PFI – A Cautionary Tale 61


Here is my personal experience of the great push for the public sector to use the Private Finance Initiative.

When I was Deputy High Commissioner in Accra, the British government was paying a very large sum to rent over 80 residential properties in a city where rents are very high for quality properties. However the British government owned a lot of land there, and it was an obvious saving to build our own residential compound.

We accordingly drew up plans and got quotes, which were submitted to the FCO with details of the very substantial savings from the medium term. The response was that we had to invite private sector bids for a PFI scheme. This amounted to no more than asking the companies who had already submitted construction bids to submit pre-financing and maintenance plans. Needless to say this increased costs very substantially.

But here is the kicker – in comparing the “build it ourselves” plan with the PFI plan, we were instructed to give an 8% cost advantage to the PFI scheme – the “public sector comparator” – to allow for the extra efficiency of the private sector. No matter we were comparing real costs to real costs, somehow magically an 8% saving would accrue from using the private sector, in a manner the Treasury refused to define. I simply shelved the whole scheme in disgust, but I understand this “efficiency saving” allowance was a standard feature of the PFI scam.

The vital thing to realise about PFI is that it was not the construction companies – such as Carillion – who stood to benefit most. It was the bankers and hedge funds who financed the schemes and stood to rake in decades of high and taxpayer guaranteed interest payments. The fundamental craziness of the entire scam is that in effect the public sector was still borrowing the money, but at significantly higher interest rates than if it had been financed the normal way through Treasury bonds.

As the scheme was at heart a massive diversion of taxpayers’ money to the bankers, it should come as no surprise that Gordon Brown was the driving force behind it. My personal experience of it, which I found disgusting, was during Brown’s tenure of the Treasury. Why Brown is still treated as some sort of guru by the media, when he has caused such immense and demonstrable harm, is an example of the desperation of the media to maintain the neo-liberal “consensus”.

There is no doubt that the people are stirring and increasingly unwilling to accept the gross and fast widening wealth gap in a society entirely skewed by its legislative organisation to the interests of the small number of the ultra wealthy. In the interests of self-preservation, the corporate and state media have been forced to allow the Overton window to drift very slightly left. Nationalisation and wealth taxation are no longer entirely taboo subjects, while Theresa May feels the need to make insincere promises to initiate token measures to restrain boardroom greed. But the blighted prospects of a generation, and the increasing financial struggles of the middle classes, have not yet produced a concomitant political reaction. I have never been so struck by the irrelevance of the witterings of the Westminster classes to the life experience of ordinary people.

It remains my view that Independence for Scotland – and for Catalonia – are part of the radical shake up of the political system required to make democracy meaningful again. The recent moves by the Scottish government on welfare protection, for example to ban the involvement of private companies in health assessments, gives me some comfort in that view. But the situation calls for a politics more radical than Corbyn or the SNP have yet dared to propose. Society now needs a fundamental redistribution of wealth. Parodoxically, the fact that so much wealth now consists in notional transactions rather than physical goods, makes this an easier task than when the classic philosophers first addressed it.


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61 thoughts on “PFI – A Cautionary Tale

  • Stuart Dickson

    ”Parodoxically, the fact that so much wealth now consists in notional transactions rather than physical goods, makes this an easier task than when the classic philosophers first addressed it.”
    Intriguing. Tell us more.

    • John O'Dowd

      It’s what Marx referred to as “Fictitious Capital” – i.e not real productive capital that actually produces wealth on combination with labour power. The fictitious variety is not wealth at all, but a system of claims on the real, productive economy.

      Since much of it resides as paper and digital entries iit can, and should be wiped out – liberating the majority of the population from debt peonage – the form of slavery now favoured by the ruling class.

  • Kangaroo

    PFI was always a scam to divert taxpayer money to private companies, usually cronies of the elite. This diversion was made possible by the obsequious behaviour of those in politics and their craving for social status. (Ref: John Cleese) not to mention the revolving door allowing politicians to personally profit from their deceitful behaviour.

