There are various risks which the private sector can take on where they might be better at managing them in a way which improves results and lowers costs. When designing a tender and negotiating with a provider the public sector needs to be careful to avoid the position where the private sector privatises the gains but keeps the public sector on risk for the losses.
The clearest way to put the private sector on risk is to make it responsible for both the financing and the revenue. The M6 toll road north of Birmingham  not only meant the private sector took all the risks of the construction, but also had to rely on the toll revenue to remunerate the capital. It had to compete with a free road provided by the state. In such a clear cut case there is no doubt the private sector is on risk.
Many PFI projects remunerate the private sector with a flow of money from the government or Council. Whilst the private contractor still has to “earn” the money by providing the school and equipment or carrying out various medical services, the money comes from the state and the state has to make sure the provision continues whatever happens. This weakens the amount of risk which is effectively transferred. In some cases the state provides shadow tolls or revenues based on usage, in other cases public money is paid year by year for use of facilities which the private sector paid for up front.
When the main point of a PFI is to provide a new school or hospital building for the state to use there can still be a proper transfer of risk. The risk mainly transferred is the risk of design, construction and fitting out. The contract to make annual payments for the facilities once provided can be designed around the budget cost of the project rather than the actual outturn, leaving the private sector at risk of budget and time overruns on the building.
January 20, 2018
I saw the figures of tenders to a Local Authority for a certain enterprise ( no names ). I remarked to a few leading figures in the Local Authority and I paraphrase my rhetorical question
” Don’t you think it odd the winning figure is so terribly close to the losing tender figure, given the complexity of all workings-out?”
My “question” was met with swift turns of head of those personages one to another and agitated meaningful looks. Yes I had rumbled them.
It is pointless speaking of private and public services when the government’s prosecution and jailings of leading figures in Local Authorities for fraud, conspiracy and grand theft is , well, here are too “tenders”
1/ Zero
2/ Zero+ minus zero
January 20, 2018
Nothing in your post about EU competition rules or EU rules on state aid. We had this with Tata still and the EU energy policy making it uncompetitive, the useless Javid was on a jolly when thousands of jobs were at risk and the govt very limited because of EU policies. Why would any right thinking person want to remain hamstrung by a further two year Extension, not transition, that May is pursuing. No extension leave now. We expect our govt to make decisions to help our industries and jobs. As Nick Boles points out today in his DT article May is pathetic and her ministers unable or unwilling to make decisions.
Is this why she loves the EU so much? she can hide and pretend anything good is her idea anything bad fobbed off by the press knowing it is the EU!
We finally have a former minister stating the bloody obvious about May. I appreciate Boles is a remainer and might have ulterior reasons, but I think we can all agree May is a national embarrassment. We can suffer her no longer. We need someone who wills and up for our country and our citizens- no need for Rudd, Hammond, Truss or Liddington to stay in office either.
What on earth was Liddington doing giving a tepid support speech to rejoin the EU! We have not left yet! Oh please, govt of utter idiots.
January 20, 2018
Much truth in this alas.
January 20, 2018
Mr Corbyn is very confused on all this. He condemns “rip-off” outsourcing and privatisation policies in the Context of Carillon. What Carillon shows is a management who have taken on work from the public sector at too low a margin to cover operating and capital costs. But then I guess it’s not surprising when no Labour front benchers have any experience outside the public sector or perhaps the legal grievance industry. We really must hope they don’t get near government.
January 20, 2018
Ok, fair enough. Now look at the list of MPs from ALL parties, and count how many have any experience within or outside the public sector. Whatever the party, they are very few such people. Labour is bad, but the Conservatives are not much better. Moreover, is experience in financial services (like e.g., JR-M) guaranteeing a knowledge in developing proper planning and execution of “infrastructure” or even simply supervising such projects.
I am afraid you have a rose-tinted view of the capabilities of MPs.
January 20, 2018
Off topic
The withdrawal bill goes before the HOL at the end of the month and there is a lot of talk kicking about it being stopped by the unelected chamber, but surely they cannot because the withdrawal question was in the Tory manifesto so doesnât that mean the Toryâs can use the Salisbury convention
The Salisbury Doctrine, or “Convention” as it is sometimes called, emerged from the working arrangements reached during the Labour Government of 1945-51, when the fifth Marquess of Salisbury was the Leader of the Conservative Opposition in the Lords. The Convention ensures that major Government Bills can get through the Lords when the Government of the day has no majority in the Lords. In practice, it means that the Lords does not try to vote down at second or third reading, a Government Bill mentioned in an election manifesto.
