Radical reform of PFIs – John Gelmini

Privatised asset

Privatised asset (Photo credit: Danny McL)

Earlier today, I re-blogged an interesting article in the FT entitled ‘Discredited’ PFI escapes with a makeover – FT.com, and after adding my two cents, I invited wider views.

I received a comprehensive and strong response from John Gelmini which I am re-blogging below.

Whilst, I broadly endorse John Gelmini’s response, I do not necessarily blame Andersen Consulting, now Accenture, for this misguided decisions from politicians, bureaucrats in HM Treasury or the wider Public Sector. For me, it also raises a much bigger issue of public accountability, namely the relationship and oversight of politicians, the Public Sector and the major management consulting firms. For further insights into my views, I would recommend a read of a blog which I wrote last year entitled:

UK Local Authorities and Shared Services: Cost-Cutting – Myth or Reality?

The earlier blog highlights how management consultants’ financial models are widely deployed out of context, blurring assumptions, risk management, governance and accountability.

Anyway, please feel free to share your views whether they are related to:

  • Radical reform of PFIs
  • Oversight of Government and Management Consulting, and
  • Effective cost reduction in the Public Sector

—————————————————————————————————————————————————– Andersen Consulting, now Accenture devised the original formulas which were used to determine whether or not PFI deals made good value for money for taxpayers.

The formulas allowed for cost overruns of up to 38 times what given costs would normally have been, which is one of the reasons so many PFI hospitals are in trouble, along with the NHS Trust areas they reside in.

The satirical magazine Private Eye and the left-wing journalist, the late Paul Foot, campaigned tirelessly and for decades against the widespread waste, fraud and criminality that accompanied many of these PFI deals which we as taxpayers are still saddled with to this day.

Whatever “making over” has been done, it is not a substitute for a new transparent value for money PFI formula and a police investigation of all those who have benefitted financially from the worst PFI deals. Such an investigation needs to be thorough and wide ranging and include all the Civil Servants who were involved whether alive or dead. All monies should be recovered where malfeasance is discovered and proven and in the case of deceased PFI directors and Civil Servants engaged in proven malfeasance and criminality, the estates and living trusts they left behind should be sequestered to repay taxpayers.

Trust CEOs, County Council Chief Executives, heads of Schools, Childrens’ and Families Directorates’ who allowed their customers and council taxpayers to be fleeced in this way should be dismissed for industrial misconduct and breach of fiduciary duty and personally surcharged to the same extent as a Lloyds “Name”. They should be barred from holding a similar role, even in an interim capacity, for life.

Privatization was and is an excellent idea and I do not mean to suggest that it should not be used along with PFI initiatives to get much needed infrastructure built now.

However, whilst PFI contractors and outsourcers are fully entitled to make healthy profits, there has to be a test of reasonableness and value for money for taxpayers, applied rigorously and transparently to each deal.

Secondly, no deal should be for more than 30 years because to exceed this is to bind future generations and mortgage the futures of people who have not yet been born.

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9 responses

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  7. Why can’t the government issue gilts at a fraction of the cost and enter into standard contracts with private suppliers if it doesn’t trust the public sector to do a creditable job on these projects? Bonkers to me – debt is debt; the PFI finance should be on balance sheet and the associated finance costs should be 100 per cent disclosed in the government’s accounts. That’s my tuppence in any case.

    • Seymour,

      Thanks, I agree with you completely, especially about full disclosure of all financing on the Balance Sheet. After all, any half-way competent credit rating agency would make an adjustment anyway.

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