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					 A Briefing on the Private Finance Initiative                                                          Spring 2008
 Issued by UNISON Scotland for branches.


SCOTTISH GOVERNMENT
PLANNING FOR PFI-LITE
                                                                                         RISK TRANSFER
Hopes that the Scottish Govern-             tailed response to the consultation.        ‘UTTER FICTION’
ment would provide a genuine alter-         In essence, we believe that the
native to the scandal of PFI/PPP            Scottish Government is simply put-
                                                                                      “The bailout of Metronet, which
were dashed when plans for the              ting a gloss of public accountability
                                                                                      maintained nine tube lines, ex-
Scottish Futures Trust (SFT) were           onto PFI and PPP instead of ad-
                                                                                      poses the utter fiction that Public
unveiled in December.                       dressing the scandalous waste of
                                                                                      Private Partnerships and PFI
A distinct ideological shift appears        public funds these policies repre-
                                                                                      projects transfer risk and debt
to have taken place since the SNP’s         sent.
                                                                                      away from the public sector.
original proposals in opposition.           The SFT is set to be a private lim-
                                                                                      In the provision of essential pub-
The consultation document on the            ited company run on non-profit dis-
                                                                                      lic services, if a contractor fails,
SFT talks of creating a huge private        tributing principles.
                                                                                      the taxpayer is the guarantor of
company to run Scottish PFI                 It will have a membership “repre-
                                                                                      last resort, no matter how the
schemes.                                    sentative of the Scottish public in-
                                                                                      debt is classified in the national
It is only critical of standard, or ‘tra-   terest” and will potentially operate
                                                                                      accounts.
ditional costly’, PFI, which made           right across the public sector, in-
                                                                                      That is the lesson of Metronet,
“the most extreme and unwarranted           cluding housing, not previously part
                                                                                      and of earlier bailouts, such as
profits”. It will continue, while the       of PFI in Scotland. It will raise funds
                                                                                      that of British Energy and Rail-
SFT is under development, with PFI          from bonds, from commercial
                                                                                      track. It is certainly the case with
schemes set up as ‘Non Profit Dis-          banks and private investors, with a
                                                                                      Northern Rock, as the Office for
tributing’ (NPD) models.                    structure almost identical to current
                                                                                      National Statistics has made
The consultation document does              PFI schemes. This has the SFT ve-
                                                                                      clear by insisting that its liabili-
not even completely rule out stan-          hicle designing, building, financing,
                                                                                      ties, to the tune of £90bn, should
dard PFI, saying that it may still be       operating, managing and owning
                                                                                      be classified as government bor-
used where the risks in a project           the new school/hospital/other facil-
                                                                                      rowing….
are deemed “exceptionally high”.            ities created.
                                                                                      The ONS is quite right to demand
This seems incredible given the             Councils, health boards and other
                                                                                      that Northern Rock's debts
highly publicised failings of so-           public bodies would pay a charge
                                                                                      should be on the books. Off-bal-
called risk transfer in the case of the     to the SFT for use of the facilities.
                                                                                      ance sheet accounting, notably
collapse of Metronet, the London            By ‘bulk-buying’, the SFT will pro-
                                                                                      used by US energy giant Enron,
Underground contractor.                     vide cheaper private finance than
                                                                                      is a device that seems to make li-
UNISON Scotland has produced a              PFI procurements.
                                                                                      abilities disappear. If only. The
briefing on the Scottish Futures            It may also provide other financial
                                                                                      technicalities are complex, but
Trust and will be submitting a de-          services, such as cheaper risk in-
                                                                                      the simple question is:


DELIGHT AS GLASGOW
                                                                continued on P2
                                                                                      Whose money goes down the
                                                                                      tubes if it all goes horribly


NHS REJECTS PFI FOR
                                                                                      wrong?
                                                                                      The answer with Metronet and


NEW CITY HOSPITALS
                                                                                      Northern Rock is ours.”
                                                                                      Ruth Sunderland, Business
                                                                                      Editor,The Observer. 10 Feb 2008.