Research briefing: The Salisbury Doctrine (PDF PDF 271 KB)Opens in a new window
January 20, 2018
It’s only a convention and some of the unelected legislators-for-life have already said that they intend to ignore it, for one specious reason or another.
Bear in mind that while the average Remain voter was a fairly sensible, reasonably patriotic, generally well-meaning but not necessarily reliably informed person who had just came to a different judgment about whether their country should stay in the EU, that is not true of many members of the House of Lords.
The best action would have been to push through a new Parliament Act to curtail their power of delay, cutting it to just a month for all Bills, and the best time to initiate that action was in the late summer of 2016 once it had become clear that eurofanatics would try to block Brexit.
Now if they decide to hold up the withdrawal Bill that could be a delay of about thirteen months, so it would still become an Act before the end of March 2019; but the longer the delay that they can create the greater the risk that the government will fall before then and MPs will not then press the Bill.
January 21, 2018
Much truth in your second paragraph.
As for the Bill and the time delay, we will still be out of the EU due to Art.50 not being reversible.
January 22, 2018
The idea that it is reversible is being allowed to take hold.
January 20, 2018
Entirely irrelevant. It is what the next Parliament, or the one after that, will do that matters. And it is a demographic certainty that theyâll undo Brexit anyway. The vast majority of young people do not want it – and we are the future. The Brexit backing pensioners clogging up Parliament and the country with their hate are of little long-term relevance.
We saw the other day how Macron looked presidential. And weak and wobbly May was his subordinate. He told her how it would be. The Tory Brexit government begging Brussels for dregs.
This is what the Brexiteers have done. Turned our previously great country in to an irrelevant rump. The UN Security Council seat goes next. Weâll be dumped from it because the party of Churchill and Thatcher has failed to learn the lessons of those two great leaders – while claiming to act in their name and has become an international joke. India or Brazil or Germany or Japan – or maybe all of them – will take the place of island Brexiteers voted to make irrelevant. Still they can happily have their blue passports for their Little Britain.
January 21, 2018
No, you point out the actions of a remainer, i.e. May. She is not a Brexiteer. Stop writing rot it makes you look stupid.
January 22, 2018
@Andy “young people do not want it â and we are the future” You mention Macron, you like him. A shock for you , Macron is really really really old , he is 40!!!!! Mrs Macron is 65 in April.
Unfortunately Andy, with every passing day, it is obviously true, young people become older and older. Many of your supporters will be too old to support your ideas. Actually if Macron were British he would be a Brexiteer! It is an old thing! It is to France’s advantage we stay in the EUetc ed
January 20, 2018
I despair at the sheer incompetence of this government. Ministers were entering into contracts with Carillion only last month. A cursory glance at the company’s balance sheet was all that was needed to confirm that Carillion was on the verge of bankruptcy. Cash at bank was very low and its debts exceeded the market valuation of the company by at least 2. The company was running on fumes.
Whichever politician or civil servant signed off such contracts with Carillion need exposing and sacked. The management of the company have tried to run the company like a non-profit operating entity. That’s not how the private sector operates. A profit must be made and operating cash needs to be continually positive or else dilution, debt and eventual bankruptcy is guaranteed. That discipline is surely vital to success
BUT- we have a new player on the scene and its name is Marxist Labour
Marxist Labour and its hard-left union backers will be overjoyed that Carillion went bankrupt. They’re happy at such a catastrophe. They will make considerable capital at such an event. For these two political players they want to see all economic activity run by the State with politicians (Labour preferably) in control and the unions controlling it all on the ground, as it were. This party openly DESPISE the private sector because they can’t politicise it. If they can politicise an entity they can control it and control equals power, unlimited, unaccountable, unelectable power
My concern is the party in government. There’s no defining theme. The PM is an unprincipled mess. Capitulating at every turn to court favour and so desperately wanting to be liked. A total embarrassment
We need a PM who puts the public sector in its place, confronts the left with some passion and aggression and then unleashes the power of the private sector.
