We always welcome a Letter to the Editor to share with our readers. This commentary from Mike Starke focuses on the subject of the Highways PFI which is being discussed at a special Cabinet meeting tonight from 6pm. In his own words. Ed
The most consistent feature of the Isle of Wight Council’s highways PFI project’s development over the past six years, since the publication of the Expression of Interest in September 2006, has been its very inconsistency.
Those of us who have followed its twists and turns closely have seen both internal and, more ominously, external pressures lead to frequent radical revisions to the project.
Inconsistencies continue
Now the Highways PFI Preferred Bidder And Final Business Case (PB&FBC), is set to be nodded through on 29 May, as a matter of “urgency”, by the unquestioning council cabinet, with the paper’s authors warning them of dire consequences if they do not hurry up.
And yet more inconsistencies emerge.
Suddenly it’s a saving?
Chief among these is how a warning to the cabinet on 11 August 2009 that the annual taxpayers’ cash commitment to the PFI would take priority over other council service areas’ spending, leading to inevitable cuts, has now, miraculously, become a source of extra income to fund services.
But then this is later contradicted, too:
Paragraph 91, 11 Aug 2009: “”¦The council has to commit and guarantee a significant element of its revenue budget over a 25-year period”¦” Then, paragraph 93: “”¦The council’s flexibility over its controllable spend on which it can look to make savings year on year to achieve a balanced budget will clearly be reduced by committing some £11m (at today’s prices) for a 25-year period”¦”
Paragraph 78, 29 May 2012: “The council’s (annual PFI) revenue budget will reduce from the current (highways expenditure of) £8.3m (formerly £11m) per annum to between £6.6m and £7m”¦ This is likely to result in a saving to the council of between £32m and £42m over the 25 years, releasing these funds to commit to other service areas”¦”
A £32m saving?
“¦ Or not. For what do we find at paragraph 108 (a)? “”¦Inflation risk – The council would have saved, as a minimum, £32m over the course of the contract (which) is adequate to offset an inflation of one per cent”¦”
So what is this notional £32m “saving”; a reserve for service provision or a contingency fund against inflation? It surely can’t be both.
Creative accounting
It should be noted in considering this “creative accounting” that, in its day, the £11m was characterised as “current” highways expenditure before £8.3m took to being thus described. However, tables of year on year highway maintenance sums in the Expression of Interest and Outline Business Case are less than half the latter figure.
The unspoken outcome of this annual commitment, whatever it turns out to be, is that the PFI Service Provider effectively regulates the level of funding available for the full spectrum of council services, taking that process out of the hands of elected representatives of the people whose cash is involved.
Whatever happened to “accountability” and how can the people’s representatives actually represent the people in these matters?
Delegated powers given to officers
Heralding this move is paragraph 56 of the PB&FBC, which requires the cabinet to abdicate its responsibilities in a series of alarmingly wide-ranging delegated powers to officials, including the appointments to key management posts.
It is worth reflecting that this would lead to the council leadership’s elected members, who have done nothing but claim the PFI is the biggest project ever undertaken by the authority, abdicating all but a minimal consultative role in vital decisions about it.
Three month deadline
And to cap it all, they are warned in what could be described as a “pre-contract penalty clause” that there would be dire consequences if they don’t buck up and see to it that nothing impedes the smooth passage to signing on the dotted line within a deadline of three months.
Consider also the prospect for the future; the quarter century of the PFI. Circumstances have forced many changes to the project in its six-year gestation, as published council papers clearly demonstrate.
Optimism a dangerous fantasy
The long list of risks to the council in the PB&FBC papers rely on such upheavals never happening in the future. Given the length of the contract and the ever worsening international financial crisis, such optimism is little short of dangerous fantasy.
And when the extra costs pile on, I confidently predict the County Hall mandarins will conceal the real causes by apportioning blame to the handiest scapegoat at the time, rather than admit the PFI project was always a fairytale dream doomed to become a costly nightmare.
Finally, the 26 pages of the PB&FBC document maintain a significant and deafening silence on one of the most important aspects of the mechanics of the PFI.
PFI contract can be sold on
The “elephant in the room” is the recent revelation by County Hall itself that, once signed, the contract becomes a marketable financial instrument that can be sold on by the successful bidder if – or more likely, when, in the ever-worsening global economic climate – it becomes a commercial imperative to safeguard the contractor’s economic position.
The initials SP are said in the PB&FBC to stand for Service Provider. They could just as well reflect the reality of most PFIs by turning out to mean Source of Profit.
Mike Starke
Image: TaxBrackets.org under CC BY 2.0
