As the Guardian reported yesterday:
A property company linked to Guy Hands has agreed to sell 36,000 military homes to the UK's Ministry of Defence for almost £6bn, signalling an end to a long-running battle between the billionaire and the government.
Annington will hand over its 999-year lease on the 36,347 homes, known as the Married Quarters Estate, to the MoD and receive £5.99bn in return – almost twice as much as Hands' private equity company Terra Firma paid for Annington more than a decade ago, but less than the £8bn the homes were valued at last year.
John Healey, the Defence Minister, had this to say about this deal in the Commons:
I am pleased to confirm that today, the Ministry of Defence (MOD) and Annington Property Ltd have formally agreed that the MOD will reacquire the 36,000 service family estate homes sold to Annington in 1996.
This agreement reverses one of the most notorious privatisations of the 1990s, with the balance of risk and reward skewed heavily against the public sector. The billions of pounds spent by the MOD on renting back these properties since 1996 could have been better spent on maintaining, improving or rebuilding service family homes.
Estimates suggest the 1996 deal has left the British taxpayer nearly £8 billion worse off - money that could have been used to deliver homes fit for our heroes. In addition to the billions of pounds paid in rent, billions of pounds worth of empty properties have also been handed over to Annington Ltd.
The new deal is a decisive break with the failed approach of the past, which will save the public purse £230 million a year in rental costs: more than £600,000 a day.
The repurchase is obvious and logical and should have happened years ago. So, why mention it? There are four good reasons.
First, this was far from the worst of the 1990s privatisations.
Second, the whole of the PFI (private finance initiative) scheme was worse than this.
Third, everything John Healey is saying could apply equally to a vast array of such schemes, all of which should be bought back by the state.
Fourth, why is Labour now promoting the use of private money for public funding in that case, when it is bound to end up like this deal, as a vast waste of public funds?
So, the question is, why not do that repurchase? It can be done by simply issuing some government debt - at a very low cost, with savings accruing as a result. What is it that makes this government, like others, is so reluctant to deliver in this way?
And why is Labour now so wedded to creating news schemes of this sort? Where is the sense in that?
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All these politicians have an eye on post Politics life/jobs – as such they will do nothing to jeopardise the current positions of their prospective future employers.
What’s best for the U.K. comes a very poor second to what is best for any of these grifters who pretend to act in the Country’s best interests. It has been like this for quite a while now. No wonder people are fed up with politicians.
A former colleague was a governor of a PFI School.
There was a charge from the PFI provider of £1000 for every Governors meeting held on the premises – bear in mind that this was 15 or so years ago
You cant make this sort of thing up
Maybe I can’t calculate (muddling my zeros, there are so many); but isn’t that under £17,000 per home?
I think you’re a decimal point out
£166,000
Quite.
Closer than my first effort just now.
Forgot that Bn was 10^9 => calculated £170 per home. Bargain of the century! lol…
….. all I would add is –
If the government thinks it is a great time to buy 36,000 houses (and Guy Hands sell) then I think we know which direction house prices are heading.
As you say, utterly amazing that a minister stand up in Parliament and make this statement while at the same time the government appears can to be hell bent on pursuing similar schemes to PFI and nobody in the government appears to spot the glaring contradiction, or, if they do, they don’t give a toss about it.
And second – and this fits with you blog about the rich – Guy Hands is such an obvious example of the many vulture capitalists that inhabit the City and yet – again – the government is oh so willing to let these people take lead roles in designing, implementing and overseeing government policy. Why? Is it really that they’re scared of these people? Or is it that they aspire to join their ranks at some point in the future (as Blair, Mandelson, et al have done) and therefore don’t want to make enemies of people who may be in positions to block their future moves to lucrative private sector jobs after they’ve finished ‘cosplaying’ as politicians?
I suspect it’s more the latter than the former.
A mix of both, I suspect.
I think you were being too polite, professor.
🙂
I was brought up in MOD married quarters (when they were maintained by the Ministry of Public Buildings & Works).
An irony not lost on us at the time of the sale, was that Annington was owned by Nomura, a Japanese bank, and this was only 50 years after VE day with many former POWs still alive after their horrific ordeals in captivity.
I did some work for the Japanese cabinet on PFI in the 2000s. They could not understand the (financial) rationale – & thought they were missing something. The report made them no wiser and it was agreed that the Brits then (& perhaps now) were mad (obvs not expressed that way). Spoke to some quite serious people btw – working in the Uk cabinet & later in the 2010s revisited “outsourcing” – the other ultra hot topic, which in retrospect was simply a way of stripping capability out of central and local gov.
Might even be able to find the reports – somewhere.
& for the LINO & Tory people that read this – nothing secret was discussed it was mostly policy – expected outcomes etc & of course – some gossip.
I was asked to work on PFI in 1997 by Alistair Darling. I said no.
Interesting in the sense that we do have a housing crisis, and if the government can do this for “heroes”, they could probably do something similar for others to provide more homes to rent out at affordable levels.
The one issue that government never addresses with housing is affordability, yet in this deal they paid just under £6 billion, for houses valued at £8 billion. The kind of “discount” that most private buyers of overvalued property in the UK never get. I suppose it is the power of the government to be able to buy in bulk! The money is guaranteed.
Like you say, it shows what the state could do, but probably won’t because it would upset the status quo. There are powers that like things just the way they are.
Thank you and well said, especially the conclusion.
One can add the sale and lease back of military equipment and the maintenance of such equipment by private sector firms such as Serco.
Therefore, soldiers have lost skills. It’s just as well that we won’t fight the red army, PLA or even Houthis.
Many ‘Civilian’ organisations were a vital part of UK Defence be it Civil or Military.
The first aggressive action against Germany by Britain in WW1 wasnt carried out by The Royal Navy or the Army but the General Post Office when the GPO Cable Ship CS Alert sailed from Dover & cut the German submarine cables in the English Channel.
In the same way GPO technicians kept communications going during the Battle of Britain and dear old British Rail managed to get the Falklands Task Force away two weeks earlier than planned.
Now these are all in the private sector and dont have the resources to do these sorts of things.
Thank you, Richard.
I remember Corbyn being slaughtered for proposing this. #confused.com.
In the UK what is the difference, or is there a difference, between PFI and a Public-Private Partnership?
Many “Subsidized housing projects” in the USA are a Public-Private Partnership.
Legally, yes
Practically, not a lot
It is astonishing when you look at stuff like this and then you realise that really the whole Thatcherite bollocks was just an excuse to enable like minded people to pick up assets cheaply and exploit them for personal gain.
Correct
As Richard and others say . a total contradiction – buying back PFI assets, at the same time as creating new ones.
The points on here about the hollowing out the capabilities of the public sector to do anything may be reaching its limits.
There is not much more for the private sector to coopt – except maybe in the NHS.
If the govt won’t understand this , and look at alternative ways of doing things – (and with the water disaster it looks as though they wont) the economy and public services will be doomed to bump along the bottom..getting worse.
Again the implications of this PFI buy back will not be discussed on @BBC (‘propagate, dont inveestigate’)
Agreed
Why is no-one asking ‘Where did the money come from?’
Gordon Brown used the more expensive option of PFI instead of simply borrowing money because he wanted to show he could keep “borrowing” down.
The result was that taxpayer’s money filled the coffers of private corporations.
It’s about time Government accounting rules were altered to reflect the higher burden on the taxpayer as a result of PFI contracts as opposed to simply borrowing.