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Labour tonight pledged new powers to let the government seize "risky" privatised contracts in a policy formed announced Carillion's collapse.

Shadow Cabinet Office minister Jon Trickett vowed to "take back control" of contracts from corporate giants if they fail to meet a long list of standards.

The policy would introduce the right for government to take back control of future public contracts from firms engaging in risky behaviour.

This would happen either by retendering the contracts to other private firms, or bringing them back in house, Labour said.

A firm could be deemed risky if it pays suppliers too slowly, pays staff and managers too unequally, refuses to recognise trade unions or fails on training and environment standards.

It comes almost exactly a week after the construction and outsourcing giant Carillion collapsed leaving almost 20,000 jobs hanging in the balance.

(Image: EPA)

Theresa May insisted the government was simply a "customer" of Carillion after she was slammed for handing the firm more than £1billion of public contracts after its profit warning last summer.

But Mr Trickett was set to say this evening: "The Tories have handed over multi-million pound contracts to large companies, regardless of how unstable those firms are.

“The Government is overseeing a race to the bottom in these firms’ standards, turning a blind eye to blacklisting, tax avoidance and a whole host of other questionable behaviours.

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“Theresa May has said she is a customer of these huge companies, but she’s actually the Prime Minister and should act accordingly."

Mr Trickett said firms will have to give full union recognition, "move towards" a 20:1 ratio between their highest and lowest paid workers, and pay suppliers in full within 30 days.

PCS union general secretary Mark Serwotka said: "Our public services are struggling to cope after years of funding cuts and privatisation has created further chaos. Any government which brings these contracts back in house will have our support".