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Old 26.06.2012, 13:23
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PFI Scam finally coming home to roost?

PFI Scam finally coming home to roost?

Successive governments have made it easier for the nicely-rich to avoid taxation by conveniently overlooking/creating tax dodging loopholes.
The PFI initiative expands this process by enabling the mass transfer of tax payer funds to further enrich the nicely-rich.

************************************************** ********************************************
.
By October 2007 the total capital value of PFI contracts signed throughout the UK was £68bn,
committing the British taxpayer to future spending of £215bn over the life of the contracts.
.
.
In November 2010 the UK government released spending figures showing that
the current total payment obligation for PFI contracts in the UK is £267 billion
.
http://en.wikipedia.org/wiki/Private_finance_initiative
************************************************** ********************************************
.
Finding out which PFI deals the UK is involved in is notoriously hard
because to figure out what is going on you need to know:
.
http://www.guardian.co.uk/politics/d...public-finance
************************************************** ********************************************
South London Healthcare faces being dissolved
.
When the three hospitals became one organisation they inherited a large debt
- mainly from the private finance initiative (PFI) that had been used for the buildings
at Orpington and Woolwich.
.
.
The BBC understands that up to 22 NHS trusts are facing serious financial difficulties
because of expensive PFI schemes,
with six thought to have taken on projects viewed by ministers as "unsustainable".
.
http://www.bbc.co.uk/news/health-18584968
************************************************** *******************************************
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However, it is thought to have been crippled by the costs of two Private Finance Initiatives
used to rebuild two of its hospitals.
The schemes, which totalled more than £1 billion,
cost more than £60 million annually in interest payments alone.
.
http://www.telegraph.co.uk/health/he...hospitals.html
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Old 26.06.2012, 13:29
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Re: PFI Scam finally coming home to roost?

No idea. Is there a summary available?
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Old 26.06.2012, 13:34
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Re: PFI Scam finally coming home to roost?

It would be nice if they could simply put the hospitals in administration, create a new NHS trust to buy the assets, and tell the PFI folks to get lost (ie accept pennies in the pound for their outstanding debts).

Private sector solutions for private sector financing
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Old 26.06.2012, 13:37
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Re: PFI Scam finally coming home to roost?

WTF is PFI ?

Found it on the BBC: Private finance initiatives are partnerships between private companies and public services
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Old 26.06.2012, 13:47
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Re: PFI Scam finally coming home to roost?

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WTF is PFI ?

Found it on the BBC: Private finance initiatives are partnerships between private companies and public services
State wants to build a hospital.
State doesn't have the money, and doesn't want to borrow it, because that makes the stats look bad.
State also thinks that "private is cheaper".
State doesn't mind that private investors can only borrow for much higher interest rates. Neither does State mind that private investors like profits.
State signs contracts that ask for "no money upfront" in BIG LETTERS, and provide for a multitude of earning opportunities for the private investors over the duration of the contract in fine print.
State still budgets for its hospitals as if the infrastructure were owned outright.
Hospital is charged loadsamoney for repayments, and GBP 333 to change a light bulb (sory guv, but there's profits to be made).
Hospital runs out of money.
The End.
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Old 26.06.2012, 16:26
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Re: PFI Scam finally coming home to roost?

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It would be nice if they could simply put the hospitals in administration, create a new NHS trust to buy the assets, and tell the PFI folks to get lost (ie accept pennies in the pound for their outstanding debts).

Private sector solutions for private sector financing
Aaahh The Greek solution.
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Old 26.06.2012, 16:31
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Re: PFI Scam finally coming home to roost?

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State wants to build a hospital.
State doesn't have the money, and doesn't want to borrow it, because that makes the stats look bad.
State also thinks that "private is cheaper".
State doesn't mind that private investors can only borrow for much higher interest rates. Neither does State mind that private investors like profits.
State signs contracts that ask for "no money upfront" in BIG LETTERS, and provide for a multitude of earning opportunities for the private investors over the duration of the contract in fine print.
State still budgets for its hospitals as if the infrastructure were owned outright.
Hospital is charged loadsamoney for repayments, and GBP 333 to change a light bulb (sory guv, but there's profits to be made).
Hospital runs out of money.
The End.
Thanks for the summary.

The irony of Labour doing this just... stinks...

I'm not a particularly active in political stuff, but even I can see how the very idea of a PFI goes comprehensively against any and every Labour principle.
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Old 26.06.2012, 16:50
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Re: PFI Scam finally coming home to roost?