                                                                       See P3
                                                                                                                       1
PROBLEMS WITH SCOTTISH                                                                  PFI COMMENTS
FUTURES TRUST AND NPD PFI                                                               “In the current economic climate, the com-
                                                                                        bination of the Barnett squeeze – which will
continued from P1                                                                       see Scotland's share of expenditure fall rel-
                                                                                        ative to the rest of the UK – and the afford-
surance for some parts of projects.      Charitable donations they make are             ability pressures of new PFI schemes place
UNISON is sceptical about whether        simply recycling public money - and            a big question mark over SFT. If still more of
such a private company can have a        they retain the secrecy and ac-                the budget intended for public services is di-
genuine public interest ethos.                                                          verted to bankers for their risk premium and
                                         countability deficit inherent in PFI
                                                                                        expensive privatisation then more cuts to
It won’t take a profit, but the banks    schemes.                                       public services and closures of schools,
and private firms contracted to run      It is universally accepted that the            hospitals, clinics, and other services will fol-
the services will.                       public sector can secure cheaper               low.”
Part of the reasoning for setting up     borrowing rates.
                                                                                        Professor Allyson Pollock, of Edinburgh
the company is to keep the spend-        UNISON devised a set of proposals              University, on the Scottish Futures
ing on infrastructure ‘off balance       for the Scottish Government which              Trust.
sheet’.                                  would allow PFI/PPP to wither on
However, the UK Government is            the vine. These are:                           “We explained that while it is difficult to say
about to move to International Fi-                                                      that any single procurement method is re-
                                         •        review existing contracts,
                                                                                        sponsible for producing poor quality it must
nancial Reporting Standards (see         with buyouts where cost-effective              be recognised that the constraints imposed
P4), which are likely to mean that       and not approve any new PFI/PPP                by PPP/PFI processes have, in many
future schemes are not allowed to        contracts                                      cases, stifled debate and creativity. Trans-
remain off the balance sheet.            •        offer Scottish Government             ferring responsibility for the quality of the
                                                                                        finished product to those less motivated in
If so, they will count towards public    grants for new capital projects irre-          the wider public interest makes delivering a
spending which would cause prob-         spective of procurement method                 quality school more difficult to achieve.”
lems for the Treasury policy, intro-     •        give health boards pruden-
duced by Gordon Brown as                 tial borrowing powers                          Raymond Young CBE, Chair of Architec-
Chancellor, that says public spend-                                                     ture + Design Scotland (A&DS), on the
                                         •        ensure that new procure-
                                                                                        organisation’s briefing to MSPs for the
ing must not exceed 40% of Gross         ment arrangements exclude staff                January 08 school buildings debate.
Domestic Product.                        from transfer and bring in a
The consultation document recog-         strengthened PPP staffing protocol             “Doctors across the UK have raised con-
nises this could make it hard to de-     across the public sector.                      cerns of bed shortages, financial problems,
                                                                                        poor design, poor quality and reduced lev-
sign an SFT which could provide          These proposals would create a                 els of care as a result of PFI… The BMA
the level of investment of recent        level playing field whereby public             has … continually highlighted the high cost
years (very expensive investment         bodies would, we believe, choose               and associated low value for money of
that mortgages future generations)       the cheaper conventional funding               these schemes, and the transfer of public
and says the proposals will be de-                                                      funds into private sector profits… BMA
                                         route.
                                                                                        Scotland… would support a capital invest-
veloped “in the light of the final       They offer the real alternative to             ment system in Scotland that enables the
IFRS outcome”.                           PFI.                                           NHS and its staff to develop high quality
On NPD, UNISON has long argued           UNISON Scotland’s SFT Briefing is at:          services for patients in a cost effective and
that NPD models of PFI are basi-         www.unison-                                    sustainable manner. BMA Scotland does
                                         scotland.org.uk/briefings/briefingsft178.pdf   not believe that the current PFI arrange-
cally window dressing. They retain       The At What Cost report is at:                 ments provide this.”
the higher borrowing costs, private      www.unison-scotland.org.uk/comms/at
profit at the contractor level and el-   whatcostoct07.pdf                              BMA Scotland, response to the Finance
ements of the risk transfer costs, all   The Scottish Government consultation           Committee’s inquiry into funding of cap-
leading to the same profiteering and     is online at:                                  ital investment projects.
