Political boffin, keen fisherman looking forward to retirement.

Tuesday, May 15, 2007

PFI – The fleecing of public money

There’s a very interesting article in the business section of the Independent today referring to the fleecing of public money by PFI schemes. Jeremy Warner notes that history is repeating itself.

Thatcher’s privatisation essentially meant that public assets were sold off to the private sector at bargain prices, effectively ripping off the public purse. According to the House of Commons Public Accounts Committee, the same sort of thing is happening with PFI. The scale of PFI debt, running at well over £160bn according to the last budget if memory serves me correct, means that this is a scandal of unprecedented scale. These are not some sort of side government initiatives, PFI or PPP (Public Private Partnerships as they are called now) have been the central plank of Labour public service financing. It’s political significance is magnified by the fact that the architect of PFI is about to become Prime Minister.

Warner writes:

In particular, the public sector is failing to share in the lucrative benefits that accrue when the debt is refinanced on better terms, or the equity is sold in the secondary market at bumper profit. This is despite the fact that the foundations on which these refinancing profits are built are the revenues supplied by the taxpayer.”

In other words as taxpayers we are being ripped off. Opponents of PFI from the start warned about the over generous returns for private firms from the public purse for their original investment. Now it turns out that whole schemes have been guilty of mismanagement and profiteering.

Now I readily accept that apart from the £16bn monster PFI deal in St Athan, we have seen very little PFI in Wales. However, this matter continues to be relevant to the Welsh taxpayer due to the centralised nature of the taxation system in the UK.

Over the years Brown has been accused of mortgaging the future of the UK by accumulating so much PFI debt. As a more learned colleague once informed me, with PFI, mortgaging the future is to kind a word as assets even after being repaid at vastly inflated costs continue to be privately owned. What Brown has done effectively is accumulate an astronomical amount of unsecured debt. He is the credit card kid of politics.


Geraint said...

I couldn't agree more, and have attacked PFIs on my blog a few times, I think that PFI/PPPs are disgracful, and wasteful. What is the point of the record spending in education and health, if it is being thrown down the black pit of PFI, which is nothing but a backdoor route to privatisation.

PFIs are a sign of New "Labour" being unable to let go of failed policies and to dogmatically persue them because New "Labour" believes that they cannot be wrong, just the same as they believe they have a god-given right to run Labour.

AxeTheTax./ WatchKeeper said...

I wont go into Margaret Thatcher selling off bankrupted Unionist Benefit Clubs, it removed Millions of £Pounds from the Taxpayers shoulders.

Your £160 Billion of PFI debt, is way out of line. The figure is in fact a projected, £1600 Billion.

I do have a copy of one PFI contract. Every time the Hospital involved is mentioned, it is reffered to as a Thirty Year contract. Well yes, up to a point.

But at the end of the first Thirty Years, another Thirty Year contract start.

The original contract, began in the year 2000. It was handed over in 2001 and the first period is intended to work on two levels. The "Ground Rent" is reviewed every year. At the moment it is £37.6 Million each year and can increase at any time.

The original cost was £129 Million. After the first year, 2002 the project was reviewed and the contract Re-Financed. Another £100 Million was paid bringing the cost to £229 Million. Now, I think it was 2005, it might have been 2006, but another review took place and a further £116 Million was paid over to the "Holding Company?", Octaagon Healthcare. The total now Paid was, £345 Million. Taxpayers Money.

This system of "Plundering The Public Sector" (By. David Craig with Richard Brooks.)is set to last and last and last.

The Hospital is built on land, bought from the John Innes Foundation "look it up", yet the Taxpayers will be paying ground rent for the next sixty years, of £37.6 Million. And every five years, the Hospital is Re-Financed.

Then in 2061, the whole thing is reviewed and it starts all over again. And don't forget, there are £1600 Billion, of these open-ended "Jobs" across the United Kingdom.

And in all Probability, "that aint all folks. Regards, ATFlynn.

Ted Jones said...

Thanks to both for your posts. I'll have to re-visit the figures.

Basically you have to ask the question is Brown fit to be PM. The long term implications of PFI costs are astronomical, and the problem is more are being signed off each passing day.

hafod said...

PFI is a scam but look on the bright side - Labour in Wales opposed the New Labour move to PFI/PPP and so we have relatively few, half a dozen schools, a waste disposal plant and a couple of smallish hospitals.
At least local govt and NHS trusts here haven't been saddled with these appalling scams for 30 yrs.
This is probably the one good thing to come out of Rhodri Morgan's rule in Wales.