Wednesday, June 15, 2011

Excessive PFI profits

HM Treasury 'in dark' over 'excessive' PFI profits
By Rob Cave, BBC News

HM Treasury is failing to monitor "excessive" profits from the selling-on of PFI (private finance initiative) equity, the BBC has been told.

One industry analyst says its "inadequate" records do not reflect the billions of pounds made in the so-called secondary PFI market.

Critics, including some MPs, say the taxpayer should benefit from a share of these additional profits.

In a statement the Treasury said it had some information on most sales.

Criticism about the lack of information held by the government comes as two influential parliamentary committees prepare to take an in-depth look at PFI.

Today the Treasury Committee will hear evidence in its ongoing inquiry into the future of PFI, asking whether it has been value for money for the taxpayer. The following day, the Public Accounts Committee will look at the lessons learned so far from the roll-out of PFI.

More than 700 hospitals, schools, prisons and other public sector projects have been built under the PFI scheme.

But in many cases, the construction and investment companies involved have sold on their equity shares to infrastructure funds on the secondary PFI market.

HM Treasury keeps a database of such transactions, but according to analyst Dexter Whitfield, it is out-of-date and contains just a fraction of the information it should.

In a report produced by the European Services Strategy Unit think tank, Mr Whitfield said: "Government monitoring of the sale of equity in public private partnership companies is inadequate, infrequent and underestimates the scale of transactions.

"Meanwhile, banks and construction companies are ratcheting up large profits extracted from what is ultimately publicly-financed investment."

In a statement, the Treasury said: "The Treasury collects and updates data biannually from departments on changes of PFI share ownership, and this information is published on our website."

"We now have some form of equity holder information on around 81% of PFI projects."

In the case of the Calderdale Royal Infirmary in Yorkshire, Mr Whitfield said the Treasury database held no information at all on secondary equity sales.

But after scouring company accounts and other documents, he found shares in the hospital had changed hands nine times since 2002.

The BBC asked five of the companies which had sold equity in Calderdale Royal to disclose the profit they had made from the deals, but was told the information was commercially confidential.

'Wealth machine'
As part of a comprehensive piece of research into the market, Mr Whitfield discovered the average profit margin on PFI equity sales was more than 50%.

Analysing a sample of 154 projects, he found profits of more than £500m. If the same level of profit had been achieved by all PFI equity transactions, he estimates private sector profits would stand at £2.2bn.

Describing the profits as "excessive", he said: "It's a wealth machine. It's not necessarily printing money, but it's virtually that, given the scale of these profits."

His call for a clearer picture of the market was echoed by the chair of the influential Public Accounts Committee, Margaret Hodge, MP.

"There has to be transparency around the system, so that if there is some profit over time in the funding of these PFI contracts, that profit can be shared between the taxpayer and the private investor," she said.

Another Public Accounts Committee member, Ian Swales, MP, said the large profits made raised serious questions about whether the deals to finance, build and maintain hospitals and schools under PFI were good value for money for the taxpayer in the first place.

"By definition, that means the taxpayer got a bad deal at the start, or there wouldn't have been these super-profits to be made."

David Metter, chairman of the Public Private Partnership Forum, an industry body for the PFI industry, said the profits made were a fair reflection of the risks taken on by the financiers and builders of the projects.

"The private sector is efficient and has demonstrated in the past 15 years that it can deliver 700 projects on time and on cost," he said.

"It would be extremely surprising if the government decided to do it another way."

File on 4 is on BBC Radio 4 on Tuesday 14 June at 2000 BST, and Sunday 19 June at 1700 BST. Listen again via the BBC iPlayer or download the podcast.

The ESSU Report, The £10bn Sale of Share in PPP Companies, can be purchased from Spokesman Books. It follows on from Professor Whitfield's previous study, Global Auction of Public Assets: Public sector alternatives to the infrastructure market and Public Private Partnerships

Tuesday, June 14, 2011

Urgent Request from Jeju Island

Call South Korean Embassy - No Navy Base on Jeju Island

The latest word from Jeju Island is that Professor Yang has resumed his hunger strike and has left the hospital in Jeju City and has been taken to a Buddhist monastery. Sung-Hee Choi is still in jail (waiting for her trial to resume on June 22) and she is hunger striking again in solidarity with Professor Yang.

We ask you now to please make another round of phone calls to South Korean embassies in your country. This time Mr. Ko (in the photo below) asks that you give feedback to the village on the response you get when you call. Even if they refuse to talk with you please pass that information to me at and I will send it to MacGregor Eddy who is now in Gangjeong village and she will give it to Mr. Ko.

We ask that you tell the South Korean embassy that you want them to stop building the Navy base because it is leading to the destruction of the soft coral reefs offshore and will destroy the farming and fishing village of Gangjeong. The Navy base, which will be a port of call for U.S. Navy destroyers and other warships, will become a lightening rod for conflict with China.

In the U.S. you can call the South Korean Embassy in Washington DC at 202-939-5600 and/or you can call the South Korean office at the United Nations in New York City at 212-439-4000.

Thanks very much for your effort. I am certain the villagers will be encouraged to know you have made the call.

Bruce K. Gagnon
Global Network Against Weapons & Nuclear Power in Space
PO Box 652
Brunswick, ME 04011
(207) 443-9502 (blog)

Mr. Ko, chair of the Committee to Stop the Naval Base, in Gangjeong village on Jeju Island, South Korea. This is what they must do every day in one way or another to stop the Navy base construction.

Wednesday, June 8, 2011

Defend Irish Neutrality

The use of Shannon Airport by US troops on their way to and from the wars in Afghanistan, Iraq and Pakistan has gained a good deal of coverage recently, primarily thanks to the wikileaks stories in the Irish Independent.

In Ireland, the new programme for government says Shannon Airport should be used only in accordance with international law. As the Hague Convention of 1907, which has been a cornerstone of international law, says neutral states cannot allow their territory to be used in a war (no US army planes land in Zurich airport), PANA expects the new Fine Gael/Labour government to live up to its promises. In the meantime, please support the Shannonwatch demonstration at Shannon Airport on 12 June 2-3 pm.

Also see which promotes a conference on global intelligence on the 11-13 July in Dungarvan. The speakers include a former director of the CIA and many others.

Since the decisive majority of the people of the US and GB want to see the end of these wars, in opposing them since 2001, PANA sees itself as pro-US and pro-British (their peoples, that is).

Roger Cole,

Chair of the Peace & Neutrality Alliance

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