                                         www.scotland.gov.uk/Publications/
inflexibility inherent in PFI.           2007/12/19093017/0

    Conference on Scottish Government’s Scottish Futures Trust Consultation
                Organised by the SNP Trade Union Group and Association of Nationalist Councillors
                 Saturday 1st March 2008, 10.30 am to 3.00 pm STUC, 333 Woodlands Road, Glasgow.
Confirmed Speakers include: Professor Allyson Pollock, Head of the Centre for International Public Health Policy at
the University of Edinburgh; Margaret and Jim Cuthbert, Independent Economic Analysts; Professor Mike Danson,
University of West of Scotland Business School; Professor Christine Cooper, University of Strathclyde Business
School; Professor David Miller, Department of Geography and Sociology, University of Strathclyde; Dave Moxham,
Deputy General Secretary, Scottish Trade Union Congress.
Free event, though pre registration would be helpful in organising lunch arrangements.
Post lunch session is only open to the conference speakers and members of the SNP Trade Union Group and the Asso-
ciation of Nationalist Councillors. To register contact Bill Ramsay, Secretary, SNP Trade Union Group
0141 422 1406 or william993@btinternet.com
                                                                                                                                    2
    SCHOOLS - A LEVEL PLAYING FIELD?
There will be no third wave of PPP          through the NPD route, during the            at a much cheaper cost than PPP,
school projects.                            period it is setting up the Scottish         which has credit-card rates of inter-
That was the pledge from Adam In-           Futures Trust. UNISON has made it            est.
gram, Minister for Children & Early         clear that NPD models maintain               “There will also be the Scottish Fu-
Years, during a Scottish Parliament         many of the problems we have                 tures Trust to look forward to. Our
debate on school buildings in Janu-         highlighted in traditional PFI/PPP.          clear intention is to provide a series
ary this year.                              PRUDENTIAL                                   of affordable options for local au-
His comments in the debate sug-             However, Mr Ingram said that he              thorities that seek to improve
gest that the Scottish Government           expected PFI/PPP to wither on the            schools in their areas.
believes it is creating a genuine           vine in future because: “Over the            I am confident that PPP will wither
level playing field where councils          next three years, some £3 billion is         on the vine, as unlamented as it
will be able to use cheaper conven-         being provided to secure invest-             was unloved.”
tional funding instead of PFI/PPP.          ment in infrastructure at local gov-                       GENUINE
UNISON welcomes this if it creates          ernment level, which includes                Dave Watson, UNISON Scottish
a situation where there are no spe-         schools.                                     Organiser, said:
cial subsidies for, nor bias towards,       “That represents a 15 per cent in-           “If this announcement means a
PFI/PPP, whether Non Profit Dis-            crease in each year of the settle-           genuine level playing field between
tributing (NPD) or ‘traditional’.           ment, compared with this year's              prudential borrowing and PPP then
We are disappointed that the Scot-          figures.                                     we welcome this as a positive step.
tish Government seems keen to               “In addition, local authorities can          “We now require a similar approach
maintain the options for private in-        use the prudential borrowing                 in other public services”.
volvement in public services                schemes to access private finance

NEW GLASGOW HOSPITAL
PROJECTS WILL NOT BE PFI
Health chiefs in Glasgow are proposing      hospitals are currently being submitted
that the £842 million new adult and chil-   to the Scottish Government’s Capital
dren’s hospitals are built using tradi-     Investment Group. The new South
tional procurement.                         Glasgow Hospital and the children’s
News of the decision by NHS Greater         hospital, relocated from Yorkhill, along
Glasgow and Clyde that public funding       with the upgraded maternity hospital
will be better value than going down the    and other existing facilities will be the         New Southern General Hospital
PFI/PPP route is being widely wel-          biggest and most modern healthcare
comed       across      Scotland.   Matt    campus in Britain. NHS Lothian’s con-        Council, NHSGGC is now required to
McLaughlin, UNISON Regional Organ-          sultations with parents found strong         submit a case to the Scottish Govern-
iser, said: “I am pleased that the Board    hostility to using private finance for the   ment that demonstrates affordability
have finally accepted the UNISON ar-        new purpose-built hospital at Little         and value for money to the taxpayer.