The public need to be told it is the private sector that pays ALL THE BILLS of the State. It is the private sector that is the absolute guarantor of all government spending.
If Labour achieve power due to Tory incompetence and cowardice this country will implode
January 20, 2018
Good morning.
We seem to have forgotten that early roads, railways, canals and bridges were all funded from private monies, with their costs being refunded either through growth of private commerce and / or through the use of tolls. In London one can see this across some of our bridges in the form of old toll booths.
The construction of schools and hospitals though PFI was a political decision and not an economic one. It was one taken to take spending off the government books in the pursuit of a political ideology of European UNION. I therefore argue that PFI needs to be greatly restricted in its use.
January 20, 2018
Before the on the never- never was taken up by fiddling chancellors the state employed its own architects, quantity surveyors and engineers or consultants with good connections to the hierachy and then went out to tender from 5 or 6 contractors. Many designs were poor with lack of flair and engineered to take a long time building. For example hospitals were built in reinforced concrete rather than steel frame and some had to be demolished when the concrete deteriorated. Schools were built using system building which occupied teams of architects designing parts which were available at the same or less cost in normal construction. The resulting schools are some of the ugliest and badly constructed in history.
The PFI contractors were good at finding consultants who could produce well designed buildings quickly and screw them down with competitive fees. There is no reason why the state could not invite tenders for the design, bills of quantity, engineering and site management from consortia and then put the winning design out to tender in the way before, ensuring competition from builders. They would hate this but the taxpayer would gain.
When in use, the maintenance could also be put out to tender, with fixed prices for items and a period limited to say four years. This again would prevent contractors from charging silly prices and putting it on the never- never.
January 20, 2018
Interesting article.
I agree that in some situations like the one you cite, The M6, private sector is responsible for both financing and the revenue – and reaps the rewards for the risk.
However, of course, not every situation is the same. How about the government appoint a minister responsible for PFI? It’s such an important part of government, involving so much money. And that under the direction of a PFI minister, with experience of working in business, the government carries out an extensive study of what works best in PFI around the world, and what doesn’t. I’m not a politician so maybe this kind of thing isn’t feasible.
January 20, 2018
However, there is also the problem that where the private sector has been given the opportunity to invest (and reap the rewards), they could charge exorbitant rates, affecting people in general (including businesses). In other words, it isn’t really a high risk project but the private sector is raking it in as if is was (which doesn’t reflect real private sector risk) when the government could have undertaken that investment itself and/or we limit the amount of profits that company can make on that particular investment.
If private companies want to charge exorbitant rates for Mars bars or Mercedes, that’s their choice. But they can’t be allowed to charge exorbitant rates for Joe Bloggs wanting to get to work. There are different levels of enterprise and capitalism, and private companies should be made to work for their profits (just like the CEO of Mars bars and Mercedes have to). Just as those in the public sector can’t expect to enjoy the same rewards of those in the private sector.
January 20, 2018
Good idea .
Try it out on HS2 and see how many bids come in ?
January 20, 2018
Minister for procurement sounds like JR would be ideal for the task. But I am sure the civil servants would still make a mess of it all.
January 21, 2018
‘But I am sure the civil servants would still make a mess of it all’
– sorry, but you’re too black and white.
My experience of working in the private sector (high tech industry) is that people in the high tech industry can make a mess of things as well (when they are being paid more not to ..).
For me, the real issue is that (good) civil servants aren’t paid more than (good) private sector workers since working in the private sector is more stressful, generally, than working in the public sector.
The public sector plays a useful role to infrastructures that private investors won’t touch but are necessary for the economy overall, as well as for people not up to working in the private sector and might end up on the dole or needing medical care for depression etc as well as for wives who want to focus on the children whilst working in less stressful public sector and for those who want to wind down in their careers and pursue other interests that help the country, i.e. charity work.
Not forgetting, of course, that there are people in the public sector with a sense of work ethic.
Saying that i’m a capitalist who supports the private sector.
Reply If people in a private sector company make a bad mistake other companies provides the goods and services and the shareholders lose. If the state makes a mistake taxpayers are fleeced and everyone is badly affected as the provision is usually a monopoly.