PFI equity moved to tax havens

Quote:
The Financial Times outlines how over 90 Private Finance Initiatives (PFIs) have been moved to offshore tax havens, reducing tax revenue paid to the UK.

PFIs are long term contracts with the government that pay out annual fees to private companies to take on public works, like road maintenance and hospital construction. By moving ownership of the schemes offshore the tax due on any profits is reduced.

The FT piece is based on a report by the European Services Strategy Unit, a think-tank which maintains a database of the projects and is highly critical of the PFI scheme.

According to its data, equity in projects owned by John Liang Infrastructure, 3i and others including schools, hospitals, courts and police stations, is now being held in Guernsey and Jersey.

According to the report 33 projects owned by HSBC Infrastructure generated £38m profit last year but paid just £100,000 in tax...

The article follows on from a BBC File on 4 investigation last week which examined the £200bn of taxpayers’ money that has been committed to such projects.

Read the FT article in full here

Listen to the File on 4 programme here
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Old 26.06.2012, 16:51
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Re: PFI Scam finally coming home to roost?

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Thanks for the summary.

The irony of Labour doing this just... stinks...

I'm not a particularly active in political stuff, but even I can see how the very idea of a PFI goes comprehensively against any and every Labour principle.
As somebody already posted - they do it like this because the costs do not show up in this years Budget numbers.

Irony also is that these are the same politicians who preach about the immorality of tax evasion while they themselves are hiding billions.....
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Old 26.06.2012, 16:54
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Re: PFI Scam finally coming home to roost?

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Thanks for the summary.

The irony of Labour doing this just... stinks...

I'm not a particularly active in political stuff, but even I can see how the very idea of a PFI goes comprehensively against any and every Labour principle.
PFIs were not started by labour, (see: history of PFI's) but the PFI schemes were expanded under labour and are still being pushed through under the coalition. It seems like a good idea but it doesn't really work for everything, and it specially doesn't work when the public has to actually fund the "Private Finance", so the benefits of transfering the risk to private companies no longer happens as it's underwritten and fully taken on by the tax payer.

What's the alternative to PFIs? Full privatisation? I don't think this is going to happen anytime soon...
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Old 26.06.2012, 21:30
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Re: PFI Scam finally coming home to roost?

One of the leading lights in NEW Labour at this time was this scumbag..Peter Mandelson.. I mean Lord Mandelson..(twice had to resign as government minister under a dark cloud)..more complete details here:

http://en.wikipedia.org/wiki/Peter_Mandelson

http://www.whatnextjournal.co.uk/Pag...t18/Mandy.html

The erstwhile war criminal Tony B Liar and the "light touch of regulation" Gordon Brown being other significant players.



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Thanks for the summary.

The irony of Labour doing this just... stinks...

I'm not a particularly active in political stuff, but even I can see how the very idea of a PFI goes comprehensively against any and every Labour principle.
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Old 26.06.2012, 22:49
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Re: PFI Scam finally coming home to roost?

George Monbiot wrote an excellent book some years back - I think it was called "Captive State" - and gave example after example of how PFI was really bad. This story comes as no surprise at all.
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Old 29.06.2012, 17:57
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Re: PFI Scam finally coming home to roost?

.
.
for every PFI hospital up and running, equity investors and bankers are charging as if for two. Edward Leigh, the chair of a Treasury committee report into PFI, called investor returns the unacceptable face of capitalism.
.
.


How PFI is crippling the NHS



http://www.guardian.co.uk/commentisf...-crippling-nhs
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Old 29.06.2012, 18:13
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Re: PFI Scam finally coming home to roost?

I do believe there are many things the private sector can do more efficiently than the state (for whatever reason).

But there should be a mechanism so that the balance still shows up as state debt. Otherwise it's a license to print money.
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Old 29.06.2012, 18:49
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Re: PFI Scam finally coming home to roost?

I've not read the links in detail, but I thought I'd quickly summarise my knowledge of PFI contracts. I'm not trying to antagonise (and am not really on here often enough to get embroiled in any arguments...!), but just thought it might interest people who wonder why the hell the public sector is willing to sign up to these things in the first place

Under PFI contracts the public sector pay a fixed annual fee for building, maintaining and operating eg a hospital. This is agreed (to the nth degree of painfully small details) prior to everything being signed and the annual repayments from the hospital are all fixed up at the time of financial close. This is based on a combination of the actual costs of building, maintaining and operating (bricks, builders, handyman etc) , the financing costs (ie interest etc) and yes a profit for the private sector (usually around 13% but it depends on the risk...so roads would have a different return from hospitals).

