PFI - Profit From Illness?
August 15, 2006 6:41 PM
Andy Mayer writes an intelligent analysis on the use of PFI for Government projects, featured in a documentary last night. Norfolk has a particularly notorious PFI project - the Norfolk & Norwich Hospital - which taxpayers will end up paying £950 million for. This is more than four times the cost of building it (£229 million).
In 2003, the Octagon consortium behind the PFI hospital, made £116 million from the refinancing of the hospital. £34 million of that was put back into the hospital. It now seems that the deal was extended from 30 years to 35 years as part of the package, which costs the hospital trust £38 million a year.
So what are the alternatives to PFI? Not a lot. Local authorities are unable to raise capital for large projects in other ways; and the Government likes PFI because it doesn't count against public sector borrowing.
In the US, democratically issued bonds are used to raise money for public projects. Control and operational remain in the public sector, and private finance can be accessed.
The Government needs to look beyond PFI. Or we might find that as the payments for the accumulating PFI contracts build, that there's no money left for new projects.
Andy Mayer's article is at http://andymayer.blogspot.com/2006/08/browns-pfi-timebomb.html
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