January 21, 2018
Japan + S. Korea = low public sector, low GDP per capita (compared to UK)
Sweden, Denmark, Norway, Finland = high public sector, high GDP per capita (compared to the UK).
Look at the evidence, otherwise you’re just behind subjective and ideological as opposed to objective and practical
Reply The UK has higher gdp per capita than Finland. The highest gdp per capita figures tend to be low tax countries like Singapore, Bermuda, Hong Kong etc
January 21, 2018
‘The UK has higher gdp per capita than Finland’
– You’re right. My mistake (our GDP per capita is more but not by much).
However, Sweden’s GDP per capita is about 15% higher than the UK’s. And Denmark’s about 9% higher than ours. That’s significant.
However, I don’t think comparing the economy of the UK (with a population of 65 million) is helpful in comparing it to the economy of the Bermuda (with a population of 65,000. You might win a numbers game with this, but not an argument on the economy.
(and not forgetting that Hong Kong and Singapore are so dependent on financial services, and not forgetting they are in a very different part of the world, with very different cultural values including those of work – anyway, New Zealand and South Korea have much lower tax rates than the UK and lower GDP per capita, by quite a bit, than the UK).
January 21, 2018
If we want our economy to do well, I think we’d be better off looking at what Sweden and Denmark are doing well (with significantly higher GDP per capita than the UK – and with relatively high public sector blowing the claim that relatively high public sector is necessarily bad). As well as the Netherlands (Netherlands has 18% higher GDP per capita than the UK with relatively high business regulation blowing the claim that relatively high business regulation is necessarily harmful) and Germany (high productivity and high exports and high high tech industry).
And looking less at Bermuda, Singapore, Hong Kong and New York (important as financial services are of course), and more at California and the US high tech industry in general.
January 20, 2018
I use the word legitimately fairly losely. The whole green crap or âsubsidy farmingâ industry surely can only survive due to fees paid to well placed âconsultantsâ with political contacts, influence and the likes. Why else is it there after all? There is clearly no scientific or environmental justification. Why is HS2 being funded? For similar reasons one assumes for it is clearly an absurd use of tax payerâs money.
Perhaps Borisâs bridge to France proposal was made to make HS2 seem comparatively sane or at least cheaper?
January 20, 2018
The problem is the mindset of politicians, bureaucrats and that section of the public that believe that things like NHS and the public sector are the envy of the world and are national treasures. The NHS is neither it equates poorly with other means of health care provision and the public sector is a dreadful means of providing anything. PFI was a sop to that mind set by attempting to keep private provision within the orbit of the public sector so allow Labour to say that they were not adding to public spending and not privatising our national treasures.
Ideologically the left cannot proclaim that socialist solutions to supply and demand do not work even though demonstrably they do not. So instead of doing away with the public sector and allowing the private sector to provide and risk not the taxpayers money but their own. So as to incentivise the provider to offer a quality and price of provision that consumers want or go out of business with no loss to the taxpayer Labour opted for PFI. Which of course has turned into a complete shambles which is the norm for many things that the public sector, government and their agencies manage when they have anything to do with them.
January 20, 2018
Well after all of that i am none the wiser..seems to me that some things like schools hospitals, essential services should be left entirely in public ownetship..there are plenty of other things like roads, bridges, football stadiums, some transportation, that can be put over to private or part private ownership..in my opinion water utility should never have been privatised..water like the fresh air we breathe is essentialb to life..i hear that Macron will be on the Marr show tomorrow..i wonder will he have any ideas on the topic..we’ll just have to wait and see
January 20, 2018
Seems to me that schools and hospitals should be entirely private with goverment giving vouchers to parents or carers where they cannot pay themselves or can top up.
Far more efficient and some real freedom and choice for people.
Food is essential and we do not have the state running that thank goodness. Hospitsls, universities and schools all existed well before the state made a complete lefty mess of them.
January 20, 2018
Just ask old Boris how he is going to finance the new bridge accross the channel..will the be public money or will it be a joint public private venture? Macron might have more to say about that when he’s on the Marr show in the morning
January 20, 2018
Why should the bridge not be paid for by private money alone, recouped through tolls on users?