    “Notional transactions” inevitably eventually result in real transactions for real estate, shares etc and these can be subject to clever taxes to address the inequity.
    The wealthy will always rail against this as they want to keep their gains at the expense of the many. So they establish false grassroots fronts such as Scotland in Union and No Borders to pursue their vested interests. Even Braveheart noted the collusion between the Scottish and English landed gentry to keep the common folk down and enhance their own position. So there is nothing new here.
    We have to expose it at every turn otherwise we will lose even more.

    • K. Crosby

      Makes a mockery of the “private sector” that the public sector has to carry an 8% handicap. Imagine you’re given the job of legalising fingers in the till. How different from PFI would your scheme be? Embezzlement a-go-go.

  • Hieroglyph

    The Banks are already turning the screws on the sub-contractors – most of whom are owed large amounts by Carillion. So, through no fault of their own, sub-contractors default, and are out of pocket. Are they given grace by Big Bank? Ha, course not. Nope, they are told to bend over, and await incoming.

    I used to have online discussions elsewhere about PFI. I came to the conclusion that PFI advocates were either utterly deluded, or just plain thick. I’m not an economist, but a more one-sided set of deals it is hard to imagine. Theoretically, a PFI arrangement might work, it all depends on the details of the contract; but the Brown version is a crock. Expect more shady deals to be uncovered.

    Mind, the best PFI deal in the world can’t really help when a business is run by crooks, charlatans, and ethical bottom-feeders. They’ve made their dough, everyone else got screwed, and nobody goes to jail. Win.

    • German Girl

      PFI doesn’t work because the government loses essential things:

      – control of processes like construction processes, or control of rights to supervise <- yep, these rights are seriously given to these private companies, for example: in Germany a school was built by a private company and the district government had not rights to control the building site. As a result the classrooms are too small. They are about 1,5m too short and that equals one row of pupils on desks. Now the district government has three options: putting in less pupils per class which results in rising costs. Or they put in the required number of pupils who then have to sit very very closely which results in less quality education and more disturbances. Or they tear down the school.

      – hands-on experience about processes: for example: a lot of hospitals have outsourced the necessary cleaning jobs to outside companies, as a result the hospitals simply don't know if they are ripped off because they don't know how much time it takes to clean a room or a hall and therefore they can't control the bills which the outside companies send them. And outside company could claim that cleaning a room took much longer and then they rake in a lot more money. (Example from Britain)

      The German Federal Financial Comittee (state institution) has evaluated PFI projects. And they conclude that these projects are always more expensive than government-led projects. They recommended that PFI projects should be stopped. Unfortunately they aren't stopped.

  • Sal Newton

    It’s not just in PFI, Craig. In earlier Tory days I was in the Civil Service. First they started letting the private sector tender for our work, but we couldn’t bid for private work. When we had barely any work left, apart from the bad jobs no-one wanted to do, they sold the department off to a private company. Within months the only staff left working for them were the top managers. I wonder if that is still happening? (Probably, looking at NHS England.)

  • James Chater

    To resist these scams requires people to wake up. This in turn implies that someone or something will free them from the intellectual shackles put in place by the BBC and the gutter media. It is a matter of education, but when these same people are suspicious about education, where does that leave us?

    • Ishmael

      Though never good to generalise. Some are suspicious, but where it comes from is the critical factor (& rightly so) …Even pop culture lets us down after the first album, being then subsumed into corporate culture. ..It still happens, take “blind boy podcast” (podcasts being a modern sort of info spreading) He’s now preaching a form of conservative bootstrap mentality (as he sells himself to iTunes, offers therapeutic background music to sooth the issues he no longer talks about)…”Citations needed” is a good podcast atm. Ep 23 (highly recommended for a look at how we are influenced via films etc. Though I’v no doubt Stallone had the best intensions you can see why that film was funded.

  • Habbabkuk

    An interesting post (as was the one on housing benefit many moons ago), but why oh why this compulsion to drag Scotland and Catalonia into everything?

    It’s perfectly reasonable and legitimate to hold the view that PFIs are a kind of giant, state-run never-never scheme with absurdly over-extractive characteristics. It is also perfectly reasonable and legitimate to use the PFI system example as an argument for the view that “society now needs a fundamental redistribution of wealth” and that the political system “needs a radical shake up”. But i submit that it is unreasonable to advance the thought that the break up of countries (the UK and Spain in this case) is in any way connected with, or could serve as a catalyst for. such a redistribution and shake up. If that were true, then surely Craig should also be in favour of the break up of the European Union (which I assume he is not)?

