JEREMY Corbyn has accused the UK Government of "negligence" over Carillion as he urged Theresa May to end the "costly racket" of private companies running services for the public.

The Labour leader said the "ruins" of the collapsed construction giant lay around the Prime Minister and he called for private firms to be "shown the door".

Later his office made clear the party was proposing a “very significant change of direction” given the current use of the private sector to manage and provide public services had failed badly.

During a rowdy PMQs, Mr Corbyn said the system of using private contractors to manage public projects was “broken” and cited a number of examples of failure such as the management of the East Coast Main Line.

Noting how in the last six months the Government had awarded more than £2 billion worth of contracts to Carillion even after its share price was in freefall and it had issued profit warnings, he told Mrs May that she and her colleagues “clearly have been very negligent".

The PM, pointing out that a third of Carillion’s public sector contracts were let under the previous Labour Government, said: “We're making sure in this case that public services continue to be provided, that workers in those public services are supported and taxpayers are protected.

"But what Labour oppose isn't just a role for private companies in public services; it's the private sector as a whole."

Later Mr Corbyn’s spokesman said there had been an “unhealthy relationship between the public sector and the private sector,” which had not been a benefit to either the workforce or the public.

He went on: “The collapse of Carillion is a watershed moment about how public sector provision has been handed progressively in larger and larger proportions to very large and increasingly powerful private sector companies, in which transparency and accountability is reduced, costs are significantly inflated, huge quantities of public money are pumped into the private sector unnecessarily into very large bonuses and executive pay packages, in which the terms and conditions of tens of thousands of workers are reduced.”

The spokesman said there was a distinction between the public sector buying in services from the private sector, which had always taken place, and the management of vast public service contracts. A future Labour government, he added, would over time “bring public sector provision back into public control and full accountability”.

In other developments:

*Cabinet Office minister Oliver Dowden said payments to Carillion directors after the date of the firm's collapse had been stopped;

*Brian Berry of the Federation of Master Builders warned there could be a "domino effect" among smaller sub-contractors from Carillion's downfall with "innocent victims" and

*the Insolvency Service said workers on most private sector contracts would continue to be paid and that 90% of Carillion's private customers had indicated they wanted it to carry on providing services until new suppliers could be found.

Meanwhile, a report today said taxpayers faced a bill to private contractors totalling £199bn for schemes under the controversial Private Finance Initiative such as the building of schools and roads.

The National Audit Office found 716 deals were currently operational under PFI and its successor PF2 with annual charges amounting to £10.3bn in 2016/17 and due to stretch into the 2040s.

The GMB union said the spending watchdog’s report showed the system was a “catastrophic waste of taxpayer’s money” and should mean the "game is up" for PFI.

The NAO drew no conclusions on the merits of the PFI and PF2 systems but found the private finance route "results in additional costs compared to publicly financed procurement".

A Government spokesman said through reform a PFI model had been created which improved transparency and offered better value for money.

"Taxpayer money is protected through PFI and PF2 as the risks of construction and long-term maintenance of a project are transferred to the private sector," he added.