The failure of the UK infrastructure firm Carillion demonstrates that “public/private partnership” means private gains and socialized losses. Carillion is being put into liquidation, with “very little of value left within the business,” despite it having had over 43,000 employees, with over 20,000 in the UK, as well as hundreds of subcontractors.
Due to the sprawl of Carillion’s activities, information about the implications of its collapse will come out over the coming days and weeks. However, some things are evident now. We’ll provide a starter list:
Many contractors to Carillion will go bust. As the Guardian explained:
Thousands of staff who worked for the collapsed construction firm Carillion inside private sector companies will have their wages stopped on Wednesday unless their jobs are rescued by other firms, the government has said.
Experts also said up to 30,000 small firms were owed money by Carillion, which crashed into liquidation on Monday morning, with insolvency practitioners reporting an immediate rush of calls from worried business owners.
Clive flagged an article from the Building Services Engineering Association yesterday:
The liquidation of construction giant Carillion could lead to potentially catastrophic losses for thousands of SMEs, according to the Building Engineering Services Association (BESA) and the electrotechnical and engineering services trade body ECA.
According to its latest set of accounts, Carillion was holding over £800m in retentions payments owed to sub-contractors. There is growing alarm that much of this money will be lost leaving many more firms at risk of financial collapse.
As Clive explained:
Likely to never be repaid to their suppliers. Retentions are basically extortion — you (the supplier or subcontractor) agree to letting us withhold payment, we agree to cutting you in on new work. Maybe. If you don’t rock the boat on other things (like turning a blind eye to site safety, engaging on-demand in phoney bidding scams and cover pricing, petty embezzlement by our managers…)
Mind you, the retentions are no doubt the biggest chunk of funds that contractors will see go poof, but they likely had additional late payments on their current gigs.
Due to the importance of many of Carillion’s roles, government will step in to take up many of the projects and bear the costs. Due to the fact that the handoff to new workers and contractors is likely to result in cost increases, plus Carillion likely underbid some of its later projects out of a need to keep cash coming in no matter what, the various authorities are almost certain to face bigger bills than they had originally budgeted for this work. That translates into tax increases, higher user charges, and/or service cuts. As the Financial Times noted:
The collapse will have implications throughout the UK, where Carillion is the biggest manager of military bases for the Ministry of Defence as well as providing facilities management for hospitals, courts and schools, and work on key infrastructure projects.
Carillion continued to be awarded government contracts as it entered a financial crisis. Carillion put out a profit warning in July 2017, and reserved £845 million to cancel contracts and cover losses. Despite obvious and increasing desperation, in the form of two more profit warnings, it won three more government contracts worth almost £2 billion in the most recent six months. Oh, and Carillion was still paying dividends as its financial condition worsened, up until it suspended them over the summer: £370 million in the last five years and £72 million in June 2017.
Taxpayers will eat most of the pension underfunding costs. Carillion’s beneficiaries will take some relatively small hits as the public pays the pension bill. From the Financial Times:
About 28,000 members of Carillion’s 13 UK pension schemes will now be transferred to the Pension Protection Fund, the lifeboat for collapsed companies. Pension scheme members who are transferred to the PPF and not yet retired will receive 90 per cent of the pension they were expecting, up to a cap.
Members already receiving their pensions will continue to receive 100 per cent of their benefits but may receive lower annual increases. The pension that a surviving spouse could inherit may also be smaller.
The Carillion pension scheme will be one of the largest the PPF has had to take over. In 2017, the company estimated its pension deficit at £587m but on Monday, Carillion’s pension trustees estimated the scheme’s “PPF deficit” at up to £900m.
The Carillion liquidation will play into Brexit. Remember how the UK is going to need a lot of new facilities near ports to handle all of the customs checks? This is hardly a good time to lose capacity in the construction industry.