    • Ishmael

      I’d have to agree & say it’s also an issue that extends to Labour. Talk is cheap. Let’s see some clear plans. I dislike the very notion of market solutions as it extends a certain ideolagly that works againt deeper reform. But I was catching up on what’s going on with the Richmond progressive alliance, & assume among other things a national bank is very much needed. But as I’v noted very many times before, the Indy team does not seem clear on anything, and that’s means you can’t even apply theoretical models of possible routes to better outcomes.

    • Habbabkuk

      As a further example: Czechoslovakia broke up into the Czech Republic and the Republic of Slovakia after the fall of the Evil Empire.

      Did that break up lead to a “fundamental redistribution of wealth” and a “radical shake up of the political system” in either of those two newly separated countries?

      Of course it didn’t !

      • Ishmael

        Sure your history is better than mine. But yea, it makes sense. The only good reforms are pushed from the bottom. The top may play a part, but individuals within it have no power to demand anything, however well meaning.

  • Clydebuilt

    PFI was discussed on BBC Radio Shortbread this morning, McTiernan was wheeled on to defend PFI, his main defence was that putting PFI debt onto the national balance sheet would have damaged the currency and the ability to borrow. STUC boss put forward the opposing view, that it doesn’t matter how many balance sheets the debt is spread accross it still comes to the same total.

    No SNP representation was allowed near this debate. Although the party have opposed PFI from the start are in power and have created their own funding model.

    • Clydebuilt

      Re Gordon Broon always thought the media preserve his reputation so that when required they can wheel him out in Scotland to save the Union.

  • reel guid

    The Major government had actually used PFI quite sparingly. No sooner had Blair’s New Labour got in than they drew up plans for a PFI happy time. Minister of State at the Health Department Alan Milburn was given the task of going crazy with PFI to build hospitals for the English NHS. Consequently the Labour Scottish Office ministers, and after devolution, the Labour Scottish Government were expected by the party to follow suit.

    Before becoming an MP Milburn had been co-owner of a radical left bookshop in Newcastle. He’s just finished a five year stint as Chair of the Social Mobility and Child Poverty Commission. And he’s the Chancellor of Lancaster University.

  • fred

    “It remains my view that Independence for Scotland – and for Catalonia – are part of the radical shake up of the political system required to make democracy meaningful again. ”

    The purpose of PFI is to get round European borrowing limits. Britain signed the Stability and Growth Pact so has to keep borrowing below 3% of GDP or Europe can impose sanctions. PFI puts government borrowing onto the books of private companies.

    Britain leaving Europe should end the necessity for PFI, an independent Scotland re-joining the E.U. would make PFI a necessity once more.

    • Kempe

      The SNP make use of PFI contracts, many of which have been criticised for offering poor value for money. They call it the Scottish Futures Trust but the basic idea is the same; get debt off the balance sheet.

      Private Eye have been complaining about the 8% “fiddle factor” used to make PFI contracts look attractive for years.

    • FranzB

      Fred – “The purpose of PFI is to get round European borrowing limits. Britain signed the Stability and Growth Pact so has to keep borrowing below 3% of GDP or Europe can impose sanctions.”

      I disagree with that – the 3% was the deficit limit for those wishing to join the euro. The limit on debt to GDP ratio was 60% (for those countries wishing to join the euro – in 2000 Italy’s debt to GDP ratio was 105%). Up until 2007, the UK debt to GDP ratio was below 40% (from 1999). Borrowing to build hospitals and schools was capital spending and wouldn’t have been counted against the current account and thus would not have affected the deficit. There was plenty of headroom for borrowing up to 2007. The Blair government was committed to the ideology of privatisation. See student fees, academies, NHS privatisation, council housing. Blair had promised to renationalise the railways but dropped this once elected.