I cite the precedent of the Channel Tunnel, a superb engineering feat and now infrastructure resource of the upmost utility, that relied not at all on public money – because of the insistence at the time of an astute Thatcher advisor, one J. Redwood for it was he!
January 20, 2018
Right now, the Channel Tunnel is used at roughly 55% of its capacity. Contrary to what Boris said, it is actually three tunnels (one in each direction, plus the service/security one). The main users are in order lorries (on shuttles) (about 70% of traffic), trains, and cars (on shuttles). Despite the queues of cars happening mainly at times of summer breaks/holidays, the overall operation looks to me as a regular user very efficient (in absence of French work actions).
If another link is to be agreed in the future, for its financing, what about private funding as was done for the Channel Tunnel.
January 20, 2018
One of the solutions is to introduce outside skills into the private sector without them being subject to its internal politics . Attempts to do this in the past were not successful due to the answering/control process ( I can provide examples but it means naming individuals ). The Civil Service contains many highly intelligent people who become quickly ingrained ; it is a great pity and waste of talent . Exposing selected Civil Servants to the private sector was the brain child of Sir William Armstrong ; secondments from both sides did help to break down the ingrained answering system but they were not pursued long enough .
Breaking down the Public Sector is essential ; as it stands it is a self-perpetuating system of little benefit to the tax payer . The Private sector also lacks continuous effective supervision and control mechanisms ; too often the relationship between Board Room , Shareholders and Customers is mired and this must come under a different discipline . If both sides can get themselves sorted out our country would be in a much better shape .
January 20, 2018
John with the M6 toll road customers have a choice to pay to use it or not.
A much more congested but free option of use is available.
We have chosen to use the toll road in the past because charges at that time were cost effective for us at the time, given the lengthy journey we were making where time was a perceived value.
From past articles It would seem not enough customers pay to use it, so the revenue gained has given a poor return on the original investment.
With Hospitals and Schools that is not the case, as you have a captive customer base and at the moment the Government pays an agreed price to use it, no matter what the local demand or performance.
The problem is with the actual price agreed by Government.
We constantly see reported figures for many simple maintenance charges being absolutely extortionate.
Does anyone even check for example the number of replacement light bulbs used, or even if they are required, does the Government have any personnel on site to authorise such work is needed.
January 22, 2018
Allowing cash tolls on the M6 has reduced the public benefit from building it, with much of the traffic unable to afford the twice daily price where they commute, and freight traffic finding the high charges they face uneconomic compared with being stuck in traffic jams on the original road (or going South about Birmingham). Perhaps the deal should have been structured so that when it was unable to repay its loans, the government would take them over at a haircut of 50% – and rip out the toll booths.
The problem we have is that government is a poor decision maker on major investments, with politicians looking for projects that could be personal memorials without regard to cost that they impose on taxpayers either directly or through imposts on consumer bills. Millenium Dome, HS2, green energy etc. – all uneconomic disasters.
January 20, 2018
Only the government would sign up to a maintenance contract for a school or hospital where no maintenance tasks were allowed by the authorities.
ÂŁ300 to change a light bulb.
Our local hospital spends over 25% of the budget on repayments and maintenance charges. Total cost 3.7 times construction cost.
Not much risk to the developer who has sold out to some pension fund.
January 20, 2018
We should go ahead with the bridge but only if the French fund 100% of it. The rail tunnel was a financial basket case and I think they funded most of that and that other financial anglo french disaster Concord. (Tony Benn pissimg money down the drain that time I think)
Governments specialise in such things.
January 20, 2018
For people who have been patient, the share Eurotunnel at 0.4 euro in 2008 now transformed in GETS (Group EuroTunnel SA) is now around 11 euros. I would not call that a financial disaster.
Are you sure you know what you are talking about?
January 21, 2018
The original investors, myself included, were left with worthless shares when the second share issue was raised. The government proposed the tunnel on its original specification, which was priced into the investment, then changed the specification from a ford to a Rolls, doubling the cost.
Fortunately, we got 10 years free passes which paid back ÂŁ2k. Almost all of the tunnel is now French owned. Never invest in anything which entails government promises.
January 20, 2018
We just need honest competent people who are genuinely trying to look after tax payers money and deliver value. Alas almost none exist in the state sector. They care not what they pay nor what if any value they get, so lang as they are well paid and pensioned.
