I took part in a Podcast for The National newspaper in Scotland this week, discussing the Private Finance Initiative (PFI). The other guest was Robin McAlpine, although we were not recorded together, but were instead recorded consecutively. That's a shame. I like time in Robin's company and I think the feeling is mutual.
This is the resulting episode. It is free on Spotify, but you might suffer an advert or two:
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Private Finance Initiative (PFI) schemes to finance various public projects were a disaster whose effects we feel today.
PFI: Challenging overly expensive contracts, 18 January 2021 by Andrew Chubb
https://seced.mydigitalpublication.co.uk/articles/pfi-challenging-overly-expensive-contracts
REVEALED: The true scale of school PFI debts (2016)
https://schoolsweek.co.uk/the-true-scale-of-school-pfi-debts/
Private Finance Initiative: hospitals will bring taxpayers 60 years of pain (2011) The Telegraph
https://www.telegraph.co.uk/news/politics/8279974/Private-Finance-Initiative-hospitals-will-bring-taxpayers-60-years-of-pain.html
Thanks
Profit
Fulfilment
Intensified
PFI was the way around the Tory PSBR (remember that?) for Labour after the 1997 election in order to spend whilst pretending not to.
To me – as is the case today – it is evidence that the Tories know how to win even when they lose. They tie Labour up in a Gordian knot of fears of debt, fear of a Left that never was, fear of 1970s IMF crisis.
You can say what you like about the Tories, but they know how to conserve the capital order for sure. Finished as a political force? I doubt it.
As for Labour, they are forced into the arms of a rapacious private sector to fulfil their objectives.
Labour, the clueless victim party of the Establishment or are they now part of that Establishment?
Either way, Labour is too laboured, too self conscious, too lacking in conviction to be of any use to me and thee.
If the Tories that led us previously were donkeys, then this Labour Party are nothing but sheep already halfway to the slaughterhouse.
And outside of the dreamworld that is parliament, the air in our cities is getting saltier by the day…………………
All these problems and issues just because there is a total lack of understanding that the government always has the money to meet the needs of the programmes it wishes to pursue. They didn’t take note of Keynes. It’s the resources that need to be found that, as a country, we might not have. Some/all may need to be imported. In my view, it is the balance of trade that the government needs to be controlling.
Not touched on are aspects of PFI that Professor Allysson Pollock has for many years been raising. Here’s an extract from her piece in The Guardian in 2012.
“Since the policy was launched in 1992, report after report over almost two decades has shown how each wave of PFI has been associated with trust mergers, leading to 30% reductions in beds; staff lay-offs; and closures of hospitals, accident and emergency departments and an untold number of community services – all because of lack of affordability. PFI, once trumpeted as the largest hospital-building programme, was in fact the largest NHS hospital and bed closure programme.”
How might this affect the block grant to Scotland?
Another Guardian piece, also in 2012, explores the rigging of Libor rates and PFI.
“PFI is the way government raises money from the private sector to build public projects such as schools and hospitals. But it has been criticised for providing a lousy deal for taxpayers by being too generous to the private contractors. Under PF2, the taxpayer will take a share of up to 49% in new projects, which the coalition claims will give the taxpayer a better deal.
But how many existing PFI deals were signed on the basis of manipulated interest rates and indexation, causing the repayments to rise annually, and why has the Serious Fraud Office not moved to open all PFI contracts to forensic examination? Unless it does, banks such as UBS and Barclays may continue to profit from deals at the expense of the NHS budget for patient care.
The NHS is generating huge profits and bonuses for the financial services industry under PFI contracts, while repayment terms for the debts are crippling the NHS. In the South London Hospital Trust, for example, debt payments in one of its PFI hospitals, Bromley, are increasing at about £1m a year partly because of complex financial instruments known as derivatives that are based on the Libor rate. Meanwhile, total trust income has fallen by £20m over the last three years. A special administrator appointed by the government is recommending that nearby Lewisham hospital be downgraded to bail out the PFI.”
Oddly enough Alex Salmond has a piece in the National today on that very subject.
https://www.thenational.scot/politics/24495293.alex-salmond-snp-took-country-debt-development-axing-pfi/
I suspect commissioned fur the some reason Robin and I were.
And Alex and I did talk about it this week.
Was PFI the product of political corruption or sheer inability of politicians to think things through or both starting with John Major? Certainly whatever it is the country needs to focus on how we can avoid both!
It was the result of dogma stupidly followed
Like you, I am baffled
It was to keep the borrowing off the accounts.
Geejay says:
August 3 2024 at 12:48 pm
It was to keep the borrowing off the accounts.