  • Joe Bloggs

    100% tax on wealth and assets over, say, £1 million. 100% inheritance tax. Use the proceeds to fund universal basic income at a liveable level. Abolish corporate ownership except in the case of community co-ops. Of course it will never happen, it seems mad in the context of today’s reality, and just making these suggestions has probably put me on some kind of list.

    • Ishmael

      UBI has issues large scale. It just pushes prices up & would get taken in rents atm. It may be ok in a system were basic services are given (including housing) and that idea of basic services seems a more realistic thing to push for atm. Personally I’d just like to be able to get some help thats not forcing me into some factory minimum wage slavery, just to get the basics to live atm, & work toward my own business. …This whole dam system is a gross form of short term ideolagly that’s going to destroy itself, and us.

      • Joe Bloggs

        I agree, the economic system is broken, dying, and needs replaced. What I proposed above isn’t my preferred solution, I’m actually opposed to UBI as just another sticking plaster for (as a Marxist would put it) the inherent contradictions of capitalism. We need more fundamental change.

        If landlords were subject to a 100% wealth and asset tax over £1 million, and there was no corporate ownership, then who would be collecting rents? If the houses were owned by the community then the money could be recycled into caring for the people living within the community. Money isn’t real anyway, it’s just an abstraction, it seems some of the current problems are cause by people forgetting that fact.

        But yes, you’re right, my attempt at an interim quick fix does seem mad and is unworkable without more far-reaching and fundamental changes. I can see where I want us to be, but I can’t see how to get from here to there. What would you suggest?

        • Ishmael

          I think what you also partly illustrate would help. If we had homes & other basic services that are not entierly subject to profit exploitation/market THEN maybe UBI would work ok. But that’s a long way off so trying to get basic services (that many are fighting for atm) seems a good idea. I’ll try find a link to recent talk on the subject. …btw, I was talking to someone from the states about this & after I gave him what seems to be the current thinking on the in the EU, I thought that over there many may just say sod it, set up their own thing, not worry about money. But here our society is way more under controll, I think the space issue also plays into that, corporate state bureaucracy is in every nook so potential to opt out is less for many.

    • Habbabkuk

      Mr Bloggs

      “100% tax on wealth and assets over, say, £1 million. 100% inheritance tax.”

      ________________________

      That would, in my opinion, be confiscation and therefore a breach of the human rights and freedoms as enshrined in international law.

      It is the politics of envy.

      To be recalled, by the way, that Sweden (of all countries) abolished inheritance tax some while ago. Sensible people, the Swedes. Why should money which has been taxed twice (on earnings and then on the interest/dividends by which inheritable capital is built up) be taxed yet again?

      • Ishmael

        How was that wealth accumulated in the first place habbabkuk? Theft (see land enclosures, the enacting of arbitrary private property rights) & exploited labour. (See the capitalist money trick)

        Your the one on the side of thoes who confiscate. Redistribution would be justice.

        Your for justice arnet you?

      • Phil the ex-frog

        Habbabkuk
        “That would, in my opinion, be confiscation and therefore a breach of the human rights and freedoms as enshrined in international law.”

        Not the ECHR which seems to not consider inheritance a human right.

        “Expectation of an inheritance could not constitute a possession under Protocol 1 Art.1” : Marckx v Belgium (1979) 2 EHRR 330.

        Property as a right is a quaqmire of ideology. I’m sure there are other laws/conventions that contradict this.

        “The politics of envy” is pure ideology, that sees taxes as a man-made interference but wealth accumulation as something “natural” unrelated to how we organise ourselves as society.

      • Stu

        Why should I pay tax on a pint of beer when I’ve already been taxed on my wages?

        Also the idea that inheritable capital is built up through interest/dividends rather than primarily by asset inflation is laughable.

  • Geoffrey

    If you want to make this a nationalist debate ( Why ?) then perhaps the lesson that could be learnt is to keep Scots out of UK politics……..Brown signed up 75% of the UK’s PFI commitments under the other awful Scot Blair.
    I presume, but I don’t know that the bailed out Scottish banks, HBOS and RBS under Brown’s disgraced Scottish mate Fred Goodwin , were heavily involved too.
    If only Scotland had got it’s independence 20 years ago !