The private sector take on the risk of the financing so if there is a currency fluctuation or a change in the underlying interest rate (usually LIBOR) then they will lose/profit from that with no negative impact on the public sector (although there is usually a mechanism in place to allow the public sector to share in any upside past a certain level).


The only times that an annual payment will differ from that agreed at financial close are:
  1. when there is a change of scope (e.g. if the public sector decides to add on a new car park that they then ask the private partner to look after)
  2. when the private sector mess up and they receive a deduction from their payment. This is determined using a payment mechanism, which again is agreed to the nth degree of detail prior to financial close. The severity of the deduction will depend on several things including the "importance" of the area in which the failure happened (e.g. if a light bulb in an operating theatre is not replaced there would be a higher penalty than if a light build in a broom cupboard is not replaced), the length of time that it took to sort it out, and the number of times it has happened before (and possibly other things that have slipped my mind).
It's also quite interesting that the value for money of PFIs is usually higher than using public funding (again all options are assessed in detail prior to putting the PFI contract out to tender...). The tender process is also very detailed, with the private sector getting pushed as far as possible to get to a preferred bidder (but that's a whole other story for another day...)

Having worked on the public sector side of these things it's often more complicated than the papers make it out to be (esp the Torygraph). I'm sure there are some times when the public sector gets screwed but the same could also be said of non-PFI projects.

It's all political swings and roundabouts really....

Last edited by LouisaB; 29.06.2012 at 18:49. Reason: typo :/
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Old 01.07.2012, 00:09
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Re: PFI Scam finally coming home to roost?

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Under PFI contracts the public sector pay a fixed annual fee for building, maintaining and operating eg a hospital. This is agreed (to the nth degree of painfully small details) prior to everything being signed and the annual repayments from the hospital are all fixed up at the time of financial close. This is based on a combination of the actual costs of building, maintaining and operating (bricks, builders, handyman etc) , the financing costs (ie interest etc) and yes a profit for the private sector (usually around 13% but it depends on the risk...so roads would have a different return from hospitals).
A wonderful thing, contracts. In reality, if the private side is advised by lawyers worth their money (and they tend to be), that means that the cost of everything is set out at the start.
With no option for the public side to switch suppliers when things get cheaper, but with plenty wiggle room for the private side to "adjust for inflation" (or words, or rather entire pages full of words, to that effect.
With the option to charge for services "at cost" - but at the inflated "internal" cost that a company affiliated with the provider charges: more profit for the provider, albeit at group level. This is how figures like the GBP 300 or so change-a-lightbulb figures come about.
With the provider's financing costs covered, where these financing costs are almost certainly higher that what the state would pay - but then the debt would be "on the books", whereas the PFI costs aren't budgeted as "debt", but as "expenses". In the long run, it's a lot more expensive for the public sector, because not only would non-PFI financing costs be lower, but there would be no profit margin to be covered either. Which brings us to...
With a fixed 13% profit margin built it, with all costs covered, so a guaranteed minimum rate of return. Nice thing, a guaranteed rate of return. It's guaranteed to the extend you can even sell your side the contract to a third party (such as an investment bank) and walk away with a couple of million GBP immediately.
And so forth...


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Having worked on the public sector side of these things it's often more complicated than the papers make it out to be (esp the Torygraph).
Having worked on the private sector side of these things we tried to make it as complicated as possible. The public sector tends to have neither the brains nor the legal firepower to see through these deals. And if some bright minds on the public sector side did look through it, there was enough political pressure to shut them up.

Sad but true. And very very profitable for PFI investors.
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Old 01.07.2012, 11:36
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Re: PFI Scam finally coming home to roost?

Fortunately, many if not most PFI suppliers are publicly quoted companies or private equity interests where the major stakeholders are pension funds.....there isn't actually a Mr PFI based in the Caymen Islands creaming off profits (though undoubtedlly many undeserving bankers and individual personnel have become absurdly wealthy by 'taxing' the projects with fees)

its very annoying not having anyone government or person or organisation to blame but there arguably better targets see for example:

http://fabooks.wordpress.com/2009/09...ole-your-vote/
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