All in it Together: How Government Is Handing Ownership of our Schools and Hospitals to Banks

001(c) Richard Zombie Dad Iles

There is a scandal unfolding quietly in this country which poses an existential threat to our most critical public services.  It is called the Private Finance Initiative.  Today, we look at the dangerous circle of self-interest which means our government is making the tax payer pay the bill for private service providers and banks to take over our schools, hospitals and other core public services.

What is PFI?

PFI stands for Private Finance Initiative.  The schemes were initially designed by Tory Chancellor Norman Lamont in 1992 and were rapidly expanded under New Labour.  They are touted as a form of Public Private Partnership.  The government uses private finance, rather than borrowing in the usual way, to raise funds for projects.  Since 1992, our hospitals and schools have been built this way.  PFI loans are at least twice the rate of interest of ordinary government loans, and repaid over 25-30 years.

The Truth about PFI

 pfi2

A recent report by the Treasury Committee condemned the Private Finance Initiative, as “always…more expensive than government borrowing”.  Furthermore, the report continues “we have not seen clear areas of savings and benefits in other areas…quality was lower in PFI buildings (and)…PFI is also inherently inflexible, especially for NHS projects”.

The report did identify major benefits to PFI unrelated to absolute costs or value for money.

  1. The majority of PFI debt does not appear in government debt or deficit figures – the government can therefore use it to bury the true debt burden.
  2. Government departments can use PFI to increase their own budgets without dipping into their allotted funds for capital investment.

Another benefit of PFI is that is allows the private sector to develop the infrastructure to deliver national services while shifting the costs and the risk to the tax payer. Put another way, the tax payer is funding the development of a private network of service providers. For it is the loan provider of the PFI scheme (the Bank) which retains ownership of the asset (the school or hospital) for at least the term of the loan (25-30 years) or in the case of default.

In fact, the only people who are not benefitting from PFI are the people actually paying for it.

The report could not have been clearer “These incentives unrelated to value for money need to be removed”.

They need to be removed because they create a conspiracy of mutual self-interest between private service providers eager to create new markets in publicly run services, banks seeking to make profits on the financialisation of our public services, and successive governments seeking to put a gloss on their spending figures.  The simple interests of the tax payer – to get what they pay for – has been quietly abandoned amid this circle jerk of the state, private service providers and the financial services sector.

It Gets Worse

pfi1

It is actually in the interests of the private service providers and the banks engaging in PFI for the state to default on its payments.  In which case, they can retain ownership of the asset – the school, the hospital, the road, the bridge etc.  This might draw one to a more sinister interpretation of the “poor quality procurement methods” used by those responsible for negotiating the PFI contracts.

Already, 22 of the 103 NHS trusts to enter PFI are facing financial difficulty due to the exorbitant PFI repayments.  Some hospitals are having to handover a fifth of their annual budget on paying for the PFI deal.

In Education, it was revealed that we are due to have a shortfall of 250,000 school places for our children by 2014, whilst the tax payer has picked up a £70m bill for PFI schools which had to close.

Overall, for a capital investment of £54.7bn (that’s how much money we actually borrowed to build stuff), the tax payer will pay back an astounding £301bn in just twenty five years.  Given what we have already seen, many of the 771 PFI projects currently running will bust the budgets of these public services long before then, leaving us with the debt but not the service.

The average profit for a Bank on an equivalent capital investment project would be between 1-2%.  A recent report by the European Union Services Strategy Unit (EUSSU), showed that the average profit for banks in PFI projects is over 50%.

So why is PFI so profitable for the banks?

Firstly, as we have seen above, the interest rates on the loans are enormous.  They are double ordinary government borrowing and the equivalent of using a credit card to build our hospitals and schools.

Secondly, the ‘Special Purpose Vehicles’ or shell companies set up to manage the PFI projects are generally based in offshore tax havens.  This means that a tax payer funded enterprise, is itself exempt from paying tax.

So the Banks have become heavily engaged in chasing the PFI pound.

At least 91 pieces of public infrastructure are now owned in this way.

HSBC has a controlling stake in 27 PFI projects, predominantly schools and hospitals.  It is now the outright owner of three NHS hospitals in Barnet, Central Middlesex and West Middlesex.

Barclays has joined HSBC in aggressively chasing the PFI pound, setting up its own wealth fund on the back of this rigged market.

As a sign of things to come, one might look at Barnet Council’s ‘Easy Council’ outsourcing project which sees 70% of the Borough’s services handed out to the private sector to exploit in just the same way.

So What?

pfi3

Some might well ask – so what? If the services are still free at the point of use, what do we care who provides them?

This question is so ill conceived, it pains me to even have to counter it.  It pains me more that it appears to be the predominant view of an increasingly out of touch electorate, without the knowledge base or the curiosity to appreciate their own mugging.