    • Ishmael

      lol. Naa, “They” (speaking in nationalist terms, just to facilitate a semi joke) will never be “indipendent” (a myth) … spread can’t now be stoped anyway. We must invade, civilise the savages. Take over for their own good.

      But seriously just made me think about that Scot who’s been on Novara Media lately. It’s amazing to watch the way his whole personality seems to ape Alex Salmond. Like a mini Alex. & this goes for English politicians also. It’s like they don’t have a persona of their own, Like Mays channeling of Thatcher. What concerns me is we have empty vessels, selling historical personas to gain political positions.

      No wonder they can’t come up with much.

  • Silvio

    Craig wrote: “Society now needs a fundamental redistribution of wealth.”

    Former Wall Street economist Michael Hudson offers up a solution that has worked well to solve the “concentration of wealth” problem in ancient economies of the past – i.e. the periodic cancellation of debt by order of an absolute ruler like a king or emperor. However, he admits that the oligarchal structure of our present day Western societies would not make this solution an easy one to implement today.

    “Hudson states that the problem originates with the privatization of finance. ‘Every society in history for the last 4,000 years has found that the debts grow more rapidly than people can pay,’ he says.’The problem is a small oligarchy of 10 percent of the population at the top to whom all of these net debts are owed to. You want to annual (sic) the debts to the top 10 percent. That’s what they’re not going to do. The oligarchy is running things. They would rather annul the bottom 90 percent right to live than to annul the money that’s due to them. They would rather strip the planet and shrink the population and be paid rather than give up their claims. That’s the political fight of the 21st century.'”

    Above quote from the following Youtube video: https://youtu.be/00iY4cpEQDY

    • Phil the ex-frog

      Ah, the ancient Jubilee. Long since co-opted until now “Jubilee” means celebrate the monarch, rather than make them into give back some of the land and wealth they stole.

  • nevermind

    Fact is that no opposition party has made any active attempts to scrap PFI/PPI schemes and hence we have no an HS 2 high speed railway a nuclear power station in Somerset and a nearly hollowed out London that have been added to the PFI scammers.

    Unless somebody speaks out and proposes to engage small and medium companies in these projects, backed by Government securities/bonds, finds another way to make these unsustainable dreams come true, this issue will not be resolved and we will carry on paying banks three times the money they invested and more.

    rescind all NHS PFI’s on humanitarian grounds, banks that had their investment back should write off their lascivious take of the taxpayer and be done with.

  • Baalbek

    Prioritizing private sector outfits has nought all to do with “efficiency” and everything to do with privileged individuals using their power and the influence it affords them to corrupt and ultimately destroy the state and its institutions and make a handsome profit for themselves in the process. It is, as you say, part of the scam that is neoliberalism. What is so dangerous about this scam is that it undermines the power of government and elected representatives at a fundamental level. The neoliberal goal is quite literally the destruction of the nation state and replacing democracy with an oligarchy. Elections will still happen and media pundits will continue trotting out the usual cliches about “our”democracy and how wonderful it is…but it will all be a meaningless charade because elected officials will not be permitted to make any changes not approved by the bankers and CEOs who call the shots.

    We are already far along the road to neoliberal dystopia. Governments in most Western nations have to varying degrees lost control of their treasuries and the ability to generate the revenue required to finance a robust public sector and the social programs and services that benefit all citizens and make for a stable and civilized society. By allowing the deregulation of the finance sector and the subsequent gutting of the real economy through offshoring and outsourcing, governments handed a massive amount of power to the banks and the private sector. Additionally, the profits of banks and corporations are barely taxed and post-2008 states must borrow money from central banks in order to operate, and their relationship to the finance capitalists is as debtor to creditor, hence the endless austerity imposed on states from boardrooms in the City, Frankfurt and Wall Street.

    Should a sincere and incorruptible politician get elected on a ticket to restore programs and services that benefit the wider public, he or she will find it extremely difficult to access the funds required for such endeavours and any attempt to seriously redress the power imbalance between employers and employees and empower organized labour will be vigorously fought. The TPP and similar “trade” deals enshrine this neutering of the nation state in law and strengthens the power of the unelected and unaccountable rentier class. A popular leader who deviates from the neoliberal script and entertains quaint notions about the public good can look forward to the entire mainstream media-propaganda apparatus deploying to demonize and condemn him at every turn, as Jeremy Corbyn found out.

