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The something for nothing country

Posted on November 12, 2012 by

The Daily Record carries not one but two “Fury” stories today. One is headlined “Fury as new Labour councillor takes seven-week holiday just six months after being elected”, which tells pretty much the whole story without having to read the article.

(In case you were wondering, the compelling defence of the East Ayrshire comrade in question is “It’s only seven weeks.” We commend Councillor Mair’s thrift in being able to save the cost of a two-month cruise from his modest £16,000 municipal salary.)

The second piece, though, is much more disturbing. Titled “Fury at £729m bill to build schools worth a fifth of that amount”, it reveals SNP Cumbernauld MSP Jamie Hepburn’s discovery that the Labour-controlled (a fact the Record strangely overlooks) North Lanarkshire Council signed a PFI contract in 2006/07 to build and renovate schools in the area, to the value of £150m.

While that sum will have been repaid to the contractors by 2017, unlucky North Lanarkshire taxpayers will continue to hand them money for a further two decades, in the amount of a staggering £29m a year.

At a time when Johann Lamont says Scotland can’t afford free prescriptions for the sick or bus travel for pensioners, that’s an incredible £579m (or around 10 years’ worth of prescriptions for the whole country) thrown at private companies by a single local council in pure extra profit over and above the cost of actually doing the job.

If that £150m of capital had been borrowed from a bank in March 2007 at an interest rate of 6% and paid back at £29m a year, it would have been cleared next June at a total borrowing cost of £30m. If the council had put the bill on a Royal Bank of Scotland “Private Black” Mastercard (for incomes over £100,000) at an APR of 14.9%, it would have been paid in full by 2017 at a total borrowing cost of £128m.

(As a bonus, the council would also have accrued 187.5 million RBS YourPoints, enough to send its councillors off for a total of 2088 nights at the Waldorf Hilton in London with a Thames dinner cruise thrown in every night. That works out at 51 nights at the Hilton and 51 dinner cruises for each of the 41 Labour councillors in North Lanarkshire – funnily enough, just fractionally more than the seven weeks of cruising being enjoyed by their Labour council colleague from East Ayrshire.)

But rather than spend £30m or £128m on borrowing the money needed to improve the area’s educational facilities, Labour inexplicably chose to blow over half a billion pounds of public money, crippling future councils with the debt for a generation. We can only assume they went to Wonga.

Under Labour councils – overseen at the time the contract was signed by a Labour administration in Holyrood and a Labour government at Westminster – someone in Scotland’s certainly getting something for nothing. We’re pretty sure that it’s not pensioners, students, children, the sick or the poor, though.

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    1. 05 04 16 11:04

      Serious Business | A Wilderness of Peace

    49 to “The something for nothing country”

    1. Macart says:

      What’s the word I’m looking for………………

      GANGSTERS. 

    2. mato21 says:

      I’m sure there was a run on brown envelopes before these contracts were signed

    3. Macart says:

      I’m originally from that area mato and was visiting over the weekend. In amongst the rattle of mint imperials and the munching of sausage rolls at an evening soiree this very subject came up. After a few tinctures had been passed round, various reprisal schemes for the punishment of said Labour cooncilors were appraised for their various merits. Tarring and feathering was popular as was tying them buck naked to a tree near midge infested waterways. I got the distinct feeling that said Labour politicos may be out of favour for some time thereabouts.

    4. Doug Daniel says:

      How anyone thought (and, more worryingly, continues to think) that PFI is a good scheme is beyond me (other than the private companies, of course). You really have to wonder about the arithmetical abilities of people who think £29million a year for 20 years is a good deal. I can understand the Tories loving it, since it fits their agenda of turning public services into cash cows for the private sector, but for Labour, there are only two explanations:

      1) Gross incompetence – a complete inability to understand simple arithmetic, and either incapable of considering the long-term implications of handcuffing councils to such deals for so long, or (the more cynical view) just not giving a toss, because it’s someone else’s money and they won’t be around to deal with the consequences

      2) Corruption – completely enthralled by rich developers, either through complete naivety and allowing themselves to be seduced by being told what a great decision they’re making, or (more worryingly and likely) finding their fingers in a few pies and making personal gain from such deals, be it through associations with third parties, or just outright bribery.