gument that a traditional funding model     France, next to the PFI Royal Infirmary      The outline business case recom-
would be cheaper and more cost effec-       and to the Simpsons Maternity Unit.          mends Traditional Procurement (fully
tive in the long term for the public        In 2006 Brian Cavanagh, the outgoing         publicly funded) as the Board’s pre-
purse.                                      chairman of NHS Lothian, said it may         ferred option after having carried out an
“UNISON members who provide cater-          not be a good idea to use PPP. Doing         assessment of a number of procure-
ing, portering and domestic services on     so could turn off public generosity and      ment models including Private Finance
site will be especially pleased because     goodwill towards any fundraising cam-        Initiative. This option brings in the cap-
this proposal, if it is supported by the    paign for the Sick Kids. In Glasgow          ital costs of the project at £842 million.”
Scottish Government, will remove the        planning permission was granted in           Further information at: NHS Lothian
inevitable spectre of privatisation that    January. NHS Greater Glasgow and             www.nhslothian.scot.nhs.uk/hospi
follows PFI around.”                        Clyde says the children’s hospital will      tals/rhsc/
There are hopes too that NHS Loth-          open in 2012 and the acute hospital          NHS Greater Glasgow & Clyde
ian’s plans for Edinburgh’s new Sick        open in 2014. A spokesman said: “Hav-        www.nhsggc.org.uk/content/default.as
Kids hospital will also reject PFI.         ing already achieved conditional outline     p?page=home_southerngeneralcam-
Outline Business Cases for the three        planning permission from Glasgow City        pus
PFI UPDATE
UNISON’S campaign against PFI in Scotland is co-ordinated by Scottish Organiser Dave Watson. If you have news of PFI devel-
opments in your area, Dave would like to hear from you. He is based at:UNISON House, 14 West Campbell St, Glasgow, G2
6RX.Tel: 0870 7777 006 Fax: 0141 331 1203 Textphone 0141 248 3981 Email: d.watson@unison.co.uk                                  3
KEVIN DUNION WANTS FOI
TO ‘FOLLOW THE MONEY’
Kevin Dunion struck a key blow for           run local authority leisure and recre-
freedom of information last autumn           ation services, local people and em-
when he ordered the release of the PFI       ployees may find that they have lost
contract with Consort for Edinburgh’s        freedom of information rights at a
Royal Infirmary.                             stroke, as these bodies are not re-
The Scottish Information Commissoner         garded as public authorities…
also called for a review of the organisa-    “One of the key purposes of the free-
tions covered by the Freedom of Infor-       dom of information legislation was to                             ££ BILLIONS OF ££
mation Scotland Act (FOISA) to ensure
that information ‘follows the money’
                                             allow authorities to be held to account
                                             publicly for their spending.
                                                                                                                POUNDS WASTED
where public services are provided by        “However in recent investigations I                               £££ ON PFI/PPP £££
private contractors.                         have found that contracts to build
This coincided with Prime Minister Gor-      schools and hospitals can run to thou-                           A major report by UNISON Scotland
don Brown launching a consultation on        sands of pages, and that authorities                             last autumn confirmed that billions of
extending the scope of legislation down      are able to withhold these on the                                pounds are being wasted on PFI and
south to include private firms delivering    grounds of cost or attempt to argue                              PPP projects.