    The panic a genuine left-leaning leader like Corbyn inspires in establishment circles suggests they are still afraid of the proles uniting to take back power, but the left had better get its act together and drop the identity politics nonsense that more than anything else has crippled it and legitimized the nationalist right. Forget thought policing Twitter and get back to articulating class politics in a way ordinary people can understand and relate to. Identity politics and its skewed prioritizing of language over actions is responsible for farcical post-Python moments like the recent uproar over Trump’s “shithole nations” remark which is a stark contrast to the deafening silence from the pearl clutching IdPol class in response to the ongoing slaughter and starve war in Yemen, ongoing Israeli apartheid and war crimes in Palestine and staggering income inequality and the plight of the post-industrial working class and the ever-shrinking middle class in the West. Killing Muslims and poor people in foreign lands and destroying their societies is acceptable but speaking crudely about them is beyond the pale. This is completely backasswards and more than a little bit insane.

    The left must decide if it has what it takes to mount a serious sustained fight against very serious and well-funded opponents who are determined to see the nation state and the last vestiges of post-Second World War liberal democracy dead and buried and replaced by a transnational oligarchy and the small technocratic class it requires to function. The West is literally facing an existential crisis and it won’t be solved by shouting on Twitter, signing Facebook petitions and having public nervous breakdowns every time someone uses rude or offensive language. Truth be told I am not at all optimistic about the left’s ability to meet this challenge, but I take comfort knowing that even I occasionally get it wrong. Not often, mind you, but it has happened once or twice before 😉

    • nevermind

      thanks for that photographic description of our journey up s..t creek, Baalbek. What is coming next, a large conflagration?
      We have fractured society into haves and have not’s, not an inch of sustainability or self sufficiency around, bar some small communities who show the way, but the great majority is totally clueless of what’s coming next.

  • John Goss

    “But the situation calls for a politics more radical than Corbyn or the SNP have yet dared to propose.”

    I agree. However we have to wait until Corbyn comes to power with a massive majority (which he will). Then the impoverished people made poor by the financial sector can petition the UK to do what Finland did to its bankers. Also the unreliable MSM can then be made to start telling the whole truth.

    Talking of which there was a brief snippet of probable truth on the BBC this morning regarding malnourished elderly people. The reader gave a figure which I cannot recall which was thought to be considerably higher because the latest figures available were from 2011. Just a minute I asked myself ‘wasn’t that the year after the Tories came to power?’ So it is unlikely theTories commissioned the study because:

    1 There would not have been time.
    2 The Tories have other priorities and care for the general elderly would not be high on its list.

    In the last seven years, probably in the whole Tory term of office, that party has shown no real concern for people who have spent their lives doing proper work, who at the end are neglected by this government of greed, many of whom should be joining Tony Blair in prison.

  • Barbara Brown

    When I graduated decades ago I was asked what I wanted to do. I answered I want to change the world. I too wanted fundamental change. I can’t see it happening in my lifetime. As we said if marching changed anything it would be banned. Surely it has to be occupation.

    • Clark

      Barbara, you are changing the world right now. Fundamental change is coming because it is unavoidable, due to practical, physical reasons; the question is whether it can be turned in a constructive direction. And the big 2003 demonstration certainly changed something; the attack upon and occupation of Iraq was the last overt war of aggression – since then, the warmongers have been forced to resort to subterfuge, eg. the ‘no fly zone’ in Libya and the support and infiltration of jihadist proxies in Syria.

      It’s a long hard road, and our lives are short in comparison. Fortitude to you.

  • Sharp Ears

    Not exactly on topic of PFI but about the squandering of public money, £47m to be exact which has disappeared into thin air, or rather a collection of trouser pockets and handbags. The Garden Bridge project was heavily supported by Boris Johnson and Joanna Lumley. TfL: were also involved financially – £7m to be exact.

    https://www.architectsjournal.co.uk/news/vince-cable-tfl-chief-should-face-inquiry-over-7m-garden-bridge-grant/10027253.article?

