Tuesday, 14 December 2010

Waste not, want not

The Treasury Christmas tree
The term PFI may sound like a nasty medical condition but it is, in fact, a nasty financial condition. Those three innocuous letters – PFI – actually stand for Private Finance Initiative. Our previous Prime Minister, Gordon Brown, was a big fan of PFI and he used the scheme to finance a lot of public expenditure when he was masterminding the nation's economic miracle.

PFI works in a convoluted Byzantine way that only an accountant could dream up. Say the government wants to build a new school or hospital but doesn’t want to borrow the money and thereby appear to add to the national debt, it does a sneaky little trick of going to some nice money lenders and asking them to build the school or hospital. In return the money lender gets a juicy contract to rent the building back to the government and provide all the services required to go with it.

Now, moneylenders aren’t known for their philanthropic gestures so the government has to offer them a pretty big carrot to get involved. Imagine a carrot that’s taller than Mount Everest and juicier than a ripe papaya; that’s the sort of carrot we’re talking about. To get the PFI companies ‘on side’, the government agrees to grant 30-year contracts to run and maintain these new establishments. Kerrching!!

So far, the government has managed to secure £60 billion of new public assets via PFIs, at a bargain cost of just £260 billion. The PFI schemes have produced a veritable torrent of cash for the providers of these dodgy financial instruments.

Let me give you an example of what I mean. When Gordon Brown wanted to tart up the Treasury, rather than taking money out of general taxation which he was far too busy hosing over his client state, he got a PFI set up to finance the whole thing. The deal meant that the company running the PFI would be responsible for everything that happens to the fabric of the Treasury buildings. This is something that the new Chancellor, George Osborne discovered a couple of weeks ago when the estimate for providing the Treasury’s Christmas tree dropped on his doormat. The Chancellor was staggered to see that the PFI firm responsible for the Treasury was going to charge a whopping £875 for erecting and decorating the tree.

Understandably, the frugal Old Etonian was livid so he instructed his top mandarin to pop out to B&Q and buy a £40 tree and have that put instead. “Sorry, no can do,” said the man in the bowler hat. "It’s PFI rules," he explained. Anything that needs erecting in the Treasury – be it a light bulb or a Christmas tree – is now the responsibility and the purview of the PFI contractor. It’s all there in the small print on page 187 of the contract that Gordon signed.

George was fuming and ordered a report on the ridiculous situation, only to be told that only the contractor had to put up the tree on health and safety grounds, and that if the Chancellor insisted on bringing in his own tree then the contractor would refuse to water it, turn the fairy lights on and off and there would also be problems in disposing of the tree on Twelfth Night since it would be classed as industrial waste and would have to be removed in a vehicle that was licensed to remove business waste. EU regulations, guv.

Well, George then threw all his toys out of his pram and the PFI contractor, no doubt anxious to please the new boy, agreed to donate a tree to the Treasury free of charge. However, the contractor refused to decorate said tree, no doubt feeling it had already done more than it should to celebrate the festive season. George's mandarin was duly dispatched to Argos and decorations were procured for a very reasonable £40. Treasury staff then decorated the tree but the contractor bridled at supplying a ladder in order that the star might be placed safely at the apex of the tree. Fortunately, the Treasury’s top mandarin, who had enhanced clearance for health and safety, having attended a ladder awareness course, was able to place the star on the tree himself. Job done.

Now all this PFI chatter may sound a million miles away from the NHS and hospital food, but when you realise the amount of colossal waste and overcharging that goes on in the world of PFI, you can see that billions of pounds are literally being poured down the drain in this dreadful waste of money in many of our hospitals. For instance, the PFI contractor in one of the hospitals I was being treated in charged the hospital a staggering £45 to provide a sandwich to patients outside of mealtimes. So, when patients returned to the ward late for a meal after having had an operation, the contractor got paid almost £50 for turning up on the ward with a cardboard box containing an apple, a dry little sandwich and a cheap low-fat yogurt. And we wonder where all the country’s money has gone.

Merry Christmas.