public sector contracts. Mr Dunion, who      that the whole contract is confidential.                         An examination of key figures from of-
has recently been re-appointed to his                         REVIEW                                          ficial documents showed that PFI and
post for four more years, strongly criti-    "I think it is important that we review                          other forms of Public Private Partner-
cised NHS Lothian for attempting to          which bodies are covered by the free-                            ships could be costing Scottish taxpay-
claim a “blanket exemption of confiden-      dom of information laws, and in addi-                            ers £2.1 billion more than conventional
tiality” on the controversial RIE contract   tion take steps to ensure that                                   funding.
yet providing “virtually no arguments” to    information rights 'follow the money',                           The extra cost is supposedly justified
justify this.                                where significant sums of public                                 by claiming that £3.5 billion of risk has
The contract is now available on the         spending are concerned.                                          been transferred to the private sector
NHS Lothian website and the decision         “Measures can be taken to ensure that                            – akin to a rip-off £3.5 billion insurance
prompted NHS Lanarkshire to also re-         the new trusts are publicly owned and                            policy.
lease full details of their PFI contracts,   there could be a requirement to publish                          Scottish Organiser Dave Watson said
including for Hairmyres and Wishaw           PPP contracts subject to safeguarding                            that ultimately the risk is borne by tax-
hospitals.                                   genuinely confidential elements.”                                payers, as the collapse of London Un-
UNISON has a number of Freedom of            Disappointingly, at the Freedom of In-                           derground        contractor       Metronet
Information appeals being investigated       formation conference where Mr Dunion                             showed.
by the Scottish Information Commis-          made his comments, Minister for Par-                                         PROFITEERING
sioner Kevin Dunion and is also seek-        liamentary Business Bruce Crawford                               He added: “These are just two figures
ing details of key hospital and schools      implied that the Scottish Government                             from the range of ways in which private
projects from councils and health            would not extend the scope of FOISA                              companies are profiteering at the ex-
boards - such as NHS Forth Valley.           but would seek instead to ‘deepen the                            pense of school children, hospital pa-
                 MISSING                     culture’ and improve existing access                             tients and taxpayers. Other factors
One incredible example of the prob-          and good practice with pro-active pub-                           include refinancing, high rates of re-
lems in obtaining information was that       lication.                                                        turn, the higher cost of private financ-
neither the (then) Scottish Executive,                                                                        ing, land sales and the PFI private
nor Scottish Water, could provide a sin-     UNISON Scotland’s response to the call                           equity market.
gle Full Business Case for any of the        to extend FOISA:                                                 "Unfortunately too often the financial
nine multi-million pound water treat-        www.unison-
                                                                                                              figures are kept from the public due to
                                             scotland.org.uk/news/2007/sep-
ment projects, with both bodies claim-                                                                        claimed commercial confidentiality.”
                                             toct/2510.htm
ing they are ‘not held’.                                                                                      The full report is at: www.unison-scot
These are the documents that suppos-         Scottish Information Commissioner:                               land.org.uk/comms/atwhatcostoct07.pdf
edly provided proof that using PFI for       www.itspublicknowledge.info/home/Scot-                           UNISON Scotland’s submission to the
the projects was better value for money      tishInformationCommissioner.asp                                  Scottish Parliament Finance Commit-
than conventional funding, yet they all                                                                       tee’s inquiry into the funding of capital
appear to have gone missing.                 NHS Lothian RIE contract with Consort                            investment projects is at:
UNISON welcomed Mr Dunion’s com-             www.nhslothian.scot.nhs.uk/news/key_doc                          w w w. u n i s o n - s c o t l a n d . o r g . u k / r e
ments on extending the FOISA to cover        uments/rie_pfi_agreements/                                       sponse/capitalinvest.html
organisations such as housing associ-
                                             NHS Lanarkshire PFI contracts:
ations and charitable trusts.                w w w. n h s l a n a r k s h i r e . c o . u k / P u b l i c a   See page 5 for a number of other
He said: “When council housing is            tions/Private+Finance+Initiative+Con                             damning reports into PFI/PPP.
transferred to a housing association or      tracts/Private+Finance+Initiative+Con
when a charitable trust is established to    tracts.htm
                                                                                                                                                                 4
ROUNDUP OF PFI/PPP REPORTS
   SOME PFIs ‘ONE FOR                           Further details at:                           ket to ensure the public interest is not
   THE PRICE OF TWO’                                                                          being compromised.