    AJ’s Will Hurst is doing the heavy lifting on this not the Tory/Johnson supporting Heil or Sun and the rest of the MSM. Wait to see if any of them run with the scandal.

    Two of the TfL crowd got jobs with Arup who were designated as contractors for the project. One was de Cani.

    I heard about it on James O’Brien’s programme on LBC. It is well worth listening to.

  • SA

    The consequences if not the inherent aim of the neoliberal globalisation project have been to transfer public funds to private wealth. One aspect of this highlighted in Craig’s article above is PFI but there are many other examples. The whole restructuring of all industries and services in the business model has led to the rise of the Chief Executives, with thier inflated salaries and often unjustified bonuses in all services from Universities, to charities to privatised utilities. But another monetary pressure that grew from privatisation was that of competitive tendering as seen in the NHS. The pernicious effects of the Lansbury reforms was this blatant piece of job for the boys as discussed in this article from 2013:
    https://www.hsj.co.uk/comment/the-harsh-impact-of-competitive-tendering/5062454.article

    Services provided by the NHS suddenly became more expensive because the process of tendering itself added to the running costs. Hidden within the rise in spending for the NHS are these administrative costs that line the pockets of various industries such as consultancy firms, lawyers, private contractors and financiers. The rot of administrative cost rise in the NHS started with Thatcher with the internal market but was pursued relentlessly by Blair’s payment by results as her successor and is now in full flow with the Tories who were helped along by the Lib Dems during the last coalition government.

    So next time we hear politicians quoting figures of real rise in funding the NHS we should ask them a simple question: What percentage of this rise has been due to the rise in administrative cost as opposed to real money to actual patient care?

  • Republicofscotland

    Regarding PFI, Labour were strongly for PFI, in a almost fanatical sense. When Alan Milburn was Health secretary, he even uttered “PFI or Bust” in hindsight the latter seems more appropriate.

    Of course, John Major, got the ball rolling with one of the first PFI schemes, the Skye bridge.

    Bank of America was the lending bank, the cost of building the bridge was £15 million, by the time certain parties palms were greased, the cost had reached £93 million.

    The Scottish government built the new Queensferry crossing without PFI, it’s under budget.

    Back to Labour and PFI, the building of new hospitals saw, every penny milked out of the sick patients. The often removed day room which had a tv for all the patients to watch, was replaced by slot machine styled tv’s you pay for which generated extra profits for the privateers.

    The result of Labour’s love affair with all things PFI is that he taxpayer has been left to pay off billions of pounds to the banks and financial institutions who had and still will make an absolute fortune out of Labour/Tory incompetence/skullduggery.

  • Leonard Young

    PFI was an Australian invention which the UK imported under John Major’s Tory chancellorship. New Labour was critical of PFI in many point-scoring debates in parliament but after gaining power accelerated PFI to a previously unimagined level. At the time and still now, most PFI contracts are not included in the rolling balance sheets of UK PLC and this short-term expedient enabled Gordon Brown and others to pretend that they were “prudent” while simultaneously unleashing mountains of debt on tax payers for several generations.

    Central to this were the bankers and regulators who at the inception of PFI contracts imposed zero constraints on the banking industry to make fabulous profits out of their administration and enabling of PFI contracts. Among the chief enablers to this light-touch were a two key people: Gordon Brown and bank regulators who failed to regulate the detail and scope of tax payer subsidy of £billions loaned on the never-never. It is therefore a cruel twist that the current chairman of RBS, Howard Davies, has only days ago declared that PFI was, and is, a fraud on the British people. Yet it was Howard – the world champion of revolving door blind ambition, having been a senior executive of a handful of failed banks, then failed regulator, then failed academic and now back to failed banker himself, who has spent the greater part of his self-serving career enabling the very financial regime he now pretends to criticise.

    If you think it is the PFI corporations alone that are the bogey-men of this now utterly debunked system of finance, you need to also investigate the hedge funds, merchant banks and other city institutions which were key to the enabling of one of the biggest tax payer frauds in UK history, and which arguably will far eclipse the mortgage frauds of the banksters prior to 2008, if ever the proper accounting of PFI is make known. The NHS alone is now going to be in permanent debt to PFI for several generations.

