 and 40 workers from Manchester, Liverpool and Wigan refused to cross. Many other workers didn't even get as far as the picket line and refused to turn up at the site again. The picket has been maintained for a year now; when One Piccadilly Gardens was completed, it was moved across the city centre to Spinningfields, where Daf is providing labour for another Carillion project, this time to build a new court building. So far, 35,000 members of the public have signed a petition in support of the electricians.

As expected, unskilled labourers were used to replace the electricians early on in the dispute. They were immediately put to work on complex and safety-critical tasks, were often unsupervised and were paid no more than £6.50 an hour in contravention of all national standards. The Health and Safety Executive (HSE) has consistently refused to get involved, disingenuously arguing that the use of unqualified electricians is not illegal. In any case, the HSE refuses to intervene in industrial disputes, even when they are over safety. The fact that there were no major casualties at Piccadilly Gardens is entirely down to good luck.

Yet the HSE's own figures highlight the risks of "de-skilling' electrical work in the construction industry. In 2001/02, for example, 12 per cent of all fatalities in the industry occurred as a result of the electrical finishing process. And it seems that deaths caused by electrical incidents are on the rise: 14 building workers have been killed in the past two years after contact with electricity.

Economists have a special word for the human and environmental costs of doing business: deaths and injuries at work, ill health and greenhouse gases caused by pollution are known as "externalities'; business does not pay for the physical damage it causes so long as it remains "external' to the profit/loss balance sheet.

This is standard accounting practice. Accountants still do not have a clue about how to measure the true human cost of business activities - even when deaths and injuries are officially recorded.

Neither do the statisticians have much of a clue about the full extent of injuries caused by work. The Health and Safety Commission estimates that only 42 per cent of non-fatal injuries at work are ever reported: the sub-contracting chain ensures that most injuries never see the light of day. "Self-employed workers' report less that 5 per cent of non-fatal injuries.

The lower down the chain a contractor is, the more likely it is that they will be blamed for safety problems. But if injuries can be covered up, no one will get blamed at all. And in industries where sub-contracting is widespread, a good safety record is highly prized by employers keen to demonstrate their good conduct to government and the public. The command to keep safety records clean is passed down the line. For the agency worker, covering up for a workmate's broken wrist or not bothering to report an electrical burn might be the difference between keeping and losing the next job.

Sub-contracting encourages companies to ignore their legal responsibilities. Lord Cullen's official inquiry into the Paddington rail disaster in 1999 referred to the rail industry's own research that found 40 per cent of Railtrack contractors failing or refusing to comply with safety law. Sub-contracting caused a "cascading effect' of non-compliance, with the responsibility for monitoring safety passed down to the companies carrying out the work.

Squeezing the workforce

The aim of sub-contracting is to produce a multi-layered false economy. As the number of participants in the market increases, so the opportunities for squeezing workforce costs are enhanced. Wages are forced down, and the responsibility for paying for training, holiday and sick leave and pension rights is displaced down the sub-contracting chain onto the workers themselves.

The currently fashionable mantra in human-resource management is that sub-contracting and competitive tendering allow for skills and specialisms to be targeted and concentrated where they are needed most. In fact, because this false economy forces cost savings to be made at every layer, and because it is now deemed too expensive to train workers on the job, it actually has the opposite effect. Sub-contracting encourages de-skilling, which in turn increases the risk of death and injury at work. The current shortage of experienced engineers and track workers in the railways is the direct result of privatisation and the creation of a multi-layered labour market.

In February four workers were killed on the railway in Cumbria while working on a maintenance contract also held by Carillion: they were hit by a 1.5-tonne wagon that had careered out of control. Perhaps the most shocking aspect of the Cumbria tragedy is the fact that Carillion was in charge when an almost identical incident occurred just 20 miles away in January 2003. The company can hardly not have been aware of its legal obligation to protect its workforce from runaway wagons.

It is unlikely that Carillion will be made to pay a heavy price for the Cumbria deaths, however. The operating profits of fellow rail maintenance contractor Jarvis rose by 20 per cent to £29m in the year that it was blamed for the maintenance problems that caused the Potters Bar rail crash. Last year two Balfour Beatty executives were charged with corporate manslaughter in connection with the Hatfield disaster of 2000; in the year that the disaster took place Balfour Beatty posted record profits of £86m - up 68 per cent on the previous year. In 2002 Carillion's own profits rose by 100 per cent - largely because of the number of public-sector contracts it managed to acquire. In the same year, three people were killed in Carillion workplaces and the company was prosecuted six times for health and safety crimes. Yet in September 2002 Carillion was handed a rail industry award for "best maintenance contractor in the UK'. Days later it was back in the dock for electrocuting track workers in two separate incidents. And when fines are imposed by the courts they are derisory: the average in 2002/03 was £29,564 per death. So, the message couldn't be clearer: not only can contractors kill and maim with impunity; they'll probably pick up an award in the process.

