City Link debacle shows law stacked in favour of bosses – MPs
THE City Link debacle has exposed how far insolvency laws are stacked against workers, senior backbenchers said yesterday.
MPs from the Scottish affairs and business select committees said the balance needs shifting after finding that the system is too heavily skewed in favour of investors and directors.
Current rules meant it was actually in City Link’s financial interest to break the law and ignore statutory redundancy compensation as any fine would be paid by the taxpayer, the committees’ report into the Christmas closure found.
City Link workers’ union RMT said it had warned about the “carefully engineered collapse” of the courier.
General secretary Mick Cash said: “Lives were wrecked, with the taxpayer footing a massive bill, while those responsible skipped away unscathed and with large chunks of their assets protected.”
The company was placed into administration at 7pm on Christmas Eve following several years of losses.
For many of the 2,727 staff and 1,000 contractors, the first confirmation that their jobs and livelihoods were at risk came from reports in the media on Christmas Day.
The report said under the current system, those who have given secure credit to a company are “cushioned” from the impact of an insolvency because losses are borne by workers, contractors or suppliers.
The committees recommended the government should support dialogue between unions, employers and insolvency experts. The report said it regretted that City Link’s owners, Better Capital, felt its investors’ interests could only be protected at the expense of the delivery firm’s future, and its workers.
Scottish affairs committee chair Ian Davidson said: “The rules on insolvency, on everything from how and when information is shared with employees, to the order in which creditors are paid out, are skewed too far to the advantage of investors, directors and management.
“Further, the system provides perverse incentives to withhold information or to skip proper consultation processes in contravention of the law and at a high cost to workers struggling to cope with the loss of their livelihoods.”
A Business Department spokesman said: “We will be taking a detailed look at this report and responding in due course.”