Last but not least, Carillion’s massive failure is an indictment of the UK’s so-called “public finance initiative,” which in the US, we call “public/private partnerships”. It is an excuse for looting. The claim was that private businesses could build and run public infrastructure more cheaply than government bodies could. Never mind that in the US, the government has been the only body able to design and execute major projects like the electrification of Tennessee Valley or Hoover Dam. Even for smaller initiatives, the premise has never made sense. Why borrow privately when the government has the lowest funding costs? Why should one assume the private sector is cheaper when it brings in numerous operators, which means additional contracting and coordination costs? And even if there are cost advantages, why should one assume the public will capture them, rather than the financiers, the executives, and the shareholders?
As Don Quijones explained at Wolf Street:
PFI deals were invented in 1992 by the Conservative government and then enthusiastically rolled out by the subsequent Labour government. The schemes usually involved large scale public buildings such as new schools and hospitals which were previously funded by the UK Treasury. Under PFI they were put out to tender with bids invited from developers who put up the investment to build new schools, hospitals or other schemes and then leased them back.
The schemes allowed ministers to harness big sums of private capital to invest in public projects, such as new schools and hospitals, without paying any money up front — and thus keeping the level of current public debt relatively low. Repayments are made over a long time scale, usually between 25 and 30 years but occasionally as long as 60 years, but often at an exorbitant rate of interest.
For the developers involved, the returns are generous and relatively safe, backed as they are by the UK taxpayer. But if the developer doesn’t want to hold on to the asset, there’s always the option of “flipping,” or selling on to some other investor, invariably one based in a tax haven, so not even UK corporation tax is paid on the profits. As the UK Independent reports, Carillion was one of four companies (the other three being Balfour Beatty, Interserve and Kier) that recently pocketed over £300 million flipping PFI schools and hospitals to the highest bidder.
In other words, many of Carillion’s PFI assets are already in the hands of foreign-domiciled investors, meaning that while the government will have to take over many of the services Carillion can no longer provide, it may still have to pay leasing costs to the foreign-owned firms that Carillion sold out to. Otherwise, those firms may sue the government for lost profits.
This is all happening as the true cost of PFI is becoming apparent. In April 2017, a bombshell report by the National Audit Office warned that the price tag for paying PFI firms would reach £8.6 billion in 2018 alone. In total, taxpayers owe a mind-watering £121.4 billion on public projects that are worth just £52.9 billion. And the compound interest continues to grow.
And as Jon Trickett, Labor MP, wrote in The Independent:
The Government’s dealings with Carillion is the perfect illustration of how the Conservatives are playing fast and loose with taxpayers money in pursuit of their ideological ambitions. This cavalier attitude was epitomised by Transport Secretary Chris Grayling, who blithely insisted that Carillion’s financial problems “were not an issue” following its successful tender for HS2 contracts last July, despite the company issuing a profit warning just a few days earlier and even though hedge funds were betting on Carillion’s failure as early as 2015.
How he is being proved wrong. Of course, it will not be Grayling, one of Theresa May’s closest allies, that suffers the consequences. Nor, I wager, will it be those involved at a senior level in Carillion, who will probably move on to pastures new, well-rewarded for their failure. Indeed, a few months before its difficulties became public, Carillion changed the wording of its pay policy to make it more difficult for investors to claw back bonuses paid to its executives in the event of financial difficulty.
Once again, it will likely be the public that pays the price, be it through the cost of bringing all the services back in-house, necessary though this is, or through a repeat of the expensive tendering processes that gave Carillion its government contracts in the first place. This is to say nothing of potential job and pension losses.
For what we know for sure about outsourcing is that when times are good and profits are to be had it’s shareholders that benefit, but when crisis hits and losses mount it’s the public that picks up the bill one way or another.
Like the bailout of the banking sector, it’s a model that privatises profits and socialises risk. It’s economics for the few, not the many, and it’s time to end it. We can start by bringing the affected public services back in-house on a permanent basis, and we can take it further by electing a Labour Government that will put a stop to the continued corporate sabotage of society.
