ARE WE MORTGAGING OUR FUTURE FOR SHORT TERM GAIN?

Discussion in 'Current Affairs, News and Analysis' started by pombsen-armchair-warrior, Jun 21, 2007.

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  1. MoD PFI Projects, the most recently delivered probably being Colchester, with ALLENBY/CONNAUGHT (SPTA) in progress, and DTR (St Athan) just signed off, deliver both Hard (buildings/grounds) and Soft (catering, security, tpt etc) services.

    Key features of these projects are:

    Capital expenditure (eg the cost of building) is generally funded through a private consortium, with perhaps some trade off in terms of land transfer, (from MoD to the contractor to build private housing etc) being used to offset this.

    Through-life expenditure (eg the cost to maintain and refresh the buildings and provide the soft services throughout the life of the contract) is funded through (generally) monthly payments from MoD to the contractor - in other words a mortgage payment.

    They are generally fully serviced contracts (we occupy the buildings, the contractor owns and services them, and provides all the aforementioned soft services).

    As Lord Drayson and his merry crew know only too well from their procurement experiences, the initial capital cost of a project comprises about 10% of the total whole life costs of a project. Crucially, the support (services) element costs about 90%, and it is this that we pay little by little each month, over a very long period of time, in order to maintain the contract.

    You might argue, therefore, that it is the contractor who is taking the least risk and most gain, with the opposite pertaining for the MoD. Putting that to one side, however, the fact remains that, because the Treasury is unwilling to commit capital expenditure to replace ageing infrastructure, we are taking a huge risk on our ability to sustain the military machine into the future. That is not to say PFI does not bring huge immediate benefits, providing modern fit for purpose barracks and facilities in a relatively short period of time, ones that are guaranteed to be serviced and maintained properly over their life span.

    Why the risk however? Because these long-term contracts, with the profit element for the contractor, have to be serviced (ie mortgage paid) for the life of the contract. This is all well and good at the moment but as the economy tightens, and the Treasury gets tough in future spending rounds, efficiencies (cuts) will have to be found.

    The sting in the tail is from where these cuts are to be made. We cannot take from the PFI pot - it is ring-fenced. Other Govt depts are going to be struggling just as equally, some with their own PFI crocodiles. That leaves only three options - pay, equipment, and infrastructure outside of the PFI arena.

    So back to the question? Is our feeding frenzy at the PFI table really worth it, or are we really bringing forward future expenditure to make ourselves comfortable, and consigning our successors to a period of famine?
     
  2. PAW,

    You 'orrible little man. I want 100 lines of "I must not, under any circumstances, question the decisions of Our Beloved Leader Gordon Brown...!" by first thing tomorrow.

    And then I want you down and giving me 20 Hail Marys.

    Litotes
     
  3. You didn't bite, PAW.....

    I agree with your post as PFI has all the hallmarks of an almight cockup - but 10 years hence!

    The people signing these cheques today have no idea of the damage that they are doing downstream - and they don't care, because it is today that matters, not tomorrow. They are hoping that the Government will then bail out the Services. Except the Government of the day, of whatever colour, will be busy trying to meet all the education, health, legal and defence bills that have just dropped through the letterbox.

    Frankly, we are in a mess now and still digging!

    Litotes
     
  4. It reminds me of Leeds United spending millions on the back of potential future ticket sales.
     
  5. You have over looked one thing, you still have the guns, so when the debt collectors try to repossess the Army....don't let them.
     
  6. On the button Pomsen. If anyone has not read it, may I commend David Craig's book Plundering the Public Sector which deals mainly with the way in which the taxpayer is being ripped off by up to £70 Billion per year in consultants and failed IT projects but he deals very lucidly with the frightening consequences of PFI at chapter 7 of his book. I have hyperlinked the title so you can read the reviews.

    PFI was the brainchild of Peter (Two Brains) Willetts whose idea emerged as a pamphlet for the Social Market Foundation think-tank entitled: 'The Opportunities for Private Funding in the NHS'. It was first announced byTory Chancellor Norman Lamont in his 1992 Autumn statement amid the gloom of a recession and in the shadow of the Tory Government's colossal losses on Black Wednesday on the money markets. Two years after Lamont launched it, Ken Clarke became very aware of it's potential for the private sector to drain the Treasury dry and in opposition, New Labour thoroughly understood it's limitations but nevertheless not only applied it, but expanded it to such an extent that by 2005 it became a central plank of of Government's Policy.

    Thus it is that you have, in reality, a Conservalabourtive policy which will lead, regardless of the outcome of an election by any party to a financial disaster.
     
  7. with you both there PAW, Iolis.

    ...your name is Mary? :? ;)
     
  8. Some years hence when the brown stuff is really sticking to the fan, the government of the day will no doubt declare a national state of emergency and requisition what it wants for military/public order requirements with no compo to the PFI interests [owners?]. In WWII, Southwick [HMS Dryad] was requisitioned from the old girl who owned it and was never handed back and of course there are other precedences. Far fetched? Maybe not........
     
  9. Litotes,

    I may have risen to the bait but I've been a little busy over the last few days arranging my exit plan from the MoD.

    PAW