      George Monbiot’s Captured State highlights the absurdity of PFI deals pretty well, in particular with an example of a hospital in the centre of Coventry. It could have been refurbished for a modest amount, but instead it was demolished and a new hospital built on the outskirts, because a) refurbishing a hospital is not as lucrative to the building firms as building a new one and b) the city centre land was worth far more money than the land in the outskirts.

      Of course, the long-term financial implications to the public purse, not to mention the inconvenience to people in Coventry of having to go further to get to the hospital, don’t even figure in the considerations…

      I hope we stop this sort of nonsense from going on once we’re independent – better local accountability would probably help. 

    5. mogabee says:

       There’s also the serious question of WHO exactly owns our schools and hospitals.

      It’s a total minefield. And by the time these debts are paid, a lot of the said schools
       and hospital buidings will be in need of refurbs. Totally incredible!

    6. Jeannie says:

      And yet, the Labour Party in Scotland is agitating to bypass the elected government at Holyrood and devolve  more powers to these Councils. Is that so they can cover up their past and ongoing mismanagement?
      Add the above to the Edinburgh trams fiasco – voted through by ALL of the unionist parties against the wishes of the SNP, then mishandled by the Lib Dems in Edinburgh Council -and you get an idea of why giving local councillors more power is not necessarily such a good idea.
      I would also be interested to see what happens should Audit Scotland ever examine the nightmarish spending of the average social work department.
      No wonder Labour wants to raise the Council Tax.
       

    7. Doug Daniel says:

      mogabee – an important point there. I’m sure many of us feel like things these days are not made to last (or, more accurately, made to not last, if you get the difference), and so it will be with these buildings, which tend to look out of date pretty quickly and use far poorer materials than the buildings they replace.

      If a PFI contract lasts 20 years, it’s in the developer’s interests to ensure the building lasts not a year longer, thus ensuring another contract for another replacement is required…

    8. Scott Minto (Aka Sneekyboy) says:

      For those who are interested,

      Please see this excellent link to the history of privatisation in the UK.

      It shows us just how much of a folly this route is!

      http://www.guardian.co.uk/commentisfree/2012/mar/29/short-history-of-privatisation

      Also, please note the years marked 1997 – 2008

    9. MajorBloodnok says:

      I’m impressed that the Daily Record is running with these stories though.  Far better than the usual ‘SNP accused’ stories that the Scotsman and the Herald feel compelled to invent on a daily basis.

    10. Arbroath 1320 says:

      D.D. I don’t think that it is choice of Labour being either incompetent OR corrupt it is a case of Labour being incompetent AND corrupt!
       
      What worries me Macart is that all these sort of stories come out AFTER council elections, after the Labour corruptables have been re elected. The other thing is people always hear about these stories and say Labour should not be allowed back in but miraculously they DO get back in.
       
      I agree with others here, those responsible for signing these disgusting dreadful contracts should be brought to book. Name and shame them, ban them from ever holding public office again. Lamont should be pulled up on these dreadful contracts at F.M.Q.’s. She is the one going on and on about something for nothing well these horrendous P.F.I. contracts are all something for nothing. What’s HER excuse for not calling for the cancellation, or at the very least re negotiation, of these despicable contracts. Oops I forgot she has her eyes set on her ermine robe!

    11. Juteman says:

      The problem with the Daily Record story is that it is a SNP picture next to the headline. No mention of Labour in the story. The casual reader skimming the paper will assume the SNP are to blame. Deliberate?

