Reading the report is always a useful start

Ritchie on PFI:

I have a number of ways I could respond to this, but I am (for once) simply going for the ‘told you so’ route.

From ‘People’s Pensions’ in 2003, where Colin Hines and I advocated local authority bonds as an alternative to PFI, the the Green New Deal, where we developed the theme, to green quantitative easing, and then People’s Quantitative Easing, I can claim some credit in being an anti-PFI campaigner, and always because it was glaringly obvious that it failed to deliver value for money.

That is 15 years of saying so.

And now, finally, the NAO catches on.

Note his insistence. PFI does not deliver value for money and the NAO now agrees.

Now look at the NAO report:

Although we do not form a view on the value for money (VfM) of PFI and PF2

Oh.

9 comments on “Reading the report is always a useful start

  1. Clearly Snippa is unable to understand a report as nuanced and carefully considered as this. What would he make of this paragraph?

    1.6 Our previous work found that project managers reported that PFI projects were
    delivered within budget more often than non-PFI projects.5
    As part of this 2017 study we
    surveyed 11 government departments. Responses showed cost certainty was generally
    seen as a benefit of PFI (five of the eight departments that responded to this question
    considered that certainty over construction costs was better under PFI). Increased
    certainty about price does not necessarily mean that the cost the public sector pays
    for construction is lower: the Treasury Committee found that some PFI projects charge
    higher prices for construction to cover unforeseen costs.6
    Prices can still increase in PFI
    projects, particularly before final terms are agreed at financial close. Our report on PFI in
    housing reported significant capital cost increases compared to initial estimates.

    or this one?

    1.11 PFI contracts stipulate that buildings have to be maintained to a specified standard:
    part of the unitary charge covers asset maintenance. Our previous analysis has shown
    that the contractually agreed standards under PFI have resulted in higher maintenance
    spending in PFI hospitals.11 Public bodies have the ability to reduce maintenance
    spending in non-PFI assets, but this is much more difficult to do under a PFI contract.
    Respondents to our 2017 survey tended to consider that maintenance standards were
    higher under PFI.

  2. Actually comment 1.11 is very important. Maintenance spend is often underestimated or even ignored in the thrill of a big capital project. One major example was the National Theatre in London. A prestigious project but no one had budgeted for maintenance and cleaning of all that concrete and all those walkways. Peter Hall’s diaries are full of his indignation about having to find money for upkeep of the building when his job was to put on plays and put bums on seats. Although the financial pressures did force him to work very hard at putting bums on seats. But the point remains, once you gave built something, annual recurring spend has to come out of a department’s budget and it is often the first candidate for cutting, in public and private sector alike and it is often under-budgeted

  3. So PFI meant the government got say a £180 million hospital built for nothing, then say £12 million paid out for 30 years with someone else responsible for building upkeep (add a few million over time for that) and at the end of the 30 years the government has a properly maintained building handed to them. For a mere £1 million a month.

    This sounds rather better than a mortgage.

    Can see its attraction, new buildings get built or sold off and for low payments in the future money does not need to be found in large quantities now.

    Disadvantage is that someone has to pay. And a good deal in late 1990s is not necessarily the same good deal 15 to 20 years later.

  4. I once commented when asked by a colleague why we leased certain assets that it meant the executive had to approve lifecycle replacement as the lease extension costs usually meant it was more productive to get new equipment than keep old equipment runnnig, but if we purchased they would just extend life to save some capital budget

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