I almost can’t look at the papers at the moment. Today, DC is on the front pages doing some kind of ‘I told you so’ dance, telling off the Eurozone for dragging the world into the mire. We’ll say nothing of the USA, the faltering Chinese economy, the massive Japanese debt, daily alerts about Greece, austerity budgets in France.
I said yesterday in relation to another matter that people should get their own house in order before pointing the finger. He who lives in glass houses and all that… but there’s a huge issue in England at the moment that is really stuck in my craw at the moment.
PFI schemes. You won’t know what these are maybe, or how ludicrous they are but when I tell you, you’ll be dumbfounded that anyone could have agreed to them. Put it this way, you might as well have given all your money to Kerry Katona and seen it go up her nose. At least it would have been more entertaining and done less damage.
Here’s the thing. Set up in 1992 under John Major, they snowballed under Brown. Just to get that straight. Conservative idea. Labour misuse. Pigeons come home to roost under Con-Lib government. Nobody is absolved from blame over this.
When you know what PFI schemes are, that’s important, because each and every one of our politicians contributed to the problem, worsened the problem and then we, the people, will suffer.
Basically, the idea is this: in order to build new public buildings when the Treasury coffers are empty, you contract out the buildings. You offer the contracts to developers and building businesses. They build a new hospital or school with their own money, and then they lease it to the people who will be using it. In the case of hospitals, health care trusts. In the case of schools, local authorities on the whole. Thus, you get a shiny new hospital or school for nothing. Yeah, right.
The leases run a bit like mortgages, in principle. The hospitals and schools pay the developer interest and a lease fee and then after 25 years, they get the building. In theory, should things go wrong, it’s like renting: it’s not your problem to fix.
In reality, it’s possibly the world’s most stupid idea. It’s stupid because the lease-back fees are exhorbitant. The interest rates would make loan sharks blush. The pay-back terms aren’t just over 25 years, but sometimes over 60. Things were built that just didn’t need building. I know there’s no reason hospitals and schools shouldn’t have a wonderful atrium and modern art and lots of glass and look totally unlike schools or hospitals.
Lots of studies agree that the very appearance of schools and hospitals puts people off what they’re supposed to be doing there. But when you’re on a budget, you don’t deck your house out in Farrow and Ball, or buy a conservatory. You build a shed and paint with B&Q budget paint. Sure, it doesn’t look as good, but it does what it needs to. More importantly, it doesn’t saddle you with debt for needless changes.
Some people will point to the benefits of PFI schemes like how they have modernised or streamlined things. But at what cost? And couldn’t those benefits have come just from building the same buildings with public funding – always cheaper – than private funding? All we’ve done is lined the pockets of the developers. Sure, we have shiny hospitals and schools and so on, but at what cost?
The cost, of course, was initially soaked up by the people who were paying for the leases – the hospitals themselves. So what happens when you have a high mortgage or repayment rate? You cut other things. You stop having your daily can of coca-cola or you stop paying a man to cut your grass.
This – on a grander scale – is what happened in the PFI hospitals. They cut other things. And the majority of expense is always staff. