PFI to be Reviewed

Discussion in 'Current Affairs, News and Analysis' started by Mattb, Nov 15, 2011.

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  1. BBC News - Chancellor George Osborne set to 'reassess' PFI

    I quite liked this quote: "The benefits of PFI including getting projects delivered on time and to budget" Ha!

    I'm still not sure whether PFI is a good idea run poorly, a bad idea full stop or simply a solution to a problem that should never have existed (public sector incompetence).

    I do tend towards the last one of those though.
     
  2. "…The committee said paying off a PFI debt of £1bn could cost taxpayers the same as paying off a direct government debt of £1.7bn.…"

    Says it all really.
     
  3. It mortgaged the future so that Brown could chuck vast sums about without it showing up on the balance sheet, Enron-style accounting in other words.

    If he thought about it at all, he seems to have relied on repayment being met through the prospect of 'stable growth for ever' which the best and brightest of the world of economics had convinced each other had been achieved. It's the equivalent of running a dozen credit cards up to the limit and relying on a future lottery win to meet the payments.
     
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  4. The problem is that the Public Sector still write the specification for the job. As per usual due to their inability to make a decision or accept any responsibility for their actions, they employ 'Consultants'. These consultants then push them into every latest material/technology, with no regard as to if it works or is cost effective. The Public Sector laps all of these ideas up.
    Even PFI jobs you have to add a lot on for the '**** around factor', and the fact the job will be constantly delayed but the constant fiddling by the Public Sector guided by the 'Consultants' as the more kit they can get approved, the bigger the consultant fees will be.
    Most Private Sector jobs, these type of consultants and architects, are usually told after concept design to go back to their office and come back with a sensible ideas or the contract will be handed over to the Main Contractor as a 'Design & Build', when the main contractor will tell the architect how he's going to design it.
     
  5. PFI was a Conservative idea that was kicked off before Labour took power. That said, Labour for a number of reasons, embraced it completely. For the private sector, PFI deals are cash cows with guaranteed government money. I have a friend who has become a multimillionaire in the last six years or so from PFI deals. He supplies student accommodation for several universities including a couple of London based one's. He's very wealthy on paper and although his amount of actual folding isn't that much, it's still an awful lot.

    I don't think Osborne will do away with PFI. He probably just want's to try and cut the costs. The key thing is that I suspect you will find existing deals are contractual arrangements with severe penalty clauses for any alterations etc. If Osborne wants to make new deals less lucrative, many companies will probably be very reluctant or even not want to get involved at all. They are in it for the money, not any sense of altruism.

    Interestingly, the banks are still proving to be very reluctant to lend money even for PFI deals. That's been a hurdle for the guy I know.
     
  6. PFI itself isn't a bad idea. The trouble is, it enables politicians to run up enormous costs and bask in the glory, safe in the knowledge that they'll be long gone by the time the bill lands.
     
  7. Even at the time of building, maximum profit was being extracted. Two schools were built round here, modern cheapo construction, folded galvanised supports and composite sheets over it, along with panels of softwood cladding. It's already falling to bits ten years later.

    The idea was that the companies would recoup their investment and make their profits, and then at the end the State would own the building. By the time the State's paid (double) for them they'll be fit for nothing but the bulldozer. The schools they replaced were brick and slate, had stood for decades and could have been refurbished for a fraction of the price of replacing them with tinplate tat.
     
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  8. PFI's have always been about hiding true costs, very few british goverments have been able to plan for beyond the next election in their long term planning and to them the PFI is brilliant we can buy something that should cost millions now and pay practically nothing for it and when it comes round to paying the PFI tens of millions in 20 years we won't be in power, hell i'll probably be retired and living it up on an MP's pention, book deal and lectures and sitting on the boards of friendly companies.
     
  9. Amazing the number of posts on here saying how good PFI is and then adding all the pitfalls why it's crap. It was never a good idea and the taxpayer has been robbed.
     
  10. Cold_Collation

    Cold_Collation LE Book Reviewer

    PFI, like any financial model, has its place. But Pigshyt Freeman has it right when he says that Brown went Enron with it. Funny how as soon as he stopped being Chancellor the rules were changed such that what he'd been doing was no longer possible... poor Darling.

    What's missing from the perceptions of anyone who embraces the concept wholeheartedly, however, is a realisation that businesses exist to make money - they aren't altruistic. If they're interested, it's because it's worth their being so.

    ... and that bleedingly obvious statement should be enough to make anyone think twice.

    As to sueing and being sued for non-fulfillment of contract, the government is the biggest single buyer in this country, last time I looked. I'd suggest that that makes for some significant bargaining power when it comes to certain old faithfuls making it onto future national framework contracts if they object too much to, ahem, adjustments.
     
  11. When the Tories introduced PFI, the leading question that had to be asked was "Overseas sales potential". The procurers were required to consider PFI, but if there were no sales envisaged, it was simple tick in the box to avoid PFI and the associated cost. The real problem was that too many jumped on the latest buzzword bandwagon and saw it as an opportunity to spend less in the early years, so didn't ask the hard questions. This mortgaged the MoD to the hilt and more. And Labour just let it carry on.
     
  12. Agreed, but it's a bit like the welfare state. It would work well, if only...