Yep. Not unlike going to a backstreet loan shark when you know the bank won’t increase your overdraft. (?). Probably in the bank’s case for sound financial reasons because they know you are in Queer Street and will surely default. But for Gordon Brown to countenance such behaviour to appease a right wing press is unforgiveable. Somewhat akin to handing over the reins of the economy to the BofE…..with a landslide majority he could have done anything that needed done. Pussy !
And the fox-hunting ban which we did get didn’t have any teeth: a total waste of parliamentary time.
Well I’m not going to forgive him. There was respect there once upon a time.
In response to both Schofield and Geejay: PFI is the “Enron” model of accounting – keep it off the balance sheet – shifting capital expenditure (look we ain’t borrowing!) to “normal” expenditure.
Broon and B.Liar were too gormless & also incapable of offering an alternative narrative (to PFI) & in any case by 1997 it was far easier to follow what Thatcher/Minor had already laid down.
I did some work (market studies) for the Japanese gov/cab office in the early 2000s – on PFI, outsourcing etc …they could not understand why the UK gov was doing what it did. I’m not sure the studies left them any the wiser cos it was not clear how outsourcing delivered any benefits.
@ Mike Parr
“…it was not clear how outsourcing delivered any benefits.”
For the government ?……No. Probably an emphatic ‘NO’
For influential and savvy friends and for oneselves a different story entirely.
What’s that smell?. it’s been lingering for so long I hardly notice it any more.
As I recall it was avoid the expenditure showing on the Public Sector Borrowing Requirement. Because in the manner of 1066 and All That (1930 parody of the way history was taught in many schools at the time ) not to be on it was A GOOD THING.
Today I wonder if we have gone backwards. The 1960s Penguin secondary history books explained how Keynes was right about the 1930s.
Today running a tax surplus is said to be A GOOD THING like ‘balanced budgets’. As it being ‘prudent with Taxpayers money ‘. A phrase which seems to be more widely used by journalists since Truss was PM, is ‘UNFUNDED SPENDING. That is, of course, A BAD THING.
The public are considered to be unable to understand complex things. The political establishment have a vested interest in perpetuating that belief.
Much to agree with
The name is Robin McAlpine!
I must have been dozy this morning not to notice those autocorrects
Sorry, Robin
The same dogma that led to railway privatisation………….
James Kirkup in the Times this week says that the Future Governance Forum ” a think tank linked to Starmer has been at work on new partnership models”.
He also says “nor is there anything dishonourable about making a profit from health, educations and the rest. Workers who provide their labour can rightly expect to be rewarded; providers of capital should to”.
Well call me cynical but this looks like another £500bn + down the tubes when PFI/PPP or whatever comes back.
This is the founder of the Future Governance Forum https://www.futuregovernanceforum.co.uk/our-people/
Time for Richard to create a Future Funding Forum?
No, time for the government to think and act for themselves.
I am finite and can do no more right now
I shall leave here links to TheNational s podcast pages, for readers to click through, as they choose.
https://www.thenational.scot/comment/podcasts/
Those who prefer open standards like an rss feed and may prefer to download their .mp3 files and listen to them later will find those facilities here:
https://omny.fm/shows/the-national-s-holyrood-weekly-podcast/playlists/podcast
Direct link to this weeks show:
https://omny.fm/shows/the-national-s-holyrood-weekly-podcast/special-edition-labours-pfi-scandal
😉
In my experience the problem was that the NHS were employing the big 4 accountants as their advisers.
Any manager or nhs accountant thinking for themselves would put the project at jeopardy.
The government / Treasury didn’t care about the costs as in effect it works as a ratchet to cut the costs of the rest of the nhs.
What it has done is penalise some areas who needed a new hospital to the benefit of those who already had updated modern hospitals. So Guys/st thomas’ benefitted while the London hospital has a hospital it cannot afford even though it has a hospital it needs.
The major responsibility for all this lies with know nothing politicians.
I was at a stakeholders arbitration event to find a way out of a negotiation impasse which went on for two days before the representative from the ministers office announced that it ‘ would be career limiting’ if the nhs didn’t give in.
So they gave in.
That minister is now acting as an adviser to Wes Streeting.
The politicians défense that they rely on advice from the Treasury and experts only proves that the whole system has been corrupted.
The issue is what happens to the New Hospitals Programme. It is unaffordable within the current funding systems.
It’s the funding system that needs to change and the nhs needs to prioritise a different set of priorities than Boris’ pet projects.
A good place to start would be to insist on a proper do minimum option on all projects and to ensure that the public sector funded option receives funding.
But I’m not not hopeful.
I worked at a PFI school for nearly 20 years and the school budget became increasingly stretched as it had to pay the various companies taking on the contract. At first it was £80,000 a year but I’m sure this increased over the years. Does anyone know what happens when the PFI contract expires?
@Lee Lawson
“Does anyone know what happens when the PFI contract expires?”
Certainly not the buggers who set them up. ” Hmph. Not my problem guv. “