    12. Macart says:

      Very true Arb, we’ve seen it many times. One thing I can say for an absolute certainty is that it is a big issue in that locale. On not one but two separate occasions over the weekend, the subject came up and those seen to be involved in the fiasco were most definitely on the receiving end of the heaviest of criticism.

    13. MajorBloodnok says:

      @Juteman

      Good point – I had noticed that it was Jamie Hepburn with a prominent SNP rosette.   Still, some people will read the article (assuming most DR ‘readers’ can read).

    14. TamD says:

      Do I detect faint murmers that the DR maybe having enough of the LP?

    15. Luigi says:

      The once-great Labour Party (which I used to vote for) did so much in the past for the working class and poor people in the great industrial areas of the UK. There are still a handful of genuine, committed individuals working within the party structure, although most of the good people left a long time ago. The current party is now so ridden with incompetence and corruption that surely its days are numbered. The people of Scotland are well aware of the mess, but they are still willing to vote for them in large numbers, purely for a perceived anti-tory value. However, even that big deception is now under serious threat, as Labour adopt more and more right-wing policies in order to placate Middle-England, and eagerly share the anti-independence platform with the tories. The only hope now for Scottish Labour is to break away, get rid of the dead wood and form an independent party north of the border.

    16. Cuphook says:

      At a time when local government was encouraged to take out PFI contracts as the ‘affordable’ way of improving the country’s infrastructure the then Labour/Libdem Executive returned £1.5B to the Treasury as they couldn’t think what to do with it. Where to even begin with such stupidity?

    17. velofello says:

      I was thinking.. about Jeannie’s post. What cheques and balances (oops  spelling OK?) were in place when the Labour government and its councils signed up to these PFI contracts? And what checks and balances (that’s better?)are in place in local government across Europe that enables bloggers here to cite European local government as an example to adopt?

      “Follow the money” is the mantra. Shareholders in these private – PFI holding – companies? 

    18. Rev. Stuart Campbell says:

      Cuphook: do you have a reliable factual source for the story about the Lab-Lib Scottish Executive returning £1.5bn to the Treasury? It’s something that comes up a lot but I’ve never been able to pin it down properly.

    19. Scott Minto (Aka Sneekyboy) says:

      @Rev

      I tried too.

      The premice is that the budgets were unused and cumulativley over the whole period Labour were in power the money “clawed back” amounted to £1.5 Billion of any money budgeted that was not spent. Thats the charge.

      The Problem is that I can see claw back happened but it was in individual budgets and its not been possible to see values or prove it. I certainly cant get anywhere near to close to £1.5 Billion.

      You would need to go through the books for each department and see if it happenend in each year and then work out the cumulative value.

      I dont think its a provable issue.

    20. Cuphook says:

      @Rev

      And I’m usually the first to demand proof. Like you, it’s a story I’ve heard over the years and seem to remember reading it when it first surfaced. A quick Google gives this blog entry from 2006 which purports to be, and reads like, an article from the Herald. The link provided takes you to the home page rather than the article. I’m assuming that the article was titled ‘Treasury could force Holyrood to conform’. I’ll try and do some digging when I’ve got the time. 

    21. AndrewFraeGovan says:

      @velofello
      There do not appear to be any checks and balances to the cheques and balances contained in the brown envelopes.

    22. Scott Minto (Aka Sneekyboy) says:

      Thats a great link Cuphook.

      All I kept finding were rumours of individual budgets being underspent and clawed back.

      But it still doesnt clear up what actually happened to that money. Any ideas?

    23. Rev. Stuart Campbell says:

      Good work.

    24. Cuphook says:

      It would take some work to discover what happened to the money as the media aren’t very good at following up complex stories which they’d rather forget about. If any of that £1.5B was returned to Scotland it would have been after the SNP came to power and it would be on the books somewhere.
       
      The first SNP government had an underspend of £41M ‘Lowest underspend so far’.

    25. Davy says:

      Rev & cuphook,
                  
                I remember the return of 1.5 billion being reported on the TV and radio and the spin that was being put on it ‘was look at how good we are at managing our money in Scotland’ we even can return money to the treasury.
              
