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Crippling Pfi Deals Leave Britain £222Bn In Debt

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http://www.independent.co.uk/money/loans-credit/crippling-pfi-deals-leave-britain-222bn-in-debt-10170214.html

Every man, woman and child in Britain is more than £3,400 in debt – without knowing it and without borrowing a single penny – thanks to the proliferation of controversial deals used to pay for infrastructure such as schools and hospitals.

The UK owes more than £222bn to banks and businesses as a result of Private Finance Initiatives (PFIs) – “buy now, pay later” agreements between the government and private companies on major projects. The startling figure – described by experts as a “financial disaster” – has been calculated as part of an Independent on Sunday analysis of Treasury data on more than 720 PFIs. The analysis has been verified by the National Audit Office (NAO).

The headline debt is based on “unitary charges” which start this month and will continue for 35 years. They include fees for services rendered, such as maintenance and cleaning, as well as the repayment of loans underwritten by banks and investment companies.

Basically, a PFI is like a mortgage that the government takes out on behalf of the public. The average annual cost of meeting the terms of the UK’s PFI contracts will be more than £10bn over the next decade.

And the cost of servicing PFIs is growing. Last year, it rose by £5bn. It could rise further, with inflation. The upward creep is the price taxpayers’ pay for a financing system which allows private firms to profit from investing in infrastructure.

How long will PFI last before a future govt has to admit it was a really bad deal for the tax payer? I'm sure the companies in question will profit greatly.

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About 5 years ago I met a lawyer who worked on PFI contracts. She said that they were much better than they used to be. I didn't believe her then and I don't believe her now. She was almost certainly an idiot.

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I've never understood PFI.

Surely a government can borrow money at a much much lower rate of interest by selling bonds and gilts then it can by borrowing directly from private companies?

It's like choosing to borrow from Wonga longterm. Mental.

Edited by byron78

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I've never understood PFI.

Surely a government can borrow money at a much much lower rate of interest by selling bonds and gilts then it can by borrowing directly from private companies?

It's like choosing to borrow from Wonga longterm. Mental.

It's just a fudge so they can "obscurify" the borrowing figures.

Similar stuff done with the unemployment figures etc.

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

Edited by Gigantic Purple Slug

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About 5 years ago I met a lawyer who worked on PFI contracts. She said that they were much better than they used to be. I didn't believe her then and I don't believe her now. She was almost certainly an idiot.

PFI contracts are usually worse than you can imagine - lets say you have a PFI building with a large room and you want to divide it into two by adding a new wall, maybe £5k of work, you can have that done , but you can't go out to tender, the work must be done by the buildings owner/management company, so you will be charged maybe £10K but in addition, having the work done means that the PFI building has been "improved" to the tune of £10K and that will be added to the yearly bill of the existing PFI contract, and so the total cost over time will be more like £40K

If a few years later you change your mind and have the wall removed, the same applies only now you are on the hook for £80K - its utter madness

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I've never understood PFI.

Surely a government can borrow money at a much much lower rate of interest by selling bonds and gilts then it can by borrowing directly from private companies?

It's like choosing to borrow from Wonga longterm. Mental.

It absolutely can. We are stick in high paying PFI contracts when we can borrow for next to nothing.

The growth of PFI is down to Gordon Brown, although they came into existence under John Major. The deals were used to conceal government borrowing, to show that Labour had not increased government borrowing and were prudent.

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and now labour returning (probably), maybe they can sort it all out.

"hell yeah" to quote Miliped.

They will more than likely be investing by borrowing as Balls likes to phrase it.

Edited by Blod

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Jam today yesterday.......a short-term, short-sighted quick fix that the future is indebted to pay for....the people who are signed up to pay the high price for yesterdays imaginary good times, not benefiting and without their consent.......what was the gold sold spent on?....got nothing left to sell, all we can do is borrow at a high price from the future....

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It absolutely can. We are stick in high paying PFI contracts when we can borrow for next to nothing.

The growth of PFI is down to Gordon Brown, although they came into existence under John Major. The deals were used to conceal government borrowing, to show that Labour had not increased government borrowing and were prudent.

One of the many bad things he did - although he did keep us out of the Euro.

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Our local hospital in Coventry is a perfect example of the huge fraud this allows. The figs and detail are disputed, but link shows clearly how this fraud works.

http://www.monbiot.com/2007/09/04/the-fat-cats-protection-league/

Needed a £30m re-fit. This wasnt meaty enough to get pfi interest, so planned a £174m rebuild. But the costs spiralled and total build was £440m..

The £440m total cost to the pfi co will be repaid at a cost of £3.3bn over 30 years.

I believe Monbiot is wrong about the car park. I cant find a link now, but there was a cost of car parking campaign a few years ago, it was suggested the hospital had guaranteed a minimum revenue to the pfi project, so they could not reduce the costs without affecting the clinical budget.

I do know for certain that parking is a massive issue. Not enough spaces. Many staff have to park in the Asda (Or Homebase) up the road and get a bus to work.

The whole project seems to have been designed around maximising return, with scant regard to making the project work.

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I think it is called privatisation.

Privitisation is when a private company is responsible for any problems and makes money if they do well. With PFI the private company makes money whatever happens and the tax payer is on the hook for any problems - it is much better for the private investors.

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How easily can these be defaulted on? You'd think the government would have an easy get-out clause, or are payments linked to CPI or RPI?

A combination of Brown and the UK civil service probably means they signed off on the most stupid, expensive contract in the world.

I would not attribute any commercial, common sense or basic competence to the civil service until you have sat down with a few 'high flyers' and realise what a bunch of idiots they are.

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PFI - Fat Cat Protection League is right. Gordon the Moron Brown. Still not undone by those that followed. A strong leader would tell the parasites where to go.

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It's all very 1984 isn't it. Tax credits are not benefits neither are EU subsidies for Duncan Smith's family. 'Self employed' are not unemployed' even if they never work. PFI is not borrowing, zero-hours means employed. Housing benefit is not a landlord's subsidy as it is 'paid' to the unemployed and workers who claim it. HS2 et al is not spending it is investment .... and of course hard-working houses generating masses of imputed rent for the grand daddy of obscuration; GDP.

Beautiful paragraph!

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I'm guessing these contracts are not included in the 1.4 trillion public sector debt.

I'm presuming off balance sheet, just to add to the student debt that will be 55% unpaid, the unfunded public sector final salaries schemes, the state pension scheme and NHS insurance shemes that are about to come due from an ageing population that didn't put aside one penny.

Guess the generation XY drones are going to need some deep pockets.

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I'd just pass a 'PFI Seizure Act' and unilaterally cancel the contracts.

If our government was a private company that had signed these contracts it would have gone bust. The contracts would ultimately be worthless. Allowing contractors to bleed off billions, knowing that the government will ultimately print any shortfall, is a moral hazard.

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One thing the self made crisis has shown. The central bank can just print the money required. After their actions never again should countries need to go to the market in order to raise funds. The system is a scam/sham. The banks and banksters as intermediaries are totally unneccessary. Give governments the ability to print money at will and voted out accordingly if they do so to fund unwise investment the effect is felt in the currency and a half awake population would know who to vote out.

There is a massive democratic and market deficit, we are being taken for fools.

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The civil service isn't very accountable so it can come up with easy to implement madcap schemes until the cows come home - probably not even then. When it all goes pear shaped just print the money off.

The LibLabCon will come up with explanations even if they're totally contradictory from one day to the next as well as completely crazy.

Edited by billybong

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