When Carillon collapsed with a mighty clang, it prompted some people to have second thoughts about the wisdom of Private Finance Initiative contracts. Look at the original thinking behind PFI and you start to wonder why anybody ever had first thoughts about this way of doing things:
No worries - they had a cunning plan. Hide the up-front costs, so it looked as if they weren't spending the money they really were spending, then saddle future generations with the cost of running and maintaining this off-balance-sheet infrastructure, as well as handing over a massive wodge of public money in rent to a bunch of private companies who'll be billing our kids and their kids, long after the Serious People have moved on, their reputation for prudent management of the public finances intact.
So Serious People solved the perceived problem of handing whopping debts on to the next generation by making current spending seem to disappear, through the magic of creative accounting, then ... er ... handing whopping debts on to the next generation.
That's so mental, it's almost impressive.
*Plenty of people have argued convincingly that the idea of runaway public spending was wasn't true when the notion of PFI was first dreamed up and still isn't true.
...why did we ever enter PFI contracts in the first place? The answer is provided on page 11 of the NAO report: PFI is off-balance sheet for national accounts purposes, which means it “results in lower recorded levels of government debt and public spending in the short term”.The problem was that Serious People believed public spending and government debt in the UK were dangerously, unsustainably high.* They lay awake at night worrying about the terrible debts future generations would inherit, if we frittered their birthright away on fripperies like schools, roads and hospitals. What did they do about this alleged existential, intergenerational threat?
No worries - they had a cunning plan. Hide the up-front costs, so it looked as if they weren't spending the money they really were spending, then saddle future generations with the cost of running and maintaining this off-balance-sheet infrastructure, as well as handing over a massive wodge of public money in rent to a bunch of private companies who'll be billing our kids and their kids, long after the Serious People have moved on, their reputation for prudent management of the public finances intact.
So Serious People solved the perceived problem of handing whopping debts on to the next generation by making current spending seem to disappear, through the magic of creative accounting, then ... er ... handing whopping debts on to the next generation.
That's so mental, it's almost impressive.
*Plenty of people have argued convincingly that the idea of runaway public spending was wasn't true when the notion of PFI was first dreamed up and still isn't true.
2 comments:
This fails to differentiate between different flavours of Serious People, AFAICS.
The Labour Serious People in charge of the 1997-2010 government inherited absolutely clapped-out infrastructure, particularly in education and healthcare, and correctly wanted to spend on it, but were faced by a hostile and influential press which repeated ridiculous lies told by Tory-leaning Serious People about runaway public spending.
In this context, PFI allowed the good sort of Serious People to make the vast improvements that they *actually did make* during their time in government, without being voted out due to confected economic crisis narratives.
The net result of PFI is almost identical to that of a government which had been able to borrow the money, but with a few percent of the cost wasted on the accounting setup. This is far better than any other conceivable outcome that could have taken place given the starting constraints.
Labour’s Serious People may have temporarily outflanked their opponents with policies that didn’t challenge those ridiculous lies, but this also meant they never quashed the lies. Labour’s Serious People would eventually be voted out due to a confected overspending narrative (emergency spending to deal with the global economic crisis, was conflated with the standard assertions about Labour profligacy, to fashion the Tory “clearing up Labour’s mess” soundbite).
Hence, austerity and the orthodoxy that government had no alternative but to kick every possible piece of infrastructure spending into the long grass with PFI and suchlike, at a time when government could have borrowed for way less than the cost of private finance. When the Labour Party spent its pre-2015 opposition years failing to challenge the narrative, preferring to flagellate itself in atonement for its perceived sin of overspending, it got hard to tell the two different flavours of Serious People apart.
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