       I can’t remember much else about it as it seemed to disappear off the media very quick.
        

    26. Cuphook says:

      And here we go. We did get the money back. See ‘Financial Position’ and ‘Wider financial management (19)’.

      The argument is, of course, that at a time when the Scottish Executive was forcing public bodies into ludicrous PFI contracts they were sitting on a large amount of money which they didn’t want to spend as that would have gone against UK Government policy.   

    27. Rev. Stuart Campbell says:

      Top sleuthing. As you say, the crucial thing is that Labour felt the need to employ crippling PFI at monstrous rates when interest-free cash was just sitting there unused.

    28. Scott Minto (Aka Sneekyboy) says:

      Well done Cuphook.

      I guess we can quash that myth but you are right about the scandalous mis-use of public funds.
      “Since devolution, the Scottish Government’s unspent balances held by HM Treasury had gradually accumulated until they reached £1.5 billion at 31 March 2007”

      Thats a lot of underspend (Averaging £187.5 Million per year).

      A few questions are raised by this:-

      1) Why did it take for the SNP minority administration to come in to even try to get that money back?
      2) If it was so easy that a minority SNP government could negotiate a deal why did Labour not do so earlier?
      3) What would a schools and Hospitals building program with an additional £187.5 million a year to pay for it have achieved?
      4) Why if this money was available EVERY YEAR was it deemed necessary to even go out to the private sector to fund some of these new builds?

      This is financial mismanagement of a staggering order and has landed the people of Scotland in Hock to the tune of Billions… many tens of times the value of this money they didnt know what to do with.

    29. Scott Minto (Aka Sneekyboy) says:

      @Rev,

      Not interest free cash… no-payback budgeted cash!!!!!

    30. Rev. Stuart Campbell says:

      Aye, indeed.

    31. Cuphook says:

      While £1.5B does seem like a lot of money (because it is) it’s nothing compared to the amount we’re paying for these contracts with the private sector. It’s just the estimated amount we paid between 2002 and 2006.

      As to, why? A political decision taken to benefit a political party rather than the country. Just picture Mandelson on Rothschild’s yacht as the abiding vision of New Labour. 

      I would be more pleased at quashing a myth if I hadn’t introduced it to the thread in the first place.       

        

    32. Tinyzeitgeist says:

      It wasn’t only labour controlled councils that used the PFI scam ;

      http://www.dunoon-observer.com/index.php/news/past-stories-covered-in-cowal-and-argyll/715–pfi-value-for-money

      It would be interesting to see just how much all of the public sector in Scotland is in hoc annually for these payments!   
        

    33. Cuphook says:

      One other point about PFI/PPP etc. is that they are a deliberate attempt to reduce our representative democracy. Private companies have managed to make themselves a priority in public services to such an extent that regardless of which party we vote for the financiers must get a share of our money before any other consideration. Whichever party we vote for there is a mechanism in place to move money from the public to the private sector, thereby ensuring no interruption to their income, and, if we want new infrastructure we must go to the very loan sharks which have made us poor, thus continuing the cycle.

    34. joe kane says:

      I remember the furore back in 1998 when North Lanarkshire Council overpaid council plumbers. It was all over the news and questions were asked in Parliament. It led to NLC getting rid of its direct labour workforce and privatising jobs and services.

      Here we are 15 years later and hardly a squeak in the news about this vast corrupt NLC PFI scandal.

    35. Appleby says:

      And I’ve seen the eye-watering prices that councils are paying for private plumbers and basic labour from private contracts now too. A lose-lose situation.

    36. Aplinal says:

      My understanding is that after the PFI contract (actually its a service contract) expires, the land/building STILL belong to the PFI company – NOT the council / Tax payer.   So a double whammy, because the PI company could say, for example, that they no longer wish to lease/rent the hospital to the local health authority.  UNLESS they agree to a huge increase in the annual rent/service contract.

