Carillion was “like a Ponzi scheme” and subject to “inadequate” Government scrutiny, according to the UK’s longest-ever serving auditor general.

Sir John Bourn said he was “angry and disappointed” when the troubled construction and outsourcing giant collapsed in January, leaving almost 500 public contracts in limbo and tens of thousands of suppliers and sub-contractors unpaid.

“The Government should not in my view have given Carillion so much work,” said Sir John, auditor general from 1998 to 2008, interviewed for a Dispatches investigation to be broadcast on Channel Four tomorrow. “You could see that Carillion was in trouble – it was all rather like a Ponzi scheme because it was taking small contracts as a way of keeping the bigger contracts going.”

Sir John is particularly critical of the decision to award Carillion eight public sector contracts, worth almost £2bn, after it issued an £845m profits warning in July 2017, among the biggest the City has ever seen.

“I was surprised the Government went on giving it contracts – you couldn’t have had a better warning to be careful,” said Sir John. “It wasn’t a good idea to give [this work] to a company in such a dicey position”.