Financial Costs

The service might be free at the point of use, but it is not free. Our taxes pay for the services.  PFI, by the Treasury Committee’s own report is proven not to provide value for money for the tax payer.  The scale of this cost has seen 4 out of 5 Local Authorities (LA) report that their LA will be in financial trouble by 2014.  As reported above, these costs are seeing the closures of hospitals and schools.  We are being bankrupted.

Human Costs

As the recent health care disaster in Mid Staffordshire, and the unfolding NHS 111 scandal have taught us – prioritising the financialisation of a service over its core purpose (helping people) costs lives.  Real people get poor quality care and die as a result.

The Economy, Stupid

Historically, a national construction project would have created jobs in a domestic construction industry, profits for domestic building and services firms, a publicly owned asset and tax revenues to the Treasury.

Now, the taxpayer forks out double the costs for the build, whilst the profits and in many cases the assets themselves go to an offshore company, which is not eligible to pay taxes in the UK.  The money is siphoned out of our economy.

The End Game

Ultimately, as seen in Hinchinbrooke hospital, it is the public and not the private side of the ‘partnership’ that gets the blame when the service inevitably collapses.

Despite being an entirely manufactured cost inefficiency for the benefit of private companies, the PFI scandal is being used by those vested interests as a case for more privatisation.  It is turned into proof positive that publicly run services are inherently inefficient, bureaucratic and costly.  They claim the answer is to allow the market (those same banks and private service providers who bankrupted the services in the first place) to take over entirely.

Every Day is Christmas Day for the Banks

 Bank of Dave

UK Prime Minister David Cameron recently told the 300 delegates at the Global Investment Conference 2013 that he believed it was time stop “endlessly bashing bankers” because the City was one of Britain’s greatest strengths.

According to the National Audit Office, The UK National Debt rose by £1.5trn as a result of the Bank Bailout. This is twice the nation’s total annual budget.  For this amount, the UK could have funded the health service (£106.7bn a year) for fourteen years , the entire education system for forty years (£42bn a year) or over three hundred years of Job Seekers Allowance (£4.9bn a year).  Not a single banker has gone to court, let alone to jail.  Instead bankers are being let off with fines and the removal of honours, effectively buying their way out of justice.

The bankers needed bailing out not due to some unavoidable natural disaster, but because of their own greed.  The bailout was the taxpayer paying down the banking sectors own bad bets, allowing the sector to privatise its profits, but socialise its losses.

Now we find, with PFI, that they have been invited in to pilfer from the tax payer in ever more elaborate ways for more than two decades.

Banker bashing by the public will not and cannot end until this criminal sector, and its cronies in parliament are held to account properly in a court of law.  This has not happened, and shows no signs of happening.

The British public needs to face up to a terrifying but empowering reality.  We have no advocates.  This is not a Tory, a Lib Dem or a Labour issue.  This is a democratic issue.  All three major parties have participated in these scams, they are all in it together.  That’s the terrifying bit.

Now for the empowering bit.  We need to really get it in our bones that the cavalry is not coming.  We are it.  We are the cavalry.  Only our newly emerging people’s campaigns and institutions can resolve the crisis, because our existing institutions not only created it, but exist to serve it.

We are only ever as ignorant and powerless as we make ourselves.

Email your local MP/Council – Ask how much they are spending on PFI projects, who those projects are with, where the shell companies are based (are they offshore tax havens) and send this information to this blog (email on the ‘About’ page).  We can then publish this information.  Not only will you help create the bigger picture of the PFI scandal, but between us we can turn a whisper of discontent into a roar of outrage.  We must become as relentless in opposing this corruption as the participants are in furthering it.  People who have taken up this challenge are posting their FOI requests here.

Move Your Money – take your money out of your bank.  More than 2.3 million people moved their money last year, double the usual number.  This means that knowledge of the corruption is having a real impact on consumer behaviour.  We enable these banks by keeping our custom with them.  Get out, now, and do so loudly.

UK Uncut Legal – support the activism and court cases to bring these scoundrels to justice.

Note of Thanks: Joel Benjamin of Move Your Money supported today’s blog with invaluable research.

48 thoughts on “All in it Together: How Government Is Handing Ownership of our Schools and Hospitals to Banks

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  13. A great peice just to remind people just how much the gov’t have sold them and their kids down the river of profit, greed, indifference but mostly contempt.
    The Private Eye has been stalking these companies for years and regulary reports on the
    pillaging/theft of public money by these criminals.

    Nothing short of a revolution in the UK will do because the same parasites running our political parties have had decades to insert their ticks into every political party in the land with the aim of disrupting or controlling them. It’s time for a new broom in parliament and their civil service too, as they are not doing their jobs as described.