      So it’s NOT just the immediate scandal about a building  costing tax payers many times the real cost, its the long term potential for even further fraud (and I think it is fraud) perpetrated on the poor stupid tax payers.

      This SHOULD be front page news on every paper, but they are noticeably quite.  Why is that?

    37. james morton says:

      Its worse than you think – the contracts are usually set for a 10 year period. An amount is announced. This is the low ball estimate – a secondary fund for “contingincies” is then prepared worth more than the contract itself. There is no incentive for this company to do the work on time, as it would lose the funds held in the secondary fund. It is actually incentivised to fail in completing its task. This is how you end up with a parliament building that was projected at 50m but then sky rocketed to several hundred million, or the tram fiasco in Edinburgh, or indeed any recent ICT contract. There is actually no risk to the companies involved. All the risk is transferred to the public.
      All private companies do this on a cost-plus basis, so are always more expensive than doing it in house or on a more stricter system of contracting work out. It’s not  sustainable in the long run and really needs to stop.

    38. Silverytay says:

      I cant talk about PFI/PPP hospitals but I have been a school janitor since 1987 and since PFI came along we were always being told that we had to change our terms and conditions to compete with the PFI schools .
      I was always led to believe that if a head teacher or education dept wanted any work done or changes to a PFI school they had to contact the factor or whoever it was that looked after the building on behalf of the company who built it . Assuming the factor etc agreed , the factor would then send contractors along to do the work and the H/T or education dept would then be  billed accordingly . This also applied to any damage or vandalism done during school opening hours .
      Things may vary between different councils depending on what type of contract was signed.
      So in essence not only is the taxpayer paying over the odds for the use of the building they are probably paying over the odds for any work the education dept need done .
       

    39. Dal Riata says:

      @Tinyzeitgeist

      Lochgilphead Joint Campus was built as part of that scam. And I’ll repeat what Doug Daniel said:
      “I’m sure many of us feel like things these days are not made to last (or, more accurately, made to not last, if you get the difference), and so it will be with these buildings, which tend to look out of date pretty quickly and use far poorer materials than the buildings they replace.”

      That is so true when you see, and know of, the shoddy work done in ‘constructing’ the Lochgilphead Joint Campus:
      Even when it was said to be ‘finished’ it still maintained that ‘unfinished’ look.
      A few months after its official opening, part of its roof was blown off in a gale – this was after a not-particularly strong gale for the area – as a result the school gym was flooded resulting in the expensive floors becoming warped and needing replaced at great cost.
      There are ongoing problems with leaks into corridors and classrooms any time it rains, which, being in the west of Scotland is often!
      There are leaking pipes at other times.
      Squash courts were built with extremely expensive wooden flooring that subsequently warped.
      Toilets and shower facilities have been installed with showers that don’t work properly or flood. 
      Other things were promised, but were not constructed due to ‘cutbacks’….

      It would seem that ‘savings were made’ (Where did the money go?) by the construction company while using expensive materials acquired from and supplied by ‘others’ … Hhmm … Dodgy (possibly).

      Shoddy? Absolutely! Buildings unlikely to last 5 years, never mind 20, or 25 … “…made not to last”… Indeed!

      The whole thing stinks big-time. 

    40. Lesley-Anne says:

      Ah good old P.F.I. now I wonder where I heard that name before … Hmm … oh that’s right I remember now!

      Dear dear dear old friend Gordon Brown the master of screwing the electorate.