                                                www.cuthbert1.pwp.blueyonder.co.uk

Scottish economists Jim and Margaret
                                                  PROJECT CHANGES                             Income from the sale of equity shares
Cuthbert took a fine toothcomb to the           ‘COST AN ARM & A LEG’                         does not have to be shared with the
                                                                                              public sector in the way that PFI refi-
financial projections for a number of           Making changes to PFI projects is             nancing deals are.
PFI schemes, with dramatic results.             costing the taxpayer millions of                            DEFERRING
They believe the public sector has              pounds, according to the National             The PAC’s May 2007 report ‘Update on
been making two elementary mistakes             Audit Office (NAO).                           PFI Debt Refinancing and the PFI Eq-
in negotiating contracts, contributing to       It slammed the range of prices charged        uity Market’ warned that some in-
huge profits for the private sector.            by contractors for jobs such as fitting       vestors might be deferring refinancing
Their 2007 report Lifting the Lid on            an electrical socket or lock or key. A        “in favour of realising gains through
PFI found that the cash returns on              lock could vary between £15 and £486.         selling their shares in the secondary
some projects were “staggering” with            Edward Leigh, chairman of the House           equity markets”.
inappropriate indexation meaning that           of Commons Public Accounts Commit-            It made recommendations for stronger
with some schemes you literally get             tee, said public sector contract man-         Treasury scrutiny and for it to publish
“one for the price of two”.                     agers must become more ‘street-wise’          annual updates on the number and
They calculate that Internal Rates of           He said: “Changes during a 25 - 30            value of PFI investments held by the
Return (IRRs), already generous, can            year PFI contract are inevitable, but         main investors.
grossly underestimate the true scale of         they should not be costing the tax-           It also said public bodies should be
return to the private consortia in some         payer an arm and a leg as they often          more aware of their contractual rights
PFI projects.                                   are.                                          to obtain financial information about
The Cuthberts used some information             “Consider the range in prices charged         their projects, including the current re-
from official documents obtained by             for some of the simplest of jobs. For in-     turns being achieved by investors and
UNISON under Freedom of Information             stance, one PFI contractor charges            annual updates of financial models,
legislation, but full information is still      over £300 to fit an electrical plug           setting out the investors’ returns.
often withheld.                                 socket, while others charge less than         www.publications.parliament.uk/pa/cm2006
               PUBLISHED                        £50…The public sector has allowed it-
                                                                                              07/cmselect/cmpubacc/158/158.pdf
Their financial analyses suggest that,          self to be taken for a ride.
as a minimum, the following two meas-           “It is depressing that, for one in five PFI     METRONET LESSONS
ures should be produced and published           projects, the public authorities trim the         TO BE LEARNED
for all past and present PFI schemes            projects at the initial plan stage to save    The House of Commons Transport
(i)       the Net Present Value of the          money, only to risk being stung later by      Committee has said the imposition of
projected non-service element of the            the private sector contractors when           the London Underground PPP by the
unitary charge, in comparison to the            things are put back into the project es-      UK Government is what led to the “lam-
original capitalisation of the project.         pecially if without a competitive             entable state of affairs” with the col-
(ii)      the internal rate of return on        process.”                                     lapse of contractor Metronet.
equity, in conjunction with the average                     UNJUSTIFIABLE                     It concluded that “whatever the poten-
notional outstanding debt over the life         Dave Prentis, General Secretary of            tial inefficiencies of the public sector,
of the project on which that IRR is pro-        UNISON, said: "Taxpayers are paying           proper public scrutiny and the opportu-
jected to be earned.                            over the odds for PFI projects that are       nity of meaningful control is likely to
They concluded: “In our view the prob-          slow, inflexible and expensive.               provide superior value for money.
