HS2 in the SH1..? Carillion collapse...

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  • FretwiredFretwired Frets: 13099
    Interesting update. RBS scuppered a rescue deal and Qatar owed Carillion around £500 million on a £5 billion contract linked to the World Cup. Qatar were refusing to pay, which seems to be something they do given many workers in the country haven't been paid for months. The company also owed £650 million in tax to the government. Looks like the receiver can keep the company going for a lot longer.
    My pump-action drivel gun is smoking hot today!
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  • And now Interserve are being scrutinised...

    https://news.sky.com/story/interserve-falls-10-as-govt-monitors-health-after-carillion-collapse-11210862

    Well known to us West Country military types. Fair to say my pa's opinion of Interserve was actually lower than his view of Carillion when dealing with them. 
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  • VimFuegoVimFuego Frets: 5176
    they were saying on the news that the word going round the city is that these companies are operating on such tight margins and with such high debt levels that they expect more to fail or need help in the not too distant future.

    I'm not locked in here with you, you are locked in here with me.

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  • FretwiredFretwired Frets: 13099
    edited January 18
    From today's Times. The NAO report came before the collapse of Carillon.

    Taxpayers are spending billions of pounds extra on hospitals and schools funded by private finance deals with little evidence of any benefit, the government’s spending watchdog has said.

    In a report today that lays bare the scale of waste under private finance initiative (PFI) schemes, the National Audit Office reveals that a group of schools costs 40 per cent more than those funded by government borrowing and cites research showing privately financed hospitals costing 70 per cent more. The NAO disputes Treasury claims that the scheme has advantages.

    The PFI model of paying for public projects using private capital began under Sir John Major’s administration in 1992 and was enhanced by New Labour. Private companies fund the construction of facilities; the state then makes payments for their use and management over a period of 30 or 40 years.

    It is designed to limit capital expenditure and transfer risk to the private sector. Successive chancellors used PFI deals to build schools, hospitals and roads “off balance sheet”, meaning that they did not count against public sector borrowing rules. There are 716 PFI projects in Britain either under construction or in operation, with a total value of £59.4 billion. Future payments for existing projects are forecast to total £199 billion, an average of £7.7 billion a year over the next 25 years.

    The NAO says today that a number of Whitehall departments have complained of being trapped in schemes that they want to abandon as they cannot afford exorbitant exit fees. Eight out of eleven government departments have turned to consultants to reduce the huge costs.

    The watchdog says that the private finance route “results in additional costs compared to publicly financed procurement”. The government’s national infrastructure plan suggested in 2010 that capital raised through PFI cost 2 per cent to 3.75 per cent more than from state borrowing, the NAO says. In its 56-page report, it adds: “We have been unable to identify a robust evaluation of the actual performance of private finance at a project or programme level.”

    The report comes after Carillion, one of Whitehall’s biggest suppliers, went into liquidation. Some of its contracts were governed by PFI.

    PFI schemes were pushed by ministers in the last Labour government, with 85 per cent of payments last year relating to procurement decisions made more than ten years ago when Gordon Brown was in No 10 and, before that, in the Treasury. The former prime minister has said that investment would have been impossible without PFI.

    PFI deals are now putting a significant squeeze on shrinking budgets, particularly in health, where active projects worth £13 billion imposed a £2 billion strain on the health budget last year.

    The Labour MP Stella Creasy wants a windfall tax on PFI deals, believing it is more likely to recoup some of the costs than ripping up the deals at huge expense. “This report is proof of what many of us have been saying for some time: our hands are tied when it comes to PFI as it’s too expensive to use and too expensive to tear up,” she said.

    The report also suggests that some PFI providers are overcharging the public sector for insurance. It says: “A number of public bodies with PFI schools expressed concerns to us about insurance costs and the gain-share agreement. In one case the [PFI firm] eventually agreed to return over £100,000 of insurance savings after being unable to provide evidence that part of the saving should be withheld.”

    A government spokesman said: “Many vital infrastructure projects like roads, schools and hospitals are paid for by PFI and PF2, stimulating our economy, creating jobs and delivering better public services. We have reformed how we manage PFI contracts, and through PF2 have created a model which improves transparency and offers better value for money. Taxpayer money is protected through PFI and PF2 as the risks of construction and long-term maintenance of a project are transferred to the private sector. Private finance is more transparent, with information and data published by government annually.”