    We have to start will the banks, stop them doing business and ultimately shut them down with whatever means are available. Attacking their infrastructure in whatever way deemed fit at the time is not really a voilent act if it rids the country of these defectives. They are the true nazis so ignore them at your peril.

    Behind on your bank loan? need medical treatment in their hospital? kids go to their school?
    Think about it.

    • Couldn’t have put it better myself. I am disgusted with what I see unfolding daily and the realization it’s been going on for a very long time. I have no idea where we start to correct this man made madness. I do know that we need to get a move on. Presently I am part of the growing numbers against the Shale Gas industry and our group RAFF have an appointment with the House of Lords on the 10th December to give our views. Should be interesting.

  14. Email to my 3 local Councillors sent. I await their response with bated breath .. yeah right. One doesnt even have an email address …

  15. A Monetarily Sovereign Government creates money by spending it, so it doesn’t have to borrow back that money it injected into the economy.

    Even so, it can borrow at effectively negative interest rates, but as private sector organisations are weaker than public government, their borrowing costs are far higher and that’s before accounting for the profit cost…all of this sucks/rentiers our public money away from us and into the pockets of the n% rich/bosses/ruling class.

  16. Ever since phony B Liar and Reichsminister Mandelbrot ditched clause 4 of the labour party constitution, the inevitable consequence of full-on rabid capitalism among all of our political parties is clearly evident. The son of a lifelong tory in control for 11 years – an avowed and unashamed fan of the wicked witch. His successor even made her his first high profile visitor to 10 downing street when he took office. Try joining the labour party and espousing socialist views – I did and was immediately marginalised and quarantined by the same middle class elites as at the top who rule in every constituencey party. Average ward meeting participants = 6, 3 elected officers and 3 socialists. AGM meeting participants = enough to re-elect the officers and not seen again til next AGM. Only middle class professionals are welcome to stand as officers and only they have any influence at constituencey level. Oh, and they h8 debating with socialists so they keep anything that could allow this from appearing on the agenda!
    P.S. If any socialist gets too annoying there are ways and means to expel him / her. I left before giving them the pleasure.

  17. If you check out “Members of the House of Lords” on wiki you will find that many of our esteemed lawmakers are in fact, current or former chairmen of banks, hedge funds, energy companies, water companies, food outlets or well knownfurniture companies. So much for “conflict of interests”. It is worrying when law, comecial interests and policing and press can be controlled by a few “elites” in their own interests.

  18. DAVID BRITTON

    I HAVE BEEN SAYING THE INTRODUCTION OF PFI WAS TAINTED FOR YEARS BY THE POLITITIONS WHO AGREED THE CRAZY RATE OF INTEREST.-SOME OF THESE COMPANIES HAVE BEEN BORROWING THIS FUNDING MONEY AT A MUCH CHEAPER RATE AND HAVE BECOME MILLIONARES ON THE DIFFERENCE. WAS THIS INSIDER TRADING OR SOMETHING LIKE IT?

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  20. Struggling to use your email link on your About page… I don’t use a mail client… this is response from John Denhams office regarding PFI projects in my area…. Dear Ms

    John Denham has asked me to respond to your email regarding a Freedom of Information request.

    Mr Denham has advised that you would be able to submit an FOI request direct yourself with the relevant department(s) and has asked me to direct you to a helpful website which details who you can request information from, how to submit a request, the processes undertaken and the timescales involved. http://www.gov.uk/make-a-freedom-of-information-request. Such requests are in the main free but some organisations may request basic administration costs to cover photocopying etc.

    I think you would find this helpful as it guides you very clearly on the information you need to provide to obtain information through this route.

    I hope you find this information useful.

    Caroline Lacey

    Office Manager to John Denham MP

    Have emailed my local councillors too… yet to receive repy

  21. I’m with the people above. I post this stuff on facebook. Nearly always to an audience of tumbleweeds!

    I find it this total blindness to reality to be quite baffling! It’s almost like most of the public is under some sort of trance.

    Maybe it has something to do with the fact that we have lived through a long apolitical period for the near two decades until 2008, where political argument was nearly dead, and the public lost the habit or the knowledge of thinking politically. Perhaps it will start to revive once the present system becomes more and more dysfunctional.

    I try to remind people of the following quotes:

    “All it takes for evil to triumph, is for good men to do nothing!”

    And:

    “The price of apathy in public affairs is to be ruled by evil men!”

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  23. Private Eye published an informative report abot PFI some years ago. Showing how these costs are kept out of accounts and continue to pay those who have their snouts in the PFI trough.

  24. Thanks for a great post. It answers my response to your “Corporate Giants” article (but I can’t believe you were spurred on by me).

    When you google UK gov’t expenditure and get a pie chart none of this seems to show up. Presumably it is a bill paid by local authorities? Does it show up anywhere?