lems with PFI are so grave that tinker-         “This latest National Audit Office report     “Crucially, it also offers protection from
ing is not the appropriate approach at          reveals how companies continue to             catastrophic failure.
this stage. We would seriously suggest          rake in the cash by charging unjustifi-       “It is worth remembering that when pri-
that there should be a moratorium on            ably high fees for making changes to          vate companies fail to deliver on large
all future PFI projects, until the full facts   contracts.                                    public projects they can walk away - the
of what has gone wrong, and why, have           “These companies are abusing their            taxpayer is inevitably forced to pick up
been established: preferably this               position by overcharging hospitals and        the pieces.”
should be done through a public en-             schools for small changes and basic           www.publications.parliament.uk/pa/cm2007
quiry.                                          maintenance.                                  08/cmselect/cmtran/45/45.pdf
“Moreover, if it is established that ex-
cessive and unreasonable profits have
                                                The report Making changes in Opera-
                                                tional PFI Projects is at:
                                                                                                     KEY RESEARCH
resulted from past PFI schemes, then            www.nao.org.uk/publications/nao_re            The Centre for International Public
efforts should be made to re-open               ports/07-08/0708205.pdf                       Health Policy at Edinburgh Univer-
them.”                                           REFINANCING AND PFI                          sity has published important re-
                                                                                              sarch on PFI in Scotland.
Lifting the Lid on PFI, published in
Scottish Left Review in Nov/Dec 2007
                                                   EQUITY MARKET                              All their reports are online at:
www.slrp.co.uk/test1/index.php?option=co        The House of Commons Public Ac-               www.health.ed.ac.uk/CIPHP/
m_content&task=view&id=64&Itemid=29             counts Committee (PAC) has called for
                                                close monitoring of the PFI equity mar-                                             5
£7 billion of PFI/PPP contracts                                                                      SCHOOLS PFI
The total value of PFI/PPP contracts in          ment project at Murray Royal Hospital,              RE-FINANCED
Scotland, as listed by the Scottish Gov-         in Perth, and at Stracathro Hospital in
ernment, was nearly £7 billion at the            Angus. It is not expected to involve any         Glasgow’s massive schools PFI project
start of February 2008.                          staff transfers.                                 is the latest to be refinanced.
A total of £5.6 billion of operational and                      SCHOOLS                           The Bank of Scotland has made nearly
signed deals are listed on the Financial         Since coming to power, the new Scot-             £20 million from the February 08 deal.
Partnership Unit website.                        tish Government has approved seven               But taxpayers will receive just £8 mil-
This includes capital values of £1.1 bil-        schools PFI/PPPs.                                lion, less than a third of the total gains,
lon worth of hospital contracts and £3.3         These are in East Dunbartonshire,                despite newer contracts requiring a
billion worth of schools projects.               West Lothian, Perth and Kinross,                 50% share.
(However, this does not include the fig-         Dumfries and Galloway and West                   It follows a recent sale of a stake in
ure for Addiewell prison, which is with-         Dunbartonshire.                                  Hairmyres Hospital, in East Kilbride,
held      as     being       commercially        Two projects involve non-profit-                 and last year’s refinancing of the Royal
confidential. Also, a small number of            distributing organisations. These are in         Infirmary of Edinburgh project.
lower value NHS contracts which have             Falkirk and Aberdeen.                            Glasgow’s schools were renovated in a
been listed before, were removed from            The schools projects on the future               £225m contract with 3Ed, a consortium
the list as they were not deemed to be           deals list are being planned in Orkney,          owned by the Bank of Scotland
PFI projects after all.)                         Moray, Inverclyde and the Western                (HBOS), John Laing plc and Secondary
Future deals total £1.3 billion in capital       Isles.                                           Market Infrastructure Fund.
value, broken down into six hospital             UNISON welcomed the announcement                 The Bank of Scotland has refinanced
projects worth £306m, four schools               last year that new prisons at Bishop-            their £177 million senior debt package,
deals worth £232m, three roads deals             briggs and Peterhead will be publicly            of the total remaining £277 million debt.
