Britain, which led the charge for public private partnerships under both Conservative and Labour governments over the past decades, is now seeing problems with the projects.
This month the new coalition government cancelled the controversial Building Schools for the Future program. Michael Gove, the Conservative Secretary of State for Education said the P3 school program had been hit by:
“massive overspends, tragic delays, botched construction projects and needless bureaucracy.”
He said: “There are some councils which entered the process six years ago which have only just started building new schools. Another project starting this year is three years behind schedule”
Earlier reports also suggest Britain’s National Health Service is having problems with the cost and inflexibility of P3 hospitals. The Financial Times reported:
Traditionally, when spending is tough, NHS hospitals put maintenance on hold to retain doctors, nurses and other services.
But Nigel Edwards, head of policy for the NHS Confederation, said: “A hospital with a PFI scheme does not have that option. They are contractually bound to keep the maintenance up – and if you are spending 10 or 15 per cent on your buildings it means all the other efficiency and productivity gains you need have to come out of only 85 or 90 per cent of your budget.”
Not surprisingly, despite problems with the P3s, parents in areas where projects to replace substandard schools have been cancelled are furious. They are even more furious because the government appears to be funding plans to convert schools to “academies” that can ignore national curriculum. These academies were just one more form of privatization promoted by the Tony Blair’s Labour government. With academies, companies and religious institutions invest in schools and get to control them.
The problems with these P3 projects in the U.K. are only coming to light years after they were initiated. Here in BC, and in Alberta with its commitment to P3 schools, it gives us something to look forward to.
Phillip Robinson // Mar 3, 2011 at 9:20 pm
At least they have seen the light, can we before our situation becomes as bad ?
Elizabeth // Mar 7, 2011 at 9:16 pm
We can’t fool ourselves – PFI is a liability
As the man now in charge of the largest PFI-built hospital in England, I know what a millstone it can be
. Peter Dixon
. guardian.co.uk, Friday 13 November 2009 16.11 GMT
I have worried about private finance initiatives for a dozen or so years, and now the select committee on economic affairs of the House of Lords is worrying too. Or at least I hope they are. They kindly invited me to give evidence to them, and I repeated what I have been saying consistently but with increasing urgency. PFI is expensive and inflexible. It may have advantages in transferring risk and keeping debt off the public balance sheet, but now that we have discovered that unlimited debt is OK for UK plc in order to prop up failed financial institutions, it is hard to continue to argue that we can’t use public debt to create long term assets – schools, hospitals, affordable homes.
My perspective is probably a unique one. As chairman of the Housing Corporation I tried to avoid PFI wherever possible and use good old cheap loan finance, without government guarantees, to produce increasing numbers of affordable homes. With banking facilities of nearly £40bn available to housing associations at rates that were not far off the price at which the government could borrow (until the collapse of the banking system screwed everything up), there was really no need for the complexity and the cost of PFI. In my other world as chairman of University College London hospitals, we have the largest PFI-built hospital in England to date to contend with. It is a great new building and yes, it was built on time and on budget, but we now have indexed payments for the next 35 years which at a time of growing concern over NHS budgets can only be a millstone.
It isn’t just that our scheme was expensive. Its very existence distorts whatever else needs to happen in this part of London and beyond. And that is before we get to paying for the much larger scheme at Bart’s and the London in a few years’ time. Another problem to which no one has yet found an answer is that the price which we get paid for all that we do is based in part on an average cost of capital throughout England. The cost of capital for hospitals with a large PFI is going to be greater than others with traditional funding. We will always find it harder to produce the surpluses we need to re-invest in our future.
We recently signed a contract for our new ambulatory cancer centre. We were fortunate enough to have part of the proceeds of the old Middlesex hospital and did not go down the PFI route. The issue for us was about how we procured the new centre, and I hope we got it right. If we didn’t, at least we know that it is the fault of my board.
What we need to have in the debate is not sterile argument about ownership. The issue is how we handle our procurements and manage our projects. Let’s face it, if the public sector can’t be trusted to procure a sensible building contract, it certainly can’t be relied upon to procure a successful PFI with a 35-year term. As far as the funding is concerned, we are fooling ourselves and probably no one else if we think that a complex structure to take liabilities off balance sheet now against future payments which to all intents and purposes are guaranteed is the answer. Remember Enron?