    PFI has always been controversial, but bipartisan consensus in its favour in Westminster has lasted for more than two decades.

    Introduced by Sir John Major in 1992, the schemes were super-charged by New Labour after Tony Blair and Gordon Brown won big in 1997 by convincing middle England of their prudence.

    The chancellor’s golden rules required him to keep debt and the deficit low, and PFI offered a way to upgrade the fabric of the state without breaking those rules because the debts incurred to fund infrastructure were held by private companies and kept off the government’s balance sheet.

    Mr Brown attributes the Labour conversion to PFI to Neil Kinnock, Mr Blair’s predecessor. In his recent memoir My Life, Our Times, the former prime minister places PFI at the heart of the party’s modernisation project, writing that Lord Kinnock “had fought a long battle against those who opposed public-private partnerships to rebuild our infrastructure”.

    Mr Brown saw it as “mobilising private sector skills for public purposes, ending the sterile battle for territory between public and private sectors”.

    George Osborne as chancellor promised a “fundamental reassessment” of the PFI model, resulting in PF2, which has not been widely taken up.

    Thus, PFI is essentially a story of the New Labour years. Huge debts are being paid to private companies, but 85 per cent of PFI payments in 2016-17 relate to decisions made more than ten years ago, when Mr Brown had just moved into Downing Street, and 42 per cent to decisions made 15 years ago or more.

    PFI gone wrong:

    Wye Valley NHS Trust
    Some hospitals are unable to reduce hospital car park charges under PFI contracts. In 2013 Wye Valley NHS Trust said that fees at Hereford’s county hospital were controlled by Mercia Healthcare, the trust’s PFI partner.
       
    Bristol Metropolitan Academy
    The secondary school paid £8,154 for a blind because of its PFI contract. Under “life-cycle” costs written into some deals, schools can be locked into contracts that force them to pay high prices for small items.

    Newman RC College
    Schools can face large bills from their PFI partners for facilities management. Newman RC College, a secondary school in Oldham, was charged £48 for security guards to open the premises so pupils could use the lavatory.
       
    Her Majesty’s Treasury
    The Treasury was refurbished using a PFI contract. When MPs considered proposals to relocate the Commons, the Treasury said that the terms of its deal ruled out lending its building to MPs.

    My pump-action drivel gun is smoking hot today!
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  • VimFuegoVimFuego Frets: 5176
    thing is, even in the early 00's, some people (like George Monbiot) were warning us about the dangers of PFI. 

    I'm not locked in here with you, you are locked in here with me.

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  • FretwiredFretwired Frets: 13099
    VimFuego said:
    thing is, even in the early 00's, some people (like George Monbiot) were warning us about the dangers of PFI. 
    The Romans used to build some pretty impressive public buildings .. they worked out PFI was a racket ... ;-)

    Time to renegotiate the contracts and shut this waste of tax payers money down.
    My pump-action drivel gun is smoking hot today!
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  • VimFuegoVimFuego Frets: 5176
    yup, even the companies who are benefiting from these contracts must see that, for their long term viability, these contracts need renegotiating. Anyone in business knows you don't milk good clients, you don't kill the golden goose. 

    I'm not locked in here with you, you are locked in here with me.

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  • Phil_aka_PipPhil_aka_Pip Frets: 7431
    Fretwired said:
    The Romans used to build some pretty impressive public buildings .. they worked out PFI was a racket ... ;-)
    or rather they made the slaves do the building. doesn't cost much to keep a slave
    "Working" software has only unobserved bugs.
    Parroty Error: Pieces of Nine! Pieces of Nine!
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  • thomasw88thomasw88 Frets: 645
    edited January 18
    Fretwired said:
    The Romans used to build some pretty impressive public buildings .. they worked out PFI was a racket ... ;-)
    or rather they made the slaves do the building. doesn't cost much to keep a slave
    DWP are working on the reintroduction of slavery as we speak.
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  • FretwiredFretwired Frets: 13099
    Fretwired said:
    The Romans used to build some pretty impressive public buildings .. they worked out PFI was a racket ... ;-)
    or rather they made the slaves do the building. doesn't cost much to keep a slave
    A slave in Roman times was basically someone who wasn't a Roman. They were deemed to be property. However, many were educated and skilled - they could earn money, own property, were well paid and could buy their freedom and become Roman. The unskilled and uneducated would probably work on the land. The buildings were probably built by salves, but they'd have been like you and me - 9 to 5 wage slaves making some fat cat further up the greasy pole rich .. :-)
    My pump-action drivel gun is smoking hot today!
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  • ICBMICBM Frets: 28323
    VimFuego said:
    thing is, even in the early 00's, some people (like George Monbiot) were warning us about the dangers of PFI. 
    I have *always* thought that it was a bad idea, and I was annoyed by Gordon Brown's expansion of a Tory scheme I had assumed would be killed off as soon as Labour got into power - it's one of the main reasons I didn't vote Labour again after 1997.

