tag:blogger.com,1999:blog-2948538160252327076.post7139683278018437138..comments2023-11-02T15:48:50.381+00:00Comments on UK Bubble UK Economy: Darling gearing up for the great PFI bailoutAlice Cookhttp://www.blogger.com/profile/05753570123987780947noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-2948538160252327076.post-90415403923575339882009-03-03T15:03:00.000+00:002009-03-03T15:03:00.000+00:00What Anon says. It is bound to end up costing more...What Anon says. It is bound to end up costing more.<BR/><BR/>As to funding such projects - if we scrapped as many taxes as possible and replaced it with Land Value Tax, then this would be a useful hurdle rate - if the extra LVT is more than the cost of the project, it's worth doing, else not.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-17783408293043234952009-03-02T18:55:00.000+00:002009-03-02T18:55:00.000+00:00I always found that the most important part of "Wh...I always found that the most important part of "Why PFI is bad" is that it costs more, much more, to build e.g. a hospital by PFI than the more "traditional" issuing government bonds to pay for it. This is principally for 2, perahaps 3 reasons:<BR/>1) There must be a large profit incentive for the private company to be interested, and these projects inherently bleed cash in awarding these profits, straight from the taxpayer.<BR/>2) The company limits itself to fullfilling it's terms in the minimal possible way, and often not at all, as it is not in the end interested in getting customers in but in keeping its government subsidy. This creates large problems in the future if certain obligations aren't spelled out (look at the collapse of Metronet and the effect on the tube if you don't believe me!)<BR/>(3?) The only supposed advantage of PFI is that companies "compete" for the contracts and thus drive costs down. In reality these contracts are almost never competetively awarded, and go to one of the few huge "specialists" in the area that are seen as capable (but aren't, look at NHS IT projects at the moment).<BR/><BR/>(4?? --apparently the government might need to throw more cash than even the above 3 reasons imply if it all goes tits up, like this article points out here)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-65833993515330682872009-03-02T18:21:00.001+00:002009-03-02T18:21:00.001+00:00Michael,PFI blurs the distinction between what is ...Michael,<BR/><BR/>PFI blurs the distinction between what is a public investment and a private one. <BR/><BR/>If the government built a hospital by issuing a bond, we would know the value of the liability since it would be in the public debt numbers. <BR/><BR/>On the other hand, with PFI, all we have is a stream of payments, which looks like a bond but doesn't appear in the stock of public debt. To put it mildly, PFI lacks transparency.<BR/><BR/>Whether the government can honour its stream of PFI payments depends on its overall stock of liabilities. <BR/><BR/>In isolation, PFI may not cause any problems. However, this government is stacking up frightening stock of future liabilities; including pension liabilites (particularly within the public sector); banking sector clean up costs, and new debt arising from huge future fiscal deficits.<BR/><BR/>You say, "If the U.K government was in danger of bending under the liability then they would be quite capable of delaying debt service regardless of the provider." Yes, I agree, and if I were a PFI provider, I would take your comment very seriously indeed.<BR/><BR/>BTW, thank you for a very thoughtful comment. It was very much appreciated.<BR/><BR/>AliceAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-91059816599427054672009-03-02T18:21:00.000+00:002009-03-02T18:21:00.000+00:00I'm actually undecided about PFI.I used to be sure...I'm actually undecided about PFI.<BR/><BR/>I used to be sure that it was unethical manoeuvring to avoid putting debt on the balance sheet... now I'm not so sure.<BR/><BR/>If a massive bust was expected - and the government has the guts to nationalise near-complete projects... then it is conceivable that the public gets much-needed infrastructure at a minimal price. Of course, this assumes that the government was both forward thinking and public spirited... both of which are a stretch of the imagination.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-59884151136396573422009-03-02T17:05:00.000+00:002009-03-02T17:05:00.000+00:00PFI ?OMG ! FFS !PFI ?<BR/><BR/>OMG ! FFS !Electro-Kevinhttps://www.blogger.com/profile/18073103431166273080noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-85617699992845413332009-03-02T16:59:00.000+00:002009-03-02T16:59:00.000+00:00Your concept of PFI is clearly at odds with the fu...Your concept of PFI is clearly at odds with the fundamental underlying raison d'ĂȘtre. You state that the U.K government will have a long term liability to service the debt. In any event if the project is legitimate then the debt must be serviced regardless of who underwrites the loan. If the U.K government was in danger of bending under the liability then they would be quite capable of delaying debt service regardless of the provider. The State of California is currently defaulting on similar agreements due to their deficit. PFI has a strong future particularly in developing countries.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-11445022156666992542009-03-02T16:48:00.000+00:002009-03-02T16:48:00.000+00:00Tee hee, as I've said before, Labour overpaid on t...Tee hee, as I've said before, Labour overpaid on these PFI projects to get them off the government's books, and now it's giving them interest subsidies as well.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-18551462728793818482009-03-02T14:57:00.000+00:002009-03-02T14:57:00.000+00:00Ah, but will Harriet Harbinger say that these debt...Ah, but will Harriet Harbinger say that these debts will not be found payable at the court of public opinion?Anonymousnoreply@blogger.com