Actually, Labour could go even further. While PFI has been a two-party affair, Corbyn has never had any truck with the Blairites who embraced it. Any financier with an operating brain cell should know that the 70 to 99 year leases that are common in PFI and public/private partnerships a very dodgy proposition. How many bonds have more than a 30 year maturity? There’s no sound reason to think that contracts that extend so long beyond other norms are either immutable or enforceable. Corbyn would be in a political position to demand that PFI deals be renegotiated and stare down the creditors. It would take some clever lawyering but one could likely come up with misrepresentations made by the deal organizers and other legal arguments for reopening the terms. And the beauty is that it would have the side effect of chilling, perhaps fatally, the market for these transactions, an outcome Labour would not mind either.
Mind you, I am not saying the odds of this happening are high. But if the shockwaves of the Carillion implosion become large enough, the seemingly impossible may start to look viable.
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Thank you, Yves, for posting this issue, especially for readers outside the United Kingdom.
France 2 featured these scams a week or so before Christmas. The French audit office is critical of them, but Macron has supporters / donors to satisfy and figures to massage. One such donor, ATOS Origin, operates on both sides of the channel, including vetting applicants for social security benefits in the UK. One juicy contract awarded by George Osborne to ATOS was the result of lobbying by Macron when Macron visited his City supporters. The pair are friends and will catch up at Davos shortly.
Readers won’t be surprised that one former CEO of Carillion has walked away with a bonus well in excess of £100m.
If the Corbynites can’t make hay from this timely “event”, as per Harold MacMillan, they need shooting.
The other parasite to watch is run by a grandson of Winston Churchill. The CEO looks like his granddad and brother, a Tory MP. Even said CEO admits to the reason for his appointment, i.e. connections to the (Tory) establishment. This parasite services Australian navy ships as well as British military assets. It grew out of the privatisation of the recruitment and pension management arms of the British government.
Greetings from hurricane hit Mauritius.
I forgot to add that, as part of its management of schools, Carillion is obligated to provide school meals free to the poor. It is not able to do so. Again, if the Corbynites can’t make hay from the sight of poor children going hungry, they need shooting. Crises should not be wasted!
It was odd to see Blairite family blogger Stella Creasy, MP for Walthamstow in north east London, shedding crocodile tears on the news at lunchtime (breakfast in Blighty).
There’s some interesting sociology, as well as politics, in the origins of this shambles. It all goes back to the 1970s, and the takeover of the Tory Party by a new generation of candidates, later MPs, and Ministers, with a background in the rent extraction professions: accountants, tax lawyers, estate agents, property developers and so on. Professionally, their interest was not in real outcomes, but in financial ones, and especially in massaging figures and taking percentages. So it seemed natural to apply the same ideas to government, and, from the early 1980s onwards, public finances started to be increasingly managed to produce the most acceptable set of figures, rather than the quaint old idea of actually doing things for people. One way of making the figures look better was to imitate the then-new idea of outsourcing, and concentrating on so-called “core-tasks.” At first, this involved just outsourcing tasks to the private sector. To an accountant, such an initiative, if it involved cleaning, for example, could be said to “save money”, although almost always the quality went down much more than the costs. But in many cases, the private company didn’t actually have the expertise to do the job, so it rapidly became the norm for the contractor to poach staff from the government, and sell their services back to the same government as contractors for a handsome profit. As a result, the government rapidly became heavily dependent on its suppliers.
One way of making “the books” look better was to reduce capital expenditure. This was the origin of the Private Finance Initiative, which beautifully encapsulated the short-term rent-extracting mentality which by that time had come to dominate the Tory Party, and indeed much of the political class. For Ministers, the attractions were obvious: lower costs in the short term against higher costs later on (but who worries about the future?) and much reduced accountability before the public and parliament, since so many things were done by faceless contractors, often behind multiple layers of ownership. Objections that one day, for example, government organisations could find themselves homeless or over a barrel to pay whatever rents were demanded were greeted with a shrug. That was a long time in the future. The rebranding by the Blair government of PFI as Public-Private Partnership was greeted with much ribald disdain at the time, and in the end turned out to be largely a continuation of the same policy. It was notorious in Whitehall that the Treasury was likely to turn down any initiative that didn’t have a PFI/PPP element in it.
