Sunday, May 20, 2007

PFI Land Giveaway

Easy boys! There's plenty of taxpayers' land to go round

We've blogged the poor value taxpayers have had from Gordo's PFI spending splurge many times (see here for BOM primer). Now we learn of a fresh problem, which may cost us further hundreds of millions.

Because it now turns out that our Simple Shopper has given away highly valuable rights over the land on which some of those shiny new hospitals and other projects stand.

In at least five of the early hospital PFIs, the private sector supplying company was granted a lease over the land extending way beyond the end of the PFI contract period, in some case by nearly a century. Which means that in certain, entirely plausible circumstances, at the end of the contract period, the PFI company could demolish the hospital and build new homes- much MUCH more valuable.

This is not at all what we've been repeatedly told by the Commissars, which is that at the end of the PFI contract period, the asset always becomes taxpayers' property. So what on earth's going on?

As per, it seems the Shopper was snakeoiled. He was led to believe that private sector operators would only be interested in bidding if they could help themselves to the farm. According to a senior PFI lawyer involved in some of these very deals:

"The leases sweetened the deals, helping to get bidders on board."

Sweetened. That's the word.
Anything else? Ah yes. According to our lawyer:

"[The extended leases] showed that the private sector had some real interest in the project, which facilitated off-balance sheet treatment.”

In other words, giving away the leases helped Gordo get the PFI liabilities excluded from his Golden Rule debt figures.

So a win-win.

Assuming you're not a taxpayer, that is. Because our lawyer reckons we will "need to pay up" if we want those leases back.

We don't like the sound of that at all.

PS The dependable Liam Halligan has a useful PFI piece here, commenting on the refinancing scandal we blogged last week . Like BOM, he also reckons PFI providers have had a cushy ride at taxpayers expense, and concludes:

"Over the coming decades, PFI will become a truly international business. And given that London is the global centre of PFI investment and expertise, calls to impose restrictions on any aspect of the business, including equity sales, will be fiercely resisted.

And as long as PFI allows ministers to carry on being photographed opening new schools and hospitals - while passing the bill onto future generations - the industry will continue to get its way."

Sounds about right. Unless that is, we can somehow force our politicos to remodel our public services along the insurance/voucher basis advocated by Reform etc. Because then we'll be doing our own shopping.

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