      So now we have the man who, in no particular order of *ahem* merit:

      a) sold UK gold reserves off at rock bottom prices

      b) voted FOR Iraq II

      c) failed to provide finances for suitable equipment for the armed forces

      d) saved the world

      e) cut the 10p tax rate but *ahem* failed to tell anyone

      f) who introduced P.F.I. to the world

      g) saved the union

      h) represents his constituency by flying around the world rather than attending his place of work

      i) undoubtedly supports Trident

      j) bought Special Forces Chinook helicopters WITHOUT the necessary software

      k) ordered TWO aircraft carriers in a contract whereby it was cheaper to keep the order for two rather than cancel one

      l) knew *ahem* nothing about the radiation lying on Dalgety Beach HIS constituency until after he lost the 2010 election

      m) carries an outright hatred of the S.N.P.

      n) thinks it alright to call members of the public racists

      o) agrees with Nick

      p) thinks it *ahem* acceptable to give survivors of the WW II Arctic Convoys a *cough* pin badge rather than an actual medal

      q) gave pensioners a 75 pence rise in their pension

      Ach I think that will do for his list of *ahem* quality decisions.

      I wonder when, if at all, ANYONE from either Labour (U.K.) or their branch office will open up their eyes to the reality of the situation that a great deal of the current problems were caused in the main by their once *cough* great leader Gordon Brown!

      Any time ANYONE from Labour starts up about money for anything we should throw P.F.I. straight back in their face with the reminder that this abhorrent scheme is costing councils, education authorities and N.H.S. Millions if not Billions of pounds that could be far better better spent on renting a site. As far as I’m aware this P.F.I. scheme only lets the authorities have their building for the length of the P.F.I. scheme. At the end of the scheme’s period the owners have the right, I believe, to claim back the building and land to sell or use for another project. Therefore, as I understand it, in around 40 years or so buildings like Raigmore hospital in Inverness, the schools in this article etc will quite possibly begin to be removed from the relevant end users … unless someone knows different! 😉

    41. Arbroath 1320 says:

      Oh Oh!

      Looks like one of my alter ego’s has been *ahem* stolen … oops!

    42. Harold Wragg says:

      There;s a similar scam bin Argyll and Bute for a few new schools.
      The PFI loan is to be repaid over 30 years – but the schools only have an expected life of 25 years.

      Madness…

    43. BrianW says:

      Ouch..

      That’s a belter or an article Stu.. it’s gonna hurt..

      Be a few fuming faces, and slamming of fists on desks in the Labour PFI Portacabin over this article.. Spittle flying as someone shouts “How BLOODY dare he..”

      Weirdly their faces should be red with downright embarrassment and incompetence, not rage at the truth being laid out bare in this article..

    44. BrianW says:

      God, I am late to the party.. this was in 2012..lol

    45. Tattie-bogle says:

      Hey Rev, Cuphook and Sneaky boy

      That story is huge what a display of incompetence and skulduggery

    46. Stuart Haddon says:

      The PFI scheme is, without doubt, one of the greatest scams ever perpetrated on an unsuspecting public.However, we do need to be careful about getting our facts straight. I was involved (about 10 years ago) in the PFI scheme in Edinburgh which was used to build new schools. Unless the rules have changed dramatically since then, it’s worth noting the following.

      The company which holds the contract owns the building. However, it is responsible for maintenance services throughout the life of the contract, including the provision of janitorial services. So, it’s not strictly accurate to say that the annual charge to the council represents the profit made by the company. This arrangement does, however, provide a huge incentive for the company to scrimp on maintenance staff and repairs (but see below).

      At the end of the contract (30 years in Edinburgh’s case), the building is returned to the council and there are strict rules about the condition of the fabric at that point.

      The original incentive to come up with PFI, apart from it being one of those idealogical issues that the Tory Party (and the Labour Party from Blair onwards) are obsessed about, was to reduce public sector borrowing. It seems likely that its legacy will prove just what a ridiculous idea that was.

    47. Fiona says:

      I do not think it was to reduce public sector borrowing. It was to hide public sector borrowing, which is not quite the same thing

    48. Christian Schmidt says:

      Ask Cllr Mair to sort it out and tell him he can keep a percentage for his next holidays. That should see most of the money returned and enable Cllr Mair to take a four year holiday to the next election.



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