Editor's blog 26th January 2009: Credit on the cards - to PFI for?
The laws of economic gravity are like hemlines: in and out of fashion. BBC News has another leak from the Conservative Party (http://news.bbc.co.uk/1/hi/health/7847933.stm) that the credit crunch might affect future NHS PFI schemes.
No shit, Sherlock. You mean banks aren't lending money to people?
Sigh. According to www.conservatives.com/News/News_stories/2009/01/Lansley_warns_of_consequences_for_patients_as_email_shows_new_hospitals_at_risk, "The email, summarising a meeting between local health bosses and Labour’s Health Secretary Alan Johnson, reports: 'The bad news is around capital schemes that would have been PFIs. PFIs have always been the NHS's ‘Plan A’ for building new hospitals, especially as they used to be off-balance sheet. There was never a 'Plan B'. Now none of the banks have any money or a likely to have any for a few years, the absence of a ‘Plan B’ is going to cause a real problem in taking new hospitals to conclusion.'”
Now I have little time to check, as it is late and I am tired, but if the source is also this one (www.hsj.co.uk/news/2009/01/leaked_memo_reveals_dh_frustration_over_mixedsex_wards.html), then an interesting pattern is starting to emerge.
Here is another reference (www.timesonline.co.uk/tol/news/politics/article5587489.ece), which seems to be based on "research seen by The Times, from Glenigan, an intelligence unit for the construction industry".
Who are these people?
Go and google the quoted Glenigan - the tagline, "Win more Construction Contracts", may drop a hint as to a potential bias. Their website (www.glenigan.com) tells you about their methodology (www.glenigan.com/ipage/methodology.asp), which reveals that they work with Peter Scott's MMD consultancy (www.mmd.org.uk).
The MMD website is intriguing. They have published nothing in the professional press since 2004 - OK, commercial in confidence and all that. Busy people ...
MMD also list as clients Interbrand Newell and Sorrell, which has not been known as such since Frances Newell and John Sorrell left the company in 2000, 24 years after setting it up (www.brandrepublic.com/news/11828/newell-sorrell-depart-interbrand/). They list the Learning and Skills Development Agency (www.lsda.org.uk), which appears not to have existed for some time. It lists Interbrew, which has not been known as such since .. 2004 (http://en.wikipedia.org/wiki/Interbrew). They list NTL, which i=since 2006-7 has been Virgin Media (http://en.wikipedia.org/wiki/NTL:Telewest). This is a random sample, and others listed check out fine.
We learn from www.fletchers.org.uk/Fleche/fleche0507.pdf that "MMD is now almost entirely virtual: that is, it puts together appropriate teams for particular projectsfrom a pool of long-term associates, but does not itself have staff".
Is this true and does it matter?
Yes - the NHS is not immune from the same laws of financial gravity affecting others. That much is true.
That said, the PFI has got the only client who cannot go bust - the UK Government - which is in effect every taxpaying one of us. There is no PLan B for PFI if banks will not lend. This is exactly as it has been since May 1997, when New Labour came to power and enthusiastically embraced the Conservatives' PFI policy (which in Opposition, they had excoriated).
PM Gordon Brown - Chancellor of the Exchequer, back in the day - knew that the principal benefit of PFI was an accountancy trick - it kept the debt off the public sector borrowing requirement (PSBR). The accountancy rules around this have of course been reviewed in recent years, and PFI is now having to come on the Government's books.
Does it matter? I am sure it does matter to those people who have been planing to proceed with PFI redevelopments. It is a spanner in the works. But probably not a very big spanner.
We the taxpayer - gosh, it's almost 'we the people'! - now own the best part of a couple of banks: Northern Crock (chair of the risk and remuneration committee - Sir Derek Wanless) and Royal Bank of Scotland. The Government may not be insanely clever in its handling of the financial crisis, but nor are they insanely stupid.
At a time of rising unemployment and a downturn in the construction market, do you think it is likely that the job-creating abilities of genuinely viable PFI projects will not be made to happen?
"Don't panic, Captain Mainwaring! Don't panic!"