Thursday, February 16, 2017

An excellent explanation of when PFI does and does not work

I have just seen a superb explanation of why PFI was a good idea for the purposes for which the Conservatives introduced it, such as toll bridges, but Labour were mad to use it to pay for hospitals.

This was posted by "Armchair Critic" on the Copeland By-election thread of the Vote UK Forum

One of the candidates in the Copeland by-election has been describing the use of PFI to fund hospitals as "Buy one hospital, pay for six."

I don't agree with much else she says but on that point my only issue is whether the number should be higher than six. The £20 million a year we are still paying for the Cumberland Infirmary at Carlisle is a major reason why our local NHS trusts are short of money.

Anyway, here is "Armchair Critic" on PFI:

"PFI was a concept invented by the Conservatives in 1986 with the Dartford Crossing Act.

The Dartford Tunnel was built in 1963, was loaded with debt and was in need of complete refurbishment and a new crossing building to increase capacity to cope with the building of the M25.

Thatcher ... for it was she ... handed over the tunnels to Trafalgar House, who had to build a new bridge, refurbish the existing tunnels, pay off the debts and hand the tunnels back to the Dept of Transport with a 100 million pound maintenance fund

In return for doing this Trafalgar House could keep all of the tolls they collected for a maximum period of, I think it was about 18 years, or until they had recovered their costs with an agreed profit, whichever was the sooner.

Trafalgar House did all of the work as instructed and handed back the tunnels to the DoT, with the maintenance fund, in about 15 years and 3 months.

At this point the tolls were supposed to be removed. That was the agreement. Unfortunately we had a Labour government in office and they decided to keep the tolls in place.

The Dartford Crossing was an excellent example of how PFI can and should work.

Unfortunately, the Labour government just saw it as a way of spending money off balance sheet and never really understood how to do it. That is why my local hospital is signed up to an absurd 35 year PFI arrangement, where the hospital pays 80 quid to have a poster put up, while the stupid little **** that claims to have organised the deal, Mary Creagh, now denies having had anything to do with it.

I knocked on a door in about 2009 for Alex Story. They guy who answered was a PFI consultant of some sort. I asked him if he would vote for us. He said that normally he would, but he wasn't going to because if he did he knew that the PFI deals he signed up would become much more difficult because the Tories wouldn't sign them with gay abandon, like Labour did. Whether that is true I have no idea.

You can't fund stuff like hospitals with PFI in my view. Whatever you build must be revenue generating to work properly. So...hospitals, multi-storey car park, yes. Anything else simply defeats the whole object as the government can borrow money cheaper than the PFI contractor."

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Anonymous said...

Hinckley Point. It's not PFI but the deal is just as bad.

Chris Whiteside said...

To be honest the issues on that one are so completely different that it's very difficult to compare them.

You can make a case for or against that one: I'd be much more worried about it were a French taxpayer than I am as a British one!