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One percent

PFI: the gift that just keeps on taking

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We are selling off everything to overseas investors and they repay us by not even bothering to pay tax on the profits.

http://www.bbc.co.uk/news/business-41778609

from the article:

Five offshore PFI companies paid little or no corporation tax during a five-year period despite making profits of nearly £2bn, the So-Called BBC has learned.

The five companies specialised in lending money through Private Finance Initiatives (PFI).

They own hundreds of public assets including schools, hospitals and even police stations.

the So-Called BBC has also learned that a small number of big offshore companies are currently on a buying spree.

They are buying up a number of the UK's public buildings.

Research carried out by the think tank that investigates PFI deals, the European Services Strategy Unit, reveals the extent of the buy-up in Britain.

Nine off-shore infrastructure funds own between 50% and 100% of the equity in 335 PFI/Public Private Partnership (PPP) projects. This amounts to 45% of all 735 current projects

12 offshore companies have bought equity in 74% of the 735 current projects

Education and health projects, including schools and hospitals, account for two-thirds of the purchases by offshore companies

 

and the response:

I think nobody foresaw this sale of the debt on to companies and this conglomeration. Now we have so few companies owing such a large amount of the debt and that is a big concern."

 

ffs, how stupid do you have to be?  Who the feck did they think would buy up all our assets?  Hardly British people who have been impoverished due to successive government policies. 

 

Thos is is a national scandal and MPs and civil servants should be behind bars for agreeing to this. 

We need to tear up these contracts and appropriate our assets. Tell these foreign asset strippers to just fuck off. 

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PFI was ill conceived in the first place; the government has access to the cheapest debt and provides this onto councils (and presumably NHS trusts) through the Public Works Loan Board.  So this should have funded these buildings.  There was no need for these shabby off balance sheet schemes that were always going to cost a lot more in the long run.

There is a similar, if smaller, problem building in the social housing sector and this time the regulator, rather than encouraging it, is actively warning against it.

It consists of housing associations agreeing to take a long lease on some new build units with the lease payment being the "rental stream" so they will pay for themself. 

Only they won't, because the rental stream in the agreement increases annually by RPI but the real rent is falling by -1% at the present and then is likely to increase long term at CPI which is typically c.1% below RPI.  With these agreements being often for thirty or forty years all of those 1%s will accumulate so that at the thirty year point if you have steady 2% CPI and 3% RPI then you have income at 181% of the starting rent but outgoings at 243%. 

So with a £200k starting rent (typical size) you are receiving at the thirty year point £362k but paying out £486k; and that £124k is a huge sum to the typically small organisations who don't have a good enough finance team to recognise a folly when they see it.

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Unemployment is too high? Put everyone into university. Make them pay on the never never. Voila. No unemployed. 

The national deficit is too high? Get others to pay for public spending and we will make it worth their while by paying them vast sums in subsequent years. Voila. We have balanced the books (almost) for this year. Next year is someone else's problem. 

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1 hour ago, Frank Hovis said:

PFI was ill conceived in the first place; the government has access to the cheapest debt and provides this onto councils (and presumably NHS trusts) through the Public Works Loan Board.  So this should have funded these buildings.  There was no need for these shabby off balance sheet schemes that were always going to cost a lot more in the long run.

There is a similar, if smaller, problem building in the social housing sector and this time the regulator, rather than encouraging it, is actively warning against it.

It consists of housing associations agreeing to take a long lease on some new build units with the lease payment being the "rental stream" so they will pay for themself. 

Only they won't, because the rental stream in the agreement increases annually by RPI but the real rent is falling by -1% at the present and then is likely to increase long term at CPI which is typically c.1% below RPI.  With these agreements being often for thirty or forty years all of those 1%s will accumulate so that at the thirty year point if you have steady 2% CPI and 3% RPI then you have income at 181% of the starting rent but outgoings at 243%. 

So with a £200k starting rent (typical size) you are receiving at the thirty year point £362k but paying out £486k; and that £124k is a huge sum to the typically small organisations who don't have a good enough finance team to recognise a folly when they see it.

Wasn't this all actively encouraged by central government under Bliar and one eyed twunk?  

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1 minute ago, One percent said:

My bad, according to wiki, it was introduced by major but then massively ramped up by the following labour government 

Cheers for looking; I actually thought it went further back. Surprised at John Major as he was usually excellent on the country's finances.

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Major used PFI for schemes like the Channel Tunnel (as intended). Blair and Brown used it to build hospitals and schools (with terrible deals), keeping that debt off the books, pretending the economy was being well run whilst taking advantage all those photo opps and electioneering boosts. Chalatins.

Ground Zero for the nation's destruction.

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1 hour ago, Frank Hovis said:

PFI was ill conceived in the first place; the government has access to the cheapest debt and provides this onto councils (and presumably NHS trusts) through the Public Works Loan Board.  So this should have funded these buildings.  There was no need for these shabby off balance sheet schemes that were always going to cost a lot more in the long run.