Appalling health and safety standards certainly won't harm your business. Even after accounting for Network Rail's reclamation of track contracts, the portfolios of Carillion, Jarvis and Balfour Beatty are likely to be stuffed with publicly funded projects for the foreseeable future. Nowhere in government will you hear anyone raising the possibility that contractors like Carillion might actually owe us for their railway misadventures. Four years ago The News of the World published a leaked memo from Carillion's rail maintenance subsidiary GT Railway Maintenance that showed management had instructed workers to ignore or downgrade track defects in order to save them the cost of making replacements. This was not only safety-critical work, but work that had already been paid for.

Where public money is being used to finance building projects, lines of public accountability still exist in some form. Local authorities insert provisions in contracts that are supposed to protect local labour. In Manchester the Daf electricians have claimed that provisions are being breached. But the council still refuses to act; its Labour leader Richard Leese says he raised the case with Carillion and the company told him that it does not use unqualified electricians. Dismissing the dispute as "inter-union', Leese claims the council doesn't have the authority to intervene.

It has been left to the striking workers themselves to ensure that casual labour is not being used. In one major victory they used a little-known clause in the Employment Agencies Act 1973 to get the Department of Trade and Industry to remove 12 agency workers from the court building site. The local branch of the civil service union the PCS is also considering a boycott of the building because of safety concerns.

Contrary to popular belief, local authorities still have a great deal of power to protect the public interest. Yet they continue to use privatisation and public-private partnerships as excuses to sub-contract out the democratic control of major public projects. The significance of the Manchester dispute is that it is bringing to light a corrosive human economy of sub-contracting that is underpinned by a decaying system of public-spending accountability. The Manchester electricians have refused to accept the golden rule of cowboy capitalism: that whenever they can, business managers will pass their responsibilities onto contractors and agencies further down the line. We must prevent our elected representatives from doing the same.

Unions and business - "partners' or sweethearts?

Electricians in the construction industry are covered by an antiquated union-management deal between the Electrical Contractors Association (ECA) and the engineering trade union Amicus. Covering all electricians on construction sites, the Joint Industry Board (JIB) agreement is based upon a model New York "sweetheart deal'.

The JIB consecrates a unique dispute resolution system, which is aimed at bypassing normal industrial relations procedure; until two years ago it barred workers from the right to an employment tribunal. This central part of the agreement was abolished after it was deemed to be in breach of the European Convention on Human Rights.

Under the terms of the JIB, employers pay Amicus dues for each worker covered by the agreement. It is rumoured that this nets the union well over £1m a year. Membership of any other union is aggressively discouraged by contractors and union officials. Workers in the Manchester dispute have evidence that Amicus officials sanctioned their sacking in a bid to preserve good relations with management.

The electricians were locked out before they could hold a strike ballot, but the corrupt politics of demarcation in the industry may also help explain why their dispute has not been recognised as official - a status that would ensure full strike pay. Instead, workers have been given token payments from the hardship fund of their union the TGWU, and the union has promised them legal representation for their tribunal. Some TGWU national officials are unhappy with the dispute and the friction it might cause with Amicus, and this lack of national support has caused problems even with the hardship payments. They were mysteriously cut off for six weeks over Christmas.

Jumping before you're buried

Jimmy Cullen is an electrician's mate from Openshaw, Greater Manchester. He was employed as a labourer, on £6.50 an hour at the Carillion site at Piccadilly Gardens. Jimmy walked off the site before the dispute drew public attention to the safety conditions there.

"I left because they tried to get me to do the job a skilled electrician should be doing. They asked me to connect light fittings. I am not competent or qualified to do this. I was also told to work without any supervision, but even if I was supervised I shouldn't be doing something as skilled as connecting light fittings and wiring up lights. It says in black and white in the national agreement that only a qualified electrician can do this work. It's not safe.'

Jimmy, like so many construction workers, was not in a position to refuse to do the work. "Whoever you work for, you know they can push you around. Refuse to do anything and they'll get rid of you. If you are with an agency there is no overtime rate during the week, no holiday pay, no sick pay. Weekend overtime is £1 extra per hour. It's a joke, but often the only option you have. When the agency phones and asks you to work, you do it because you know they won't ask you back otherwise.'


 

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