  1. We call them P3s. Public Private whatever. Don't know what the 3rd P is or even if there is one.
    The tree fiasco sounds so unionish. Sorry can't do that, not in my job description or the contractor has the contract for that particular job. Stupid.
    At work we waited many days for the facilities dept. to move a printer from one spot to another and hook it up. We finally did it. Didn't get any flack from facilities, just a half hearted "you can't do that" from our supervisor who then walked away.
    We just canned Stephen Duckett (head of Alberta's health board) because, gosh, I don't know why. It is a wonder he didn't walk out because of all the crap he had thrown his way. Maybe he sabotaged himself with the 'cookie' thing (google it, it's on YouTube).
    Going to hell in a handbasket we are.

  2. Chris in Melbourne14 December 2010 at 20:06

    Hi Libby!
    If it's anything like here it will be Public Private Partnership. Thats where the private bit builds the whatever (road, building, runs services)and as per TM's description gets to trouser the income derived. Of course all of the financial details are 'commercial in confidence' so us mere mortals don't get to know where all the loot went. And, of course, when the infrastructure has reached the end of it's 'shelf-life' it is taken back over by the Government of the day, just in time for the taxpayer to fork out for all the maintenance and refurbishment.
    Over here in Victoria OZ it is heavily whispered that some of the deals between our recently un-relected State Government were so dodgy that one of them, a redevelopment of the main railway station for local and interstate rail traffic has had it's financial doings sealed for fifty years! Another,a major freeway became a toll road
    for the builder, but predominantly has turned into a white elephant for them as a huge percentage of the motoring public will not pay the over the top toll, and there are alternate routes. The list goes on and on. Our desalination plant being built at seemingly three times the cost of plants elsewhere in the world which under the terms of the deal we must pay the operator $$$$ per annum when finished, even though it's going into mothballs as it's not needed.

  3. PFI seems to be a variation on Hire-Purchase, or as my parent’s generation would have called it, buying on ‘the Never-Never’.

    Hasn’t George Osborne got anything better to worry about? He of all people really ought to know that an organisation typically costs 3 to 10 times as much to run as the labour and materials consumed. The question I feel compelled to ask is, “Did his staff welcome the break from their salaried duties to buy and decorate the tree, or had they nothing better to do for an hour or two?” We can be fairly certain that they still had their full lunch break that day.

  4. I suppose if you add up George Osborne's time, the time of his mandarin and the staff needed to decorate the tree, then the money the PFI contractor was charging is a bit of a bargain. That said, I think it goes to show how costs in the public sector are totally out of control and bear little relation to reality. Artificial tree next year and some immigrant labour to decorate it?

  5. PFIs are very common within education in Scotland causing major headaches when the school want to do anything at all. Put up a notice board can take over 6 months to achieve. Any alterations to the lighting on the stage - the PFI company have to do it at a major cost. Consequently, the school don't put on many shows that need extensive lighting! And so it goes on.
    Forth Valley Health Authority have a brand new PFI hospital. Unfortunately, they don't have automatic doors on the entrance to wards or physiotherapy department. How much will it cost to sort out and at who's expense? You can be assured that the private company won't be paying!
    I dislike PFIs as it gives control over every minor detail to people who know nothing at all.

    Hope you are doing well TM?

  6. Chris in Melbourne25 December 2010 at 07:47

    To XTM and family~A Joyous Xmas to you all!

  7. Happy Christmas to you, Chris... and all the people who read my blog. I really appreciate your visits. Sorry for not posting a lot recently but I've been putting the finishing touches to a project I've been working on which will appear on tv in February. More details closer to the time.

  8. Interesting :o) Will wait to hear more on the project, in the meantime wishing you and your family a very Happy New Year.


  9. Chris in Melbourne4 January 2011 at 09:29

    Hi XTM and family. Happy New Year to you. Live well and prosper!

    I was just checking in,as you do from time to time.

    Interesting that the local side bar ads out here today are variously for: A University Nursing Course, a number of supplementary food products, nice beds, a Compensation Law Firm and rounding off with one for a quite reasonable restuarant.

  10. how can i get in to this business sounds very lucrative lol