There is a similar, if smaller, problem building in the social housing sector and this time the regulator, rather than encouraging it, is actively warning against it.

It consists of housing associations agreeing to take a long lease on some new build units with the lease payment being the "rental stream" so they will pay for themself. 

Only they won't, because the rental stream in the agreement increases annually by RPI but the real rent is falling by -1% at the present and then is likely to increase long term at CPI which is typically c.1% below RPI.  With these agreements being often for thirty or forty years all of those 1%s will accumulate so that at the thirty year point if you have steady 2% CPI and 3% RPI then you have income at 181% of the starting rent but outgoings at 243%. 

So with a £200k starting rent (typical size) you are receiving at the thirty year point £362k but paying out £486k; and that £124k is a huge sum to the typically small organisations who don't have a good enough finance team to recognise a folly when they see it.

Indeed,

And all those LA have decided to use those cheap loans to speculate on tired  commercial propery, a sector thats falling like a ricket powered rocket...

There was no need for this off balance sheet fuckwitery. Except Brown bent the whole capital and current spending columns.

The compounding IR is down to Brown being innumerate cunt in a rush.

LHA are not small orgs - at least in the number of people they employ and how much the executive board pay each other.

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5 minutes ago, spygirl said:

Indeed,

And all those LA have decided to use those cheap loans to speculate on tired  commercial propery, a sector thats falling like a ricket powered rocket...

There was no need for this off balance sheet fuckwitery. Except Brown bent the whole capital and current spending columns.

The compounding IR is down to Brown being innumerate cunt in a rush.

LHA are not small orgs - at least in the number of people they employ and how much the executive board pay each other.

This assumes that the politicians are actually in charge. Given that for the last 30 odd years they have all followed, more or less, the same policies, im convinced that they have very little power. These decisions were made elsewhere with useful fools implementing them

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5 minutes ago, spygirl said:

 

LHA are not small orgs - at least in the number of people they employ and how much the executive board pay each other.

It was that the small HAs which are generally run by well intentioned social workers rather than people who understand finance are the ones who are signing up for these deals.

A big one like Sanctuary or L&Q has sufficient finance / treasury expertise to spot this financing as a lemon a mile off and wouldn't consider it.

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19 minutes ago, Frank Hovis said:

Cheers for looking; I actually thought it went further back. Surprised at John Major as he was usually excellent on the country's finances.

He is an accountant. Who ran away from the circus.:o

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3 minutes ago, MrPin said:

He is an accountant. Who ran away from the circus.:o

John Major is one of the few politicians I would spend an evening in the pub with. Oh he's done well with his part time directorships, but he does seem like a down to earth bloke..

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Just now, MrPin said:

John Major is one of the few politicians I would spend an evening in the pub with. Oh he's done well with his part time directorships, but he does seem like a down to earth bloke..

Hope he doesn't turn up with his mistress.  She would drive you mad within minutes. 

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Given the shocking state of our public infrastructure this particular political accounting wheeze has obviously been a massive disaster at the functional level even without considering the spiralling costs.

Edited by Virgil Caine

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4 minutes ago, MrPin said:

John Major is one of the few politicians I would spend an evening in the pub with. Oh he's done well with his part time directorships, but he does seem like a down to earth bloke..

Order of the Garter, and guardianship of the Princes William and Harry. Obviously regarded as a safe pair of hands.

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Just now, eight said:

Order of the Garter, and guardianship of the Princes William and Harry. Obviously regarded as a safe pair of hands.

I think that's what he was.:o In retrospect.

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19 minutes ago, Frank Hovis said:

It was that the small HAs which are generally run by well intentioned social workers rather than people who understand finance are the ones who are signing up for these deals.

A big one like Sanctuary or L&Q has sufficient finance / treasury expertise to spot this financing as a lemon a mile off and wouldn't consider it.

Not sure.

Sanctuary are huge.

The local one Yorkshire coast homes hardly a small undertaking.

In terms of employees its much more nepotistic and righton by the council. ach time a 3rd sector org runs out of money, a lot of the employees turn up on the books doing vague jobs. 

Employment ckntracts seem to stipulate that turning up to work is optional.

Yes it may be innumerate but theres no way the org is small.

The way to deal with this sort of fuckwittery is let it go bust and sack everyone.

 

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17 minutes ago, spygirl said:

Not sure.

Sanctuary are huge.

The local one Yorkshire coast homes hardly a small undertaking.

In terms of employees its much more nepotistic and righton by the council. ach time a 3rd sector org runs out of money, a lot of the employees turn up on the books doing vague jobs. 

Employment ckntracts seem to stipulate that turning up to work is optional.

Yes it may be innumerate but theres no way the org is small.

The way to deal with this sort of fuckwittery is let it go bust and sack everyone.

 

It's happened twice so far: Ujima and Cosmopolitan.

There are several dodgy ones now because the ultra low interest rates have encouraged a lot of risk taking.

The HA with the lowest credit rating is Poplar Harca; though I may be unfairly singling them out as the vast majority don't have credit ratings because they don't need them.

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