Those of us who watched this slow-motion car crash in preparation over the decades, and prophesied tears before bedtime, will not have been surprised at all. But I suspect there’s a lot more to come yet.
Thank you Colonel Smithers and thank you David you both nailed it . Any readers of this blog wanting to know the provenance of these disasters should watch Adam Curtis’s documentary ‘ The Mayfair Set’ especially the part ‘ Entrepreneur Spelt S.P.I.V. ‘ in which he dissects the founding fathers of the scam – Jim Slater, Tiny Rowland, James Goldsmith et al – who all claimed to be reviving British industry whilst raping and pillaging it. That was the Reagan/Thatcher revolution and we were all suckered into it courtesy of that impish little conman Milton Friedman winner of the non-Nobel prize. Human history is replete with houses being burnt down before any rebuilding can take place and, as the great Zimmerman wrote ‘ Don’t stand in the doorways, don’t block up the halls ‘ which I take now to mean let this particular one burn to the ground.
> in the origins of this shambles
“Omnishambles,” surely? Experts in English English please correct me…
Great comment!
PFIs the product of misconceived ideas on gov’t spending and public budget deficits. As bad an idea as his “light touch” on financial regulation. Italy and Greece used financial derivatives to mask the true state of their budget deficits to “qualify” for Eurozone membership (and thereby destroyed their economies in the process). UK governments stupidly deployed PFIs, for no apparent reason at all, other than to con the City into thinking that Labour was being “fiscally prudent”.
When I have my tin hat on I wonder whether those ideas were not so much misconceived as carefully preconceived.
> stupidly deployed PFIs, for no apparent reason at all,
Maybe the relatively small vigorish for the “rent extraction professions: accountants, tax lawyers, estate agents, property developers” was enough to tip the scale in favor of PFI? Despite the small amounts involved (relative to the scale of the contract). I periodically quote this parable from Ian Welsh:
Welsh was speaking of politicians, but I suppose the insight could be extended to rent-extracting professionals.
Not to say that pressure wouldn’t have come from the contractors, too, of course.
An often overlooked part of the PPPs/PFIs is how lucrative the projects are for the bankers, consultants and advisers for both the government and the bidders. I would love it if the UK government went after the firms saying that Carillion was financial stable and sound.
If the government is going to be on the hook for bailing out this lot, how about they take a leaf out of how some countries have resolved it. That is one, nationalize the lot. Two, sack the entire management team that drove the company into the ditch. Three, send in a troop of accountants to not only assess what the true situation of the company is but also to find any criminal actions on the part of the departed management. Four, spin off the profitable parts of the company for a fair market price. Five, prosecute any management found guilty of financial crimes and actually send them to hard-time prison.
This to my mind should be what should be happening but I doubt that any of it will happen. No one will go to prison, executives will still be receiving their good performance bonuses, any parts sold will be sold off seriously undervalued and go to mates whereupon it will be revalued at the real price (as happened to British Post) and the poor Brit will be told There Is No Alternative but suffer cuts to services to bail this company out of its fix. It might be even necessary to sell off the NHS to raise the needed funds. I’m sure too that the City will be threatening all sorts of repercussions to make sure that the ‘right’ course of action is chosen. I’m sure that Sir Humphrey Appleby would know the drill.
I would (or rather Corbyn should) add a 6th measure to your list – legislate to claw back management bonuses and director’s fees to the tune of however much is required to make good the public purse after rescue. I would go further and pursue the profits of shareholders under the same general proviso: contributions to cover costs and levied according to size of shareholding.
It’s about time capitalism returned to some creative rather than scotfree profit-making destruction. You pays your money you takes your chance.
Sir Humphrey might know the drill, but the show(s) were written by a Thatcherite to impugn government in favour of the “private sector.” It was, I think, supremely successful neoliberal propaganda.
I don’t think the private sector comes off all that well in Yes, Minister. Do you, really?
They are not bailing out the company. Carillion is being liquidated. The assets will be sold and the press says they aren’t worth much
However, they will take care of the pensioners in large part and will still have to step in to finish the projects and find a way to provide the government services it was performing, like cleaning NHS hospitals and doing facilities management of barracks.