    Ukip did mention the problem in their local manifesto for 2013 elections, but didn’t seem to be able to offer any solutions other than more grassroots opinion on each issue before any PFI decision was to be made, by local referenda instigated by 5% of the people.

    We could with a banner poster showing how much PFI has cost, and is continuing to cost, balanced against the welfare budget and the “fraud” it entails.

    Ray

  25. “This question is so ill conceived, it pains me to even have to counter it. It pains me more that it appears to be the predominant view of an increasingly out of touch electorate, without the knowledge base or the curiosity to appreciate their own mugging.”

    I think that we need to be brutally frank and honest in this statement, and particularly in regard to the sentence I’ve copied above: I believe that the people of the United Kingdom are sleepwalking towards utter disaster in this instance, and in other matters concerning the governance of this their country. They are being led by their noses with their ears well and truly blocked by the incessant chatter of those sidetracking the REAL issues that confront us – mainly internally – and fooled by the relatively unimportant European Union versus Ukip and Tory backbench nonsense, created and hyped up to divert peoples’ attention from what is happening HERE by sections of those people standing to benefit the most: the so-called “wealth creators”, bankers and politicians! Sadly, many people ignorant of this raise their voices in accord with these fraudsters and conmen. They are acting stupidly, and there is NO other explanation for their foolishness!

    I regularly re-post much of what I read on these threads into my Facebook pages. I’m deafened by the silence that results in response to them, only getting feedback in agreement with your opinions – and my comments – from one source, and that being from my eldest daughter. Even people I know to be aware of, and angry about these issues, remain silent, as though they believe that it might ALL go away soon – or at least at the latest after the next general election. How to reconcile the bravery in adversity of past generations that peopled this nation of ours, with the slavish mentality of current generations, particularly the younger generation, completely eludes me… It prompts one to give up on the country and its peoples and become a totally uncaring introvert.

    • absolutely agree with you… feel like I’m talking to politics to myself on my facebook page… post and post and post and pretty damn sure that most people have excluded me from their newsfeed… who wants to be inconvenienced by the truth?

    • Thank you for sharing as feel very much the same regarding the sleep walking into being mugged every which way literally, I feel ashamed of this generation and never have I been so embarrassed as when politicians from UK go around Europe pointing fingers and accusing European members as being socialist just because they stick up for the citizens of Europe, I know that corporations pay exceptional amounts to lobby in UK & European Parliment. Thank you for taking the time to put in words how mainly conscientious people feel about the absolute self servative condem Government we have today, shafting us with a giant shard, evil extreme, I’m sure that they have fingers in all the planets polluting pies, get rich from distroying the enviroment and then get rich from private health care due to people becoming sick with cancer. Sickens me the victim blaming culture, women whom get cancer isn’t because they drink its because radiation pollution from Chebnobyl & now Fukushima, in the atmosphere, in the rain, in the food we eat der!!!!!

      • Just out of curiousity .,do any of the political parties have to pay tax on the private contributions ?They are not a charity and if I remember rightly they are classed as a business ie PLC .I’m inferring from that ,that all the Parties are tax evading .

  26. My father worked for the civil service during Thatcher’s days and was bound by the official secrets act. Shortly before he died, I happened to say that politicians are “robbing bastards”. “People say that,” he said, “but I don’t think they have any idea of the extent to which public assets are being directly stolen by individual politicians. It started during the privatisations of the nationalised industries and hasn’t stopped since. Politicians of all parties have behaved in ways which would earn ordinary people years in prison and it is all done behind closed doors.”

  27. If the public really understood what is happening with their money we will have a revolution. The Trade Unions can do more to better inform their membership.

  28. It is fascinating that the ConDems do the shift the blame to the Neo-Labour when they talk about reasons for austerity cuts. The previous ones did the same.

    Now UKIP are saying, we are different to the others, when they are more right wing compared to the majority of Tories. If people are blinkered enough to vote them in, then Britain deserves the more blatant fascist country it will become.

  29. Whoa…I thought the gov’t were finished with these criminal PFI schemes. Why are people still allowing this to happen?? Instead of ‘benefit scroungers’ it is our ‘masterful overlords’ we should be focusing on. They are robbing us blind.

  30. All the major parties work for the same corporations, I’ve been saying this for years. I read somewhere that Labour, Lib-Dem and the Conservativs all have their speeches written by the same company so that should speak volumes. PFI serves to speed up the collapse of our country and bring on the ‘post democratic society’ that CP has been training our ‘future leaders’ for. Obviously this will never make mainstream news so it’s up to us to try and wake up the minds around us and send them off to educate others, but people are so blinded. It’s so frustrating trying to enlighten a closed mind who thinks that they have to obey these corrupt idiots so everyone else should too.

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