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PFI: Unpalatable & uncuttable

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posted on Oct, 14 2009 @ 10:10 AM
There are several aspects to this news piece in the Private Eye about the revealings of a new Audit Commission that are interesting and important. Firstly, there’s the conspiracy angle in that the government are refusing to include some massive and worrying figure to the ‘official’ government debt figures. This is despite Gordon Brown saying last year that it was wrong to do such a thing, but when the problem is on this scale, it’s probably best to keep it under wraps, eh, Gordon? Another conspiracy angle would be the ominous privatisation of military training that gets mentioned. If this was happening in America, we all know there’d be a dozen threads on that alone.

Perhaps the real conspiracy angle should be why PFI schemes exist in the first place as the only people that seem to benefit from them are private firms.

There’s also a relevance to the news of Gordon Brown holding a “fire sale” in order to pay off debt in that these are things that the government will barely admit to despite costing the taxpayer £billions but can’t actually get rid of. Not to mention how it compares to the almost daily stories about how teen-age mums, the unemployed, the sick and immigrants are costing the country. The reality is that when you want some really big numbers as to where money is actually leaking out of the Treasury it’s on things like PFI schemes and failed private contracts regarding nation-wide IT schemes that evaporate despite costing £billions.

Also, on a personal level, this illustrates the reality of ‘socialist Britain’. It’s something I hear constantly on this board, even after several posters had to go into overdrive to explain how what many American’s perceive as being socialist, socialist policies and so on wasn’t really the case. Anytime there’s been a bad news NHS story on this board, it’s always jumped on by ignorant assertions as to ‘this is what happens when you have socialized medicine (sic)’. Yet, ironically, I’ve not seen a bad news NHS story on a message board for a long time about a hospital that wasn’t actually a ‘trust hospital’ and was therefore at least partly-funded by a Private Finance Initiative scheme. This means, rather than being the socialised bogeyman that many Americans try to suggest, they’re actually run on very similar lines to private firms but are free at the point of use. All these ‘socialized’ policies that are perceived as failures by Americans actually seem quite ‘freemarket’, ‘capitalist’ and American to me.

I really can’t stress how important PFI is to the problems with this country and yet, nearly everyone I speak to about it, knows practically nothing about them and that’s if they’ve even heard of them. In the 1980s there was massive round of privatisation which was sold to the public as being good for business as it would drive competition and so on. As much as I resent this kind of privatisation and the knock on effect that nothing in this country actually belongs to the country anymore or even firms based in this country, at least it was semi-honest and out in the open. What’s been happening for the last decade or so has been privatisation by stealth.

I am having to include much of the original as it only exists in print form so I can’t take the opening or relevant paragraphs and link to the actual story.

Unpalatable & uncuttable

How much are the country’s 640 private finance initiative schools, hospitals and the like costing taxpayers… and what can be done to cut the bills? Sadly, “a lot” and “nothing” are the answers.

Non-negotiable payments under PFI contracts are running at more than £8bn on projects with “capital value” (broadly the cost of building the hospital or school) of 363bn. But even these numbers mask the difficulty of coping with PFI in practice.

Hardest hit are education and health. The latter’s budget has £1.2bn in PFI costs to shoulder; and the effect in some trusts has been crippling.

A new Audit Commission report shows six acute hospital trusts in England still burdened by huge deficits despite cuts and efforts at “turnaround”. Much of this is put down to poor financial management, but five of the trusts operate from buildings built and financed through PFI and so are saddled with massive extra costs too. They are:

  • Barking, Havering and Redbridge Hospitals trust, which has a £35m deficit accounted for by a £238m PFI hospital costing £45m a year;

  • Bromley Hospitals trust (£4.9m deficit; £120m PFI hospital; annual cost: £13m)

  • Buckingham Hospitals trust (£2.745m deficit; £45m PFI hospital; annual cost: £13m);

  • Queen Elizabeth Hospital trust, Greenwich (£5.5m deficit; £96m PFI hospital; annual cost: £24m)

  • West Middlesex University Hospital trust (£3.5m deficit; £96m hospital; annual cost: £12m)

By contrast only one of 130 non-PFI acute hospital trusts has a deficit.

Across government, the full set of PFI deals valued at £63bn will eventually cost taxpayers a whopping £246bn on the Treasury’s latest figures. But with a further 115 scheme valued at £13bn “in procurement”, this, and the annual bill, are already set to rise significantly. Thus, though every political party is committed to spending cuts, unless some very big deals are reneged upon, PFI payments will simultaneously go up.

The deals won’t be pulled because PFI remain politically useful. Despite Gordon Brown’s declaration after the financial meltdown last year that “it was wrong to have off-balance sheet activities”, the Treasury recently announced that PFI will continue to be excluded from government debt figures.

So PFI will roll on regardless and programmes such as the bizarre deal to privatise military training, or the flagship Building Schools for the Future scheme, will not be reined in.

Growth areas are waste treatment, where £2.75bn of rubbish processing is in the PFI pipeline to go with the £1.8bn worth of deals already signed by councils and educations.

As education secretary Ed Balls struggles to find the £2bn savings he has hinted at, and at the same time has to cope with an annual PFI bill of more than £700m, another 33bn worth of schools are being negotiated under BSF, even though the scheme was recently panned by the Commons public accounts committee as ludicrously expensive (but very profitable for the bankers and consultants). These projects will soon cost the schools budget at least a further £400m a year (more than the £250m a year Balls says he will save by cutting senior teachers jobs). And if the full £55bn programme goes through, as remains promised, the soon-to-be-slashed education budget will eventually carry an £8bn annual PFI millstone.

Whether there will be enough left in the pot to teach pupils how not to screw up public finances for their children is as at best uncertain.

posted on Apr, 4 2010 @ 06:23 AM
I think PE do themselves a disservice by not having their content available online, except for the jokes and trivia. I've been collecting it for over 30 years and it's like an alternative history of the UK.

And I'm pretty sure that it was them (although it might have been George Monbiot) who noticed that this method of finance had a previous heyday in Mussolini's Italy. As he said, fascism should more properly be called corporatism as it marks the merger of state and corporate power.

As did state-capitalist Communism, of course.

Pity so few Brits on these boards look at stuff like this.

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