January 20, 2018
Maybe if we increased competition, reduced subsidies and monopolist funding & rules favouring monopolistic providers in areas that are not natural monopolies.
Perhaps restrict the tax deduction on PFI projects of interest payments, so at to encourage long term share capital or even mutuals.
Small can be beautiful and work. Large doesn’t seem to work and only concentrates risk back to the state. If the private sector is unable or unwilling then extreme care is needed to look after the public interest.
Can we trust the integrity of the contract award system? The system needs to be more open and transparent to bring light to dark corners.
Make the banks funding of PFI fully transparent, they should disclose there earnings on each deal. Bring all PFI deal contract c companies “onshore” for tax and disclosure purposes.
Insist the banks funding the project, have a failure scenario, that involves a privately sourced insurance policy “paid upfront” which mitigate costs associated with a transfer of services or contract.
More clawback provisions of “profits” to be made against those who have managed to privatise a profit and socialise the loss. Maybe maximum pay or distribution restrictions.
Stop bailing out preferred private interests. Where bailouts are done maximum transparency should be the default position for the shortest period possible.
January 20, 2018
I’m assuming Macron is going to advise us to ramp up the house building program as there will be plenty of people turning up at Calais to be waved in. May is paying the EU to wipe us out. I hope she feels her reward from the EU is worth it.
January 20, 2018
As libertarian would put it: You don’t know a thing, do you? The original agreement was on 400 children and the UK has only taken about half of those in close to two years.
My understanding of Macron’s demands was about the remaining two hundred. And if you have been to Calais Eurotunnel in Coquelles recently, you might have realised that you would have to be very very clever to pass through anywhere within the kilometres of double 10 ft high fences.
You might have better chances with a small boat going to any of the non-monitored harbours on the South coast of England.
January 21, 2018
Yes, but some of those ‘children’ as you call them had beards !
January 21, 2018
Children are under 16.
Many of the “children” who were to be “reunited” with their families, couldn’t be once they got here because it turned out they weren’t related, so local authorities had to bear the cost etc.
If these “families” had really existed, don’t you think they would have gone over to Calais to pick their “children” up?
Most of these men plan to bring their families in, not join them.
January 20, 2018
Findings of a recent survey, as reportedly articulated by a senior leader show that becoming a parent “looks like a bad career move” and ” the beginnings of a very perverse form of equality” between men and women.
It has always been time, for us to recognise women give birth more than men.
January 20, 2018
Off-topic, it could be seen as good news that leaders in the City are now expecting far fewer job losses from Brexit than imagined previously:
https://www.thesun.co.uk/news/5384951/britain-to-lose-fewer-jobs-post-brexit-than-originally-thought/
“BRITAINâS financial services industry will lose far fewer jobs because of Brexit than first feared, the City of London have declared.
The corporation that runs the Square Mile said yesterday the number of postings shifting overseas because of our EU exit is ânow likely to be at the lower end of estimatesâ.”
Or alternatively it could be seen as yet another indication that Theresa May and her government have decided to sell us out, agreeing that the whole of the UK and its economy will continue to obey all EU laws in perpetuity – EU laws as interpreted by the EU’s court – and moreover UK taxpayers will continue to foot the bill for businesses to have access to the EU’s services market, including financial services, even though we will get nothing at all back from the continuing EU to pay for their unfettered access to our domestic market, not for wine or for cars or for anything else whatsoever.
But whichever way it is one thing is certain: while as defined Britain’s “finance sector” may indeed account for about 12% of our economic output only a small fraction of that 12% has any connection to international trade, including trade with the EU:
http://johnredwoodsdiary.com/2016/10/05/the-imf-forecast/#comment-835073
and
http://johnredwoodsdiary.com/2017/10/31/the-banks-negative-view-of-brexit/#comment-897862
“All of that may be true, but in reality only a small proportion of those 2.2 million workers in the financial services sector will have anything to do with the EU â that is beyond having to obey EU regulations, like the rest of us â and only a small part of that ÂŁ72 billion trade surplus can be on trade in financial services with the EU, given that the exports to the EU in 2014 were only ÂŁ22.7 billion and that’s before taking off the value of the imports from the EU … ”
Once again we see the prospect of a small external trade tail unjustifiably wagging the whole UK dog, just as even the tiny 0.1% of UK GDP corresponding to goods exported from Northern Ireland to the Republic is enough to condemn the whole of the UK and its economy to permanent “regulatory alignment” with, which is to say legal subjugation to, the EU even after we have formally left the EU.
