[A-List] UK corporate state: PPPs laid bare

["Michael Keaney" <michael.keaney@xxxxxx>]

Strange how exactly the same report can lead to such diametrically opposed
conclusions. Earlier I forwarded the Guardian's take on the National Audit
Office's report on PPPs:

See http://lists.econ.utah.edu/pipermail/a-list/2002-November/021606.html

Now the Independent tells us that in fact the NAO report was highly
critical. Who should we believe?


PFI short-changes taxpayers, says NAO
By Michael Harrison, Business Editor
The Independent, 07 November 2002

The Government's Private Finance Initiative came under fresh attack
yesterday after Whitehall's spending watchdog disclosed that taxpayers had
missed out on millions of pounds in savings made by PFI contractors.

There was further bad news for the controversial initiative after a leading
contractor said it had decided to steer clear of traditional PFI schemes and
London's Transport Commissioner Bob Kiley threatened a fresh legal challenge
in Europe over the public private partnership for London Underground.

The National Audit Office said it had discovered that 61 per cent of PFI
contracts let to date had no clause in them entitling taxpayers to share in
the gains if the contractor refinanced the project on more favourable terms
as the risks diminished.

In some cases, the NAO said there was evidence that refinancings had taken
place without the relevant government department even being aware of what
was going on.

To overcome this problem, fresh guidance was issued in July by the
Government to enable refinancing gains to be shared 50:50 by taxpayers and
project backers. It has also launched a code of practice designed to help
departments claw back 30 per cent of future refinancing gains on early PFI
deals. But Sir John Bourn warned that for the taxpayer to benefit,
government departments would have to manage the new and highly complex
arrangements effectively.

It highlighted a number of deals, such as one involving Premier Prisons,
where the structure of the PFI was so complex and intricate that it would be
hard for the Home Office and Prison Service to know if a refinancing had
been carried out.

Meanwhile Capita, which is involved in PFI projects such as the operation of
the Criminal Record Bureau, said it had no interest in taking on traditional
schemes where contractors build and then run public services such as
hospitals and schools. Rod Eldridge, Capita's chairman, said the high cost
of bidding and the heavy upfront costs had deterred the company.

The legal action being threatened by Mr Kiley relates to London Transport's
decision to advance £35.8m to the Tube Lines consortium to cover its costs
of bidding.