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The Tory government faces furious questions today over why it handed more than £1billion of public contracts to stricken company Carillion .

The British construction and public services giant, which employs 20,000 people, was plunged into liquidation this morning over financial woes.

Carillion runs massive railway building projects as well as being responsible for services at schools, prisons and NHS hospitals. It provides school dinners for more than 200 schools.

The government, whose COBRA emergency committee meets to discuss the collapse today, announced it will continue to provide funding required by the Official Receiver to maintain public services.

Cabinet Office minister David Lidington stressed the only extra costs to taxpayers would be those of the Official Receiver, insisting staff should "keep coming to work" and "will continue to get paid".

But there are growing questions about why his government kept rewarding Carillion with public sector work after it sounded profit warnings.

(Image: AFP)

The firm, which has debts of £1.5billion, issued a profit warning in July. Yet days later it was given an HS2 rail contract worth £1.4billion and a £158million MoD deal.

Carillion issued a second profit warning in September. Weeks later it got a £62million rail contract.

The Cabinet manual says firms that issue profit warnings are “high risk”. The deals are likely to come under fire in the House of Commons today.

Carillion chairman Philip Green, who urged people in 2015 to vote Tory, was an adviser to then-Prime Minister David Cameron .

The firm has 450 government contracts that represent more than a third of its reported revenue in 2016.

(Image: AFP)

Shadow business secretary Rebecca Long-Bailey demanded a "full and transparent investigation" not just into the company, but the government.

She warned there were "extreme concerns" about the government's handling of the situation adding: "We expect the Government to step up now, take these contracts - the public sector contracts - back into public control."

Lib Dem leader Sir Vince Cable added: "We urgently need a parliamentary inquiry into some of the very questionable decisions made in the past few months - not least the award of public contracts to a company that was clearly in danger of collapse.

"The issue of the former chief executive still being paid his salary, plus perks and bonus, is also a reward for failure that has to be looked into."

Asked if the latest contracts were a mistake, Theresa May's spokesman said: "Since the profit warnings were issued in July, the Government has been closley monitoring the situation and has been in constructive discussions with Carillion.

"We remained hopeful that a solution could be found while putting robust contingency plans in place to prepare for every eventuality. Our primary responsibility has always been to keep our essential public services running safely."

But Shadow Cabinet Office Minister Jon Trickett said: “Alarm bells have been ringing for over six months.

(Image: REUTERS)

"The Government must [say] what due diligence measures were undertaken before awarding contracts to Carillion worth billions.”

Rail, Maritime and Transport union general secretary Mick Cash said: "This is disastrous news for the workforce and disastrous news for transport and public services in Britain.

"We have been warning since Thursday night that we thought the collapse of the company was imminent.

"The blame for this lies squarely with the Government who are obsessed with outsourcing key works to these high-risk private enterprises."

Shadow Transport Secretary Andy McDonald said the government should step in and take over Carillion’s rail contracts.

GMB national secretary Rehana Azam said: "What’s happening with Carillion yet again shows the perils of allowing privatisation to run rampant in our schools, our hospitals and our prisons."

Yet Tory minister Mr Lidington defended the private finance system as a whole, saying: "Since its inception in the 1990s private finance has helped to deliver around £60 billion of much-needed capital investment in infrastructure in the UK across a range of projects.

"We will continue to maintain partnerships with responsible firms in future.”

Downing Street denied the government "fed" Carillion contracts to keep the firm going and said the number awarded since its profit warning was in "single figures".

Some, but perhaps not all, of those contracts were joint ventures meaning other firms can help pick up the slack, Theresa May's spokesman said.

No10 did not rule out an investigation into the tendering process in future. "If there are lessons that can be learned they will be," a spokesman said.

Some contracts may be taken back in-house, Downing Street added - without being able to confirm how much that will cost taxpayers.

Asked if Transport Secretary Chris Grayling had failed over the HS2 contract, the spokesman said: "No. HS2 carried out additional due diligence. It sought reassurance from Carillion and its two partners in the venture, who are Kier and Eiffage, that they remained committed and able to deliver the contracts."

Asked about staff in private sector contracts the spokesman said: "This is obviously extremely regrettable and we understand some members of the public and staff in particular are going to be concerned about Corillian’s announcement.

"We stand ready to help them in the usual way. It’s too early to say what the outcome will be in relation to each individual contract which Corillian hold, but we will provide any help that’s needed."

But Theresa May's spokesman added: "Taxpayers cannot be expected to bail out a private sector company."