Given how hollowed out government is, that will mean bringing in outsourcers for projects. The one exception may be the outsourced services like the hospital cleaning. It’s way too time consuming to go through new bids, so they will probably hire those workers and on-site managers.
Neither Don Quijones nor Jon Trickett understand that, in a fiat economy, taxation does not underwrite government expenditure, so taxpayers’ money is not involved, directly or indirectly. Nor do McDonnell or Corbyn seem to understand this simple maxim. They should use Carillion as a means to attack the financial incompetence of the Tories and the link this has to their neoliberal fantasies.
Only true if one does not have to import much, and only possible if one currency is a reserve currency.
Not the case in the UK.
The MMT people avoid discussing the foreign exchange trap. In some ways it is a common fault in US perceptions.
An ethno-centric view of the world.
If you can pay for imports with your own currency it is not an issue, it doesn’t have to be a reserve currency.
An MMTer discusses foreign exchange.
Most trade is in USD, if e.g. Tunisia want to have an airline system and need to buy airliners, Boeing wont sign a contract in Tunisian Dinars, the contract will probably be in USD enforceable under international law.
If Tunisia cant ern those USD with export surplus it have to borrow them, if it “print” Dinars to buy USD the Dinar will depreciate om currency markets. And they will find that less stuff “is for sale” to them. I they then get in trouble paying the loans the peace loving so called the international community will send out its goon squad in form of IMF/WB and give them an offer they cant refuse.
There is no ‘ foreign exchange trap ‘ Syanoia . MMT describes the world of money as it actually is in a country with a sovereign currency, stripped bare of all the accumulated nonsense used to beat the populace up under the heading ‘Affordability’.
Exactly. Begin with a profit layer that must be offset to maintain parity, cuts have to come from somewhere to lower costs, meaning labor costs (includes subcontractor cost). Going cheaper only increases the downward spiral.
Virtually every cost saving distills down to reduction of labor somewhere along the chain. There isn’t much in the World we can use as-is right out of the ground at the point of use without labor components.
‘We don’t exist to them, do we?’: why working-class people voted for Brexit
The depth and duration of the mismanagement is breathtaking. It would take recurring active deceit to have survived this long. One would think a criminal investigation would be in order, unless a government hanging by a thread were committed to looking only forward, never back.
And, hey, let’s bet the US’s entire future infrastructure, its building, repair, ownership, use and cost, and, say, a trillion public dollars, doing a wash, rinse, repeat over here. What could go wrong?
Or, in different words, unless the government would find itself among the suspects. Jon Trickett uses the words “in pursuit of their ideological ambitions”, but it can be simpler. Their friends want money, Her Majesty requests that they form a government, they find that their hands are on the money tap. Nothing to it, really.
I am continually surprised that pension funds do not seem to have annual sufficiency audits and requirements that they be adequate for forecasted needs. Over half a billion in underfunded liabilities would make even Sen. Fulbright blanch. It must have taken a few years to get that far behind.
I guess that, despite receiving so many government contracts, the issue never came up or was never considered worth pursuing. But I forget, using pension funds for ongoing spending needs is apparently legal in the UK, and gutting pension funds is a popular, if unofficial, blood sport.
Pensions dramatically underfunded, yet dividends and large bonuses were paid out? It’s as if senior executives’ responsibilities did not include adequately funding pensions, which are nothing more than earned-as-you-go deferred comp.
No senior executive or board member, for example, would allow his own comp plan to be underfunded, let alone by an amount that could only be cured by appealing to taxpayers – or by sticking them with the tab while you swan off to Ibiza, fully compensated.
It reminds me of the proverb that nothing concentrates the business mind so much as a few years in Reading Gaol.
“It’s as if senior executives’ responsibilities did not include adequately funding pensions…”
Senior exec’s primary responsibility is to MAXIMIZE SHAREHOLDER VALUE. Anything else is secondary at best.
I know this to be true because uncle Milton told me so.
You’re shining me on. As Yves could point out at length, shareholders come last in order of priority, legally and economically.
