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

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

After a tie-break the Guardian loses. The august Financial Times reports
that the NAO was indeed highly critical of the manner in which taxpayers are
being ripped off by PPP contractors. So much for "partnership", and so much
for the Guardian's position as the paper of record for left-leaning readers.


UK companies hang on to extra PFI profits
By Nicholas Timmins, Public Policy Editor
Financial Times: November 7 2002

Companies have made millions of pounds in extra profits from refinancing
private finance initiative projects without either telling the government or
sharing the gains, the National Audit Office said on Wednesday.

The government has just agreed with the PFI industry that the public sector
will take 30 per cent of the gain where completed deals are refinanced. For
new projects, the gains will be shared equally.

But an NAO report on Wednesday said up to 36 of the 200 projects completed
so far may have been refinanced without the government being told.

The NAO has no estimate of how much might be involved, but the extra profits
will run into millions of pounds.

John Edmonds, general secretary of the GMB union, said: "This is a scandal.
PFI companies have effectively been laundering their profits at the expense
of the taxpayer."

Refinancing can boost profits because the big risk of constructing the
project has gone once it is operational. That allows cheaper finance to
replace equity or expensive borrowing. Equally, interest rates have fallen
since the projects were signed, and lending rates to projects have also
dropped because PFI is now seen to be less risky.

The NAO has unearthed a dozen projects, from the first PFI school to the
Calderdale Hospital and road projects, where consortia have shared gains
with the commissioning department. But in three cases, the public sector has
received none of the extra profit.

It has also found six cases where the department was not told of financing
changes likely to generate gains plus 30 where changes had been made with
insufficient information to identify a gain.