Carillion bosses face an investigation into a “shameful” bid to protect their bonuses before the firm went bust, with the company’s collapse now threatening to turn into a major corporate scandal.

The Government warned directors of the firm, which handled hundreds of public contracts, that they would be hit with “severe penalties” if found guilty of misconduct in securing some £4m in handouts last year.

The bonuses were branded “exorbitant” in the Commons – one former cabinet minister likened the situation to a “British Enron” – while Labour leader Jeremy Corbyn said the collapse is a “watershed moment” for privatisation.

As the fallout spread, ministers were adamant fault lay squarely with the firm’s management and said taxpayers would avoid significant extra costs, despite stepping in to ensure Carillion-provided public services continued.

But a slew of inquiries are now expected to pick through not only Carillion’s downfall, but the actions of ministers who handed the firm 450 contracts in recent years.

After Carillion failed, having racked up debts and liabilities worth £1.5bn, MPs heard how bosses tweaked rules in the firm’s 2016 annual report to make it harder for investors to clawback bonuses if the company hit trouble.

Previously the firm had the right to reduce bonuses not yet paid, but after the 2016 report so-called “clawback” provisions could only be applied if financial results “have been misstated” or “the participant is guilty of gross misconduct”.

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A few months after the alteration an accounting crisis wiped £600m off the firm’s share value.

Labour MP Emma Reynolds, in whose constituency 400 of the 20,000 at-risk UK jobs are located, branded the bonuses “exorbitant” while workers’ pensions were at risk and creditors are set to get nothing.

Cabinet Office Minister David Lidington told the Commons in response that the official receiver in the case would launch an investigation into the circumstances around the firm’s collapse, and went on: “I think it would be wrong of me from the dispatch box to pre-empt the inquiry … into the conduct of both present and previous members of the board of directors.

“But I can say ... that the official receiver has not only the power to investigate, he has the power to impose severe penalties.”

His Labour counterpart Jon Trickett said: “It is shameful that as Carillion went from crisis to crisis, they were more concerned about protecting their big bosses rather than workers or our public services.”

The Institute of Directors (IoD) also waded in with a stinging rebuke to Carillion’s top executives for what it called a lack of “effective governance”.

Jeremy Corbyn attacks Conservatives' 'rip-off privatisation policies' after Carillion collapse

Head of Corporate Governance at the IoD, Roger Barker, said: “There are some worrying signs. The relaxation of clawback conditions for executive bonuses in 2016 appears in retrospect to be highly inappropriate.”

The firm was involved in providing school dinners and cleaning services to some 230 schools; delivering maintenance and facility management services to hospitals, including 200 operating theatres, covering almost 12,000 beds and catering for 19,000 meals a day; construction work on rail projects including HS2 and Crossrail; maintaining 50,000 Army base homes; £200m of prison contracts and other major construction projects.

There are some worrying signs. The relaxation of clawback conditions for executive bonuses in 2016 appears in retrospect to be highly inappropriate Institute of Directors Head of Corporate Governance Roger Barker

The firm’s share price has plunged more than 70 per cent in the past six months after making a string of profit warnings and breaching its financial covenants.

But Downing Street accepted that eight contracts had been signed since a July 2017 profit warning, including a deal last Monday not yet signed with Leeds City Council to provide a new orbital road.

Of the others, two were deals with the Ministry of Defence, two related to HS2 and two were Network Rail contracts with a joint venture attached, plus a further one without, worth £62m.

Mr Lidington said: “It is regrettable that Carillion has not been able to find suitable financing options with its lenders and I am disappointed that the company has become insolvent as a result.

What is the Carillion fiasco? Economics Editor Ben Chu explains

“It is however the failure of a private sector company and it is the company’s shareholders and its lenders who will bear the brunt of the losses: taxpayers should not and will not bail out a private sector company for private sector losses or allow rewards for failure.”

He said the taxpayer would step in to ensure workers providing public services were paid and to indemnify the official receiver, but officials insisted it would not mean major extra costs beyond what the Government would have paid Carillion under normal circumstances.

But as well as the official receiver’s probe, the Commons Public Administration Committee announced it would launch an inquiry into how the Government manages the risks of outsourcing.

One area of inquiry will likely include a decision to move a Government representative tasked with managing the relationship between Carillion and the public sector to another project, around the time the firm issued a profit warning last summer.

Labour Peer Andrew Adonis has said the Carillion fiasco has ‘shades of a British Enron’ (PA)

Ex-Labour cabinet minister Lord Adonis said the situation had “shades of a British Enron”, adding on Twitter that it involved “wild overbidding, fast-and-loose & grossly overpaid management [and] taxpayers taken for a ride”.

The Transport Committee will also grill Secretary of State Chris Grayling next week over contracts he approved before considering a wider inquiry, while chair of the Pensions Committee Frank Field MP said the Government had failed to heed warnings about Carillion.

The Labour MP said: “We called over a year ago for the pensions regulator to have mandatory clearance powers for corporate activities like these that put pension schemes at risk and powers to impose truly deterrent fines that would focus boardroom minds.

“If Government had acted then, the brakes might have been put on Carillion’s massive ramping up of debt and it never would have fallen into this sorry crisis.”

Britain’s corporate governance watchdog, the Financial Reporting Council, revealed they had been “actively” watching Carillion.