Actually, senior executives act as if they come first. Increasing “shareholder value” – cash payouts instead of reinvesting in their business – they use as a ruse to increase their own comp.
Who comes last is everyone else, but it starts with employees, then customers, suppliers, creditors. Cuts in quality – and outsourcing things like “service” to customers themselves, or cutting it completely – and increases in price seem ubiquitous.
Sociopaths are a class of beings responsible for the cyclical collapse of civilizations. Their predations are instinctual, and unless they are recognized and pilloried they will never stop ’till they’ve gutted the entire planet.
there is always a lot of talk about it–at least rats try to leave a sinking ship–we just seem to grab popcorn and watch the show…
http://www.informationclearinghouse.info/article30892.htm
“There are seven characteristics I can think of that define a sociopath, although I’m sure the list could be extended.
Sociopaths completely lack a conscience or any capacity for real regret about hurting people. Although they pretend the opposite.
Sociopaths put their own desires and wants on a totally different level from those of other people. Their wants are incommensurate. They truly believe their ends justify their means. Although they pretend the opposite.
Sociopaths consider themselves superior to everyone else, because they aren’t burdened by the emotions and ethics others have – they’re above all that. They’re arrogant. Although they pretend the opposite.
Sociopaths never accept the slightest responsibility for anything that goes wrong, even though they’re responsible for almost everything that goes wrong. You’ll never hear a sincere apology from them.
Sociopaths have a lopsided notion of property rights. What’s theirs is theirs, and what’s yours is theirs too. They therefore defend currency inflation and taxation as good things.
Sociopaths usually pick the wrong target to attack. If they lose their wallet, they kick the dog. If 16 Saudis fly planes into buildings, they attack Afghanistan.
Sociopaths traffic in disturbing news, they love to pass on destructive rumors and they’ll falsify information to damage others.
The fact that they’re chronic, extremely convincing and even enthusiastic liars, who often believe their own lies, means they aren’t easy to spot, because normal people naturally assume another person is telling the truth. They rarely have handlebar mustaches or chortle like Snidely Whiplash. Instead, they cultivate a social veneer or a mask of sanity that diverts suspicion. You can rely on them to be “politically correct” in public. How could a congressman or senator who avidly supports charities possibly be a bad guy? They’re expert at using facades to disguise reality, and they feel no guilt about it.
Political elites are primarily, and sometimes exclusively, composed of sociopaths. It’s not just that they aren’t normal human beings. They’re barely even human, a separate subspecies, differentiated by their psychological qualities. A normal human can mate with them spiritually and psychologically about as fruitfully as a modern human could mate physically with a Neanderthal; it can be done, but the results won’t be good.”
> They therefore defend currency inflation and taxation as good things
Those are signs of sociopathy? Maybe you could back up this pasted list with a source and evidence?
it is unclear what that means–I got the list from the link posted above it. it is opinion for the most part, imo. I posted as an example of the kind of useless complaining that goes on about “they” largely with the effect of venting with no effect.
Besides the issues cited concerning retention payments and pension underfunding, what government agency, “independent auditor”, and which members of the company’s board were responsible for the overall auditing of this corporation to assure management was not engaged in what is known in the construction industry as “front-running”? This practice is conceptually similar to a classic Ponzi scheme when progress payments received to fund outlays under later contracts are instead used to pay suppliers and subcontractors under earlier contracts, and for payouts to insiders. Based on a casual reading of this piece, appears that the signs are there.
The damage caused by this failure in the UK raises significant concerns regarding the touting by the current US administration of the supposed cost benefits of these “Public-Private Partnership” structures in remediation and development of degraded US infrastructure.
Good article.
Here in Canada we are also screwed over. Carillion employs about 6000 people here in Canada.
http://www.cbc.ca/beta/news/thenational/the-national-today-carillion-north-korea-tunisia-protests-1.4487446
Sadly this private public partnership madness has affected Canada as well. I think that the majority of the infrastructure construction should be left in the hands of the public sector.
Financing through PPP has been often a costly mistake and the public gets the short end of the stick.