    Anyone with half a brain can see that it's a bad deal in the long run, even if the government hadn't given ludicrous cancellation terms to the companies operating it as well as allowing them to make excessive profits in the first place - essentially a licence to print money at public expense. It's always cheaper for the state to borrow money and finance things directly. If Brown had wanted to increase public spending - which I totally agreed with - then he should have been honest about how it was to be paid for.
    "Take these three items, some WD-40, a vise grip, and a roll of duct tape. Any man worth his salt can fix almost any problem with this stuff alone."
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  • Clarky said:
    they said on the news today that the C level managers that walked out last year will continue to be paid up until October this year.. CEO is on 600k, CFO on 400k etc

    being paid anything at all not to go to work.. let alone that much..
    absolutely unbelievable 

    This story just gets worse and worse. How do some of these people sleep at night?

    Sounds like some higher ups knew exactly what would happen. 
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  • ClarkyClarky Frets: 2552
    Clarky said:
    they said on the news today that the C level managers that walked out last year will continue to be paid up until October this year.. CEO is on 600k, CFO on 400k etc

    being paid anything at all not to go to work.. let alone that much..
    absolutely unbelievable 

    This story just gets worse and worse. How do some of these people sleep at night?

    Sounds like some higher ups knew exactly what would happen. 
    pay back everything dated from their last working day and then prison is the solution for them
    play every note as if it were your first
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  • Phil_aka_PipPhil_aka_Pip Frets: 7431
    Clarky said:
    pay back everything dated from their last working day and then prison is the solution for them
    so long as it wasn't a prison that they built (or supervised the building of) - we'd want to keep them inside of it!
    "Working" software has only unobserved bugs.
    Parroty Error: Pieces of Nine! Pieces of Nine!
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  • Clarky said:
    pay back everything dated from their last working day and then prison is the solution for them
    so long as it wasn't a prison that they built (or supervised the building of) - we'd want to keep them inside of it!
    Fat chance if G4S are in charge of security. L..
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  • Phil_aka_PipPhil_aka_Pip Frets: 7431
    "Working" software has only unobserved bugs.
    Parroty Error: Pieces of Nine! Pieces of Nine!
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  • stickyfiddlestickyfiddle Frets: 8264
    ICBM said:
    VimFuego said:
    thing is, even in the early 00's, some people (like George Monbiot) were warning us about the dangers of PFI. 
    I have *always* thought that it was a bad idea, and I was annoyed by Gordon Brown's expansion of a Tory scheme I had assumed would be killed off as soon as Labour got into power - it's one of the main reasons I didn't vote Labour again after 1997.

    Anyone with half a brain can see that it's a bad deal in the long run, even if the government hadn't given ludicrous cancellation terms to the companies operating it as well as allowing them to make excessive profits in the first place - essentially a licence to print money at public expense. It's always cheaper for the state to borrow money and finance things directly. If Brown had wanted to increase public spending - which I totally agreed with - then he should have been honest about how it was to be paid for.

    The key benefit is you get to pay for the asset over 20 or 40 years. Obviously you pay a little more, but if you don't have 1bn to spend on a new hospital today then it's better value. Further to that, the risk for cost and time overruns should be passed entirely on to the private party, so he has every incentive to finish on time and on budget, or he makes no money.

    But that requires an extremely robust contract that can't be taken advantage of (e.g. the cost of replacing a blind in a school should have been borne by the company under its contract, not paid for under "lifecycle"). The UK government just doesn't appear to be able to deliver that.
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