So now it becomes clearer that Brexit will indeed mean Brexit, but only in name.
January 21, 2018
Welcome aboard, glad you could make it !
đ
January 20, 2018
JR: “How do you shift risk to the private sector to justify private finance of public services?”
It ain’t any use to ‘risk shift’ if you ain’t prepared to take the risk of the private sector operation failing.
Politicians are incapable of allowing a private enterprise to fail.
So this idea is a non starter out of the gates.
January 20, 2018
Social media is full of it. Labour is having a National Campaign Day. This means that thousands of Labour members and their families will be bussed-in to localities where local Labour Ward branches can’t get above four members to attend a monthly meeting, in order that voters will get the impression Labour is thick on the ground. Annoying having them banging on doors waking up babies and shift workers, setting every dog barking in quiet streets.
It is going to rain and blow today. Good!
January 21, 2018
Quite around here đ
January 20, 2018
After the accident involving a family of five on the M6 over Christmas, will your govt reconsider the wisdom of “Smart Motorways”?
http://www.dailymail.co.uk/news/article-5290983/Smart-motorway-horror-sees-lorry-crash-familys-car.html?ITO=1490&ns_mchannel=rss&ns_campaign=1490
January 20, 2018
Slight aside: – great title to today’s piece, would be excellent for one of those essay competitions that national newspapers sometimes run.
BTW – could someone clarify for me is the Carillion situation one of cashflow or long-term profitability? I cannot really see this from the general media coverage.
January 20, 2018
Off topic but very interesting Virgin have designed a form of transport called the hyper loop. This old get you from Edinburgh to London in 30 mins. It looks like a worm hole going through space. Perhaps they should scrap HS 2 and go hyper modern. Richard Branson would surely take the risk and the money.
January 20, 2018
correction..This would get you from E….
January 20, 2018
Regrettably the concept of shifting risk from the private sector to the public (ie taxpayer) was accepted when the banks were bailed out in the “financial crisis” (©Crony Capitalism…the only sort now extant)..
It is never a bad idea to copy a successful strategy. Why is anyone surprised that others have done so?
True competition is unknown to modern business….ably assisted by the Tory party.
January 20, 2018
JR, you should really tell the whole story of the “M6Toll” motorway. The fact that it lost ÂŁ25 million a year and had to have its debts restructured by the 27 Banks that ended up owning it. They then tried to flog it for ÂŁ1.9 billion, but no offers. Now, yet another bunch of Australians have bought it, probably at a fire sale price, that might actually get it to make a profit.
The government has a “National Loans Fund” (which is where the magic money tree lives). It owns the Debt Management Office (DMO), which owns The Public Works Loans Board (PWLB) but not for much longer. That lot can finance infrastructure projects cheaper than any private sector, profit seeking Bank. But, they currently are only allowed to lend to public sector organisations.
There is no need for private finance for any public sector infrastructure goods or services bought from the private sector. Unless you just want to hand some more public money to the Banksters in fees and interest payments.
January 20, 2018
Mr Redwood,.
Is it true that the same company commissioned the construction of both the Dartford bridge and the M6Toll? Secondly, was the second project, originally a public road (labelled as the A446M) a sop for the short payback time for the former? The operator of the M6Toll , Midland Expressway Ltd, had the choice of revenue from Central government (determined by traffic sensors) or toll booths, the system they chose. The low usage that I see, on a daily basis, suggest that they made the wrong decision.
January 20, 2018
Very true Dr Redwood bu there is another question. Why does the the state have to be involved at all? it is too easy for the state to indulge its fancies with other people’s money. HS2 is a case in point. There is not a clear business case for it. yet the government insists on proceeding for political reasons and, one could argue, is therefore somewhat careless with tax payer’s money. And it can always print or borrow.. the state really should be cut back.
Sure we need hospitals and schools. But why should they be an essential provision by the state? Why is the private sector not able to provide them? that is the fundamental question.