“Carillion Canada is the country’s largest road service contractor, responsible for plowing and maintenance along 40,000 kilometres of highways in Ontario and Alberta.”
Not a big deal. You use snowmobiles and dog sleds there anyway. https://www.buzzfeed.com/laurenstrapagiel/all-hail-shania-twain-queen-of-canada?utm_term=.rkqN6j1lD#.ea6NLjwG0
dear readers, please keep in mind that Trumpf had “assigned” the puerto rico power grid to a two-man LLC out of Montana, Whitefish Energy, whilst enjoying this excerpt from todays FT:
“But a deeper dive into Carillion’s accounts show that as far back as 2011, all was not as well as it seemed. buried in its financial statements were signs that customers were taking longer and longer to pay while at the same time the company was taking on large debts that were hidden to anyone who did not look for them over a hundred pages deep in its annual reports”
Receivables rose from 14.4% of revenue in 2009, to 30.5% 2016.
“and what…was the company doing to plug the gap in its cash flow to enable it to pay its own employees and contractors/suppliers?”
“UK construction and services companies are in a very low margin business,….. there are no real barriers to entry, no real brand, and they are providing unskilled labour,….there is fierce competition, lots of players holding on the same contracts and this means many go out and bid for work on basically zero margin.”
“At the same time that Carillion was being paid more slowly, it started to make use of UK government schemes introduced in 2011 to speed payments to smaller businesses and contractors. In order to pay its own suppliers and bills, Carillion started to use the new Early Payment Facility. Under this scheme, suppliers owed money by Carillion could take their invoice to a number of partner banks….RBS, Lloyds, Santander, and be paid in advance. the banks took a small fee on the invoice and the debt was transferred from Carillion owings its suppliers….to the banks“.
Emphasis MINE.
The Puerto Rican government chose Whitefish. I’m not saying the process was clean, but I haven’t seen evidence that Trump picked up the phone and told them “Whitefish.” If you have evidence to the contrary, please supply it.
In the 1970s the councils still built housing and schools, “public works”, with fulltime staff inhouse, housing associations built some too. PFI started with john major I believe, but from blair on all public buildings of all types were financed this way or as PPP.
However much of this PFI work was with local gov, not national, eg the council might need a new library and offices, be unable to afford tens of millions to build one outright, particularly the poor ones, however they could afford to pay market rent for the facility for 30 years, collecting council tax annually (also central gov subsidies). At the end of the 30 year contract they will pay eg £1 and own the facility outright. But its the lucrative 30 year facilities management contract that was of interest to the contractors/developers, everything from toilet rolls to window cleaning, and all the routine ongoing maintenance required under all the warranties. In some cases they built at a loss just for that 30 year management contract. These PFIs were financed by eu banks as well, and since the council was still uk gov, even if they council went bust, the contract covered all that, and the investment was considered riskfree. I also remember seeing some of these PFI contracts being packaged and sold too. PPP was used for major infrastructure, such as the channel tunnel, which if memory serves, needed a bailout, and got one as one would expect, as with all essential public infrastructure.
Whenever I see statements like “public/private partnerships” guaranteed to be a failure, I immediately think about Tokyo Metro: https://en.wikipedia.org/wiki/Tokyo_Metro. Someone please bring over that “failure” to UK/US. Heck everywhere really.
You wouldn’t much care for the rest of Japanese society that makes such things work, not the peer pressure, government regulation and controls, etc. But the rigid hierarchical authority might be familiar.
Yeah, but it works, that’s the point.
Everything has a price. I will take less of whatever imaginary freedom there is in Western society and for once just have something that REALLY works.
Instead everyday you get confronted with the Crapification of Everything.
Who was that guy who was lauded for making the trains run on time?
Good thing,rates, that you don’t get to decide the “price point” for sale of the general welfare to private interests.
I’m amazed at the 99-year leases. So the Tories signed over public facilities to the financiers for the same length of time the Brits got the Qing Dynasty to sign over the New Territories in Hong Kong.
And I suppose a comparison between today’s British Establishment and the Qing Dynasty would not be inapt…