worth £680m and two waste manage-                operated.                                        The City Council receives a 30%
ment projects valued at £94.3m.                  However, Addiewell, in East Lothian,             share, based on the HM Treasury vol-
The hospital projects include develop-           will be privately run.                           untary code on refinancing.
ments in Fife, Midlothian and Forres.            A list of the timetable for the schools          The Glasgow deal was signed eight
And NHS Tayside has just named three             PPP programme and details of ‘done’              years ago. More recent PFI projects
shortlisted bidders for a Non Profit Dis-        and future deals are at:                         share the proceeds of refinancing
tributing model of PPP to provide a              www.scotland.gov.uk/Topics/Govern                equally between the public and private


          SELECTED SNIPPETS
£100 million mental health develop-              ment/Finance/18232/12308                         sector partners.
                                                                                                                 HOSPITALS
                                                                                                  Kier Group announced in February
                                                                                                  2008 that it had made a 500% return on
Moray Council is to save council taxpayers around £250,000 annually by bringing schools           its investment in the Hairmyres Hospi-
ICT support in-house when the PFI contract ends in July. Alan Kirkwood, head of ICT serv-         tal PFI project. It sold its 50% share to
ices, said the ICT section in the council will provide a quality support service to the 54 pri-   Innisfree M&G PPP fund for £13.8 mil-
mary and secondary schools.He said that PFI in the 1990s had been the only option
                                                                                                  lion in cash. This is on top of £2.2 mil-
available to fund the investment needed and a large subsidy was provided. But now ICT
projects are not considered suitable for PFI.
                                                                                                  lion of deferred profit from an August
                                                                                                  2004 refinancing.
Civil servants from Scotland have spent more than £10,000 promoting PFI at confer-                The Hairmyres contract was signed in
ences abroad. Fourteen trips since 2002 ran up a bill of £10,551, including nearly                March 1998.
£4,000 for five civil servants to attend the fifth annual PPP global summit in Prague.            Last summer a refinancing of the con-
                                                                                                  tract with Consort for the RIE saw NHS
A Scottish housing association is proposing building a primary school as part of a Public         Lothian receive nearly £32 million,
Community Partnership PPP. Cordale Housing Association’s plans for Renton, in West                which was taken as a lump sum and re-
Dunbartonshire, would finance the building through loans and lease the school back to the
                                                                                                  ductions in unitary charge payments.
local council. However, UNISON said the Non Profit Distributing model of PPP proposed
is more expensive for the council than using prudential borrowing to finance capital.
                                                                                                  Tom Waterson, Chair of UNISON’s
                                                                                                  Scottish Health Group and Lothian
Health Secretary Nicola Sturgeon has set a cap on charges for hospital car parking                Health Branch, said at the time: “The
of £3 per day. However, it is unclear exactly when and how this will be applied to PFI            reduction of just over £1m per year in
hospitals where private contractors set parking rates. Meanwhile spaces in the Glas-              payments still leaves the public paying
gow Royal Infirmary car park are for sale, despite low paid staff being unable to af-             around £45m per year – when the orig-
ford the £52 a month charges. The PFI contract and planning regulations stipulate a               inal contract was for £30m!!”
percentage of spaces being available to the public.

The independent scrutiny panel which lcriticised NHS Lanarkshire’s plans to close Monk-
lands hospital’s A&E heard a large number of concerns during its consultation exercise            NB: UNISON at UK level produces a
that the high costs of the PFI hospitals at Wishaw and Hairmyres had influenced deci-             monthly Positively Public bulletin with
sion-making. Monklands A&E will now be retained.                                                  lots of PFI/PPP nws. Current and past
                                                                                                  issues are available at
The Fire Brigades Union has asked Health Secretary Nicola Sturgeon to look into                   www.unison.org.uk/positivelypublic/pp
why NHS Forth Valleydoes not see sprinklers as necessary for the new £300m
                                                                                                                                          6
                                                                                                  briefing.asp
Larbert PFI hospital.

				
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