    • SA

      Thanks for that. The Tories keep saying how much more money has been given to the NHS but that is because the NHS has become a conduit through which public funds are funnelled to the private sector. Option upraiseals performed at huge costs with money going to consultancy firms, the monetising of tendering by trusts to bid against private companies to run thier own services, with big chunks invested into this plus legal fees and so on. In fact it is all a big con. And the nation owes some individuals some billions. Who are these individuals who seem to be getting richer and richer?

      • Leonard Young

        @SA “The Tories keep saying how much more money has been given to the NHS but that is because the NHS has become a conduit through which public funds are funnelled to the private sector. ”

        Precisely, but it’s not just PFI-direct. It is also indirect PFI which includes for example the vast amount of wastage from employing locum doctors and temp nurses through agencies, some of which earn as much or more per employee than the nurses do for each hour worked. Add to this the extremely poor deal the NHS gets from big pharma and suppliers of equipment despite its enormous buying power. The NHS is being sucked dry by a combination of all of these factors.

        • SA

          Indeed. There used to be an NHS licums agency which charged reasonably for locus but that was abolished in favour of the private ones. The other irrationality was that if you fail your targets you have to pay a fine whatever the reason.

  • Sharp Ears

    Have these individuals no shame,?

    ‘Labour has warned that the crown representatives who are supposed to police public sector suppliers such as the failed construction company Carillion face potential conflicts of interest, as its own research showed that several hold external directorships and one is a Tory donor.

    A dossier produced by the party showed that the former admiral Sir Robert Walmsley, who is responsible to the taxpayer for monitoring the outsourcing multinational Serco, also sits on the board as senior independent director of two defence contractors, Ultra Electronics and Cohort plc.

    Daniel Green, the crown representative for the energy sector, is a Conservative donor who has given £330,000 to the party and £15,000 to Theresa May’s successful leadership campaign in 2016. His profile on the LinkedIn network says he is the chief executive of a private equity firm, Liquid Business.’

    Labour alleges conflict of interest in oversight of private suppliers
    People responsible for policing contractors such as Carillion often sit on company boards, research finds
    https://www.theguardian.com/business/2018/jan/21/conflict-of-interests-rampant-in-firms-such-as-carillion-warns-labour

    ‘Former admirals’ are all over the shop. Many are embedded in NHS Trusts and the like.

  • Laurence M. Hazlewood

    What our entire Civilisation needs is a complete paradigm shift. The global obsession with the myth of Money, a grotesque phantasm that exists only in data streams and records held in computer chips has brought this Planet to the very edge of Extinction. All it would take to utterly destroy this myth is one direct hit, as has happened many times before, of a Solar Ejection Flare, A Carrington Event, that would almost certainly wipe out all electrical circuits and systems planet-wide. In an instant the 10% would become like the 90% and with communications wiped out, air travel, powered transport of all kinds as useless as candles in a hurricane, some reality would have to be re-constituted.

    It is criminally obscene that 80% of the “wealth” of the entire planet should be held by 1% of the population. If Man won’t address this problem now it will be too late to do so in the very near future. Nature has an astonishing knack of redressing imbalances in the system, that process is now unstoppably under way. We will not be given a second chance.

  • Craig P

    I have wondered for a while what advice was given to ministers by the Treasury around PFI. There must surely be a report that has not yet seen the light of day pointing out its manifest flaws.

  • Peter Crowley

    The net result of “hedging interest rate risk” is the the bank gets a backhander for uprising the project. This is the secret that the Treasury are trying so desperately hard to hide………

  • Peter Crowley

    i can understand the 8%. It’s the unthinking promotion of swaps I find hilarious.

    PFI, LOBOS,other borrowing…. one question keeps reoccuring

    WHY ARE THEY ALL SO BLOODY LONG TERM?

    Politicians think extremely short term. Companies think longer term. Civil Servants think longer still.

    Mortgages last 7 years. Marriages last 8-11 years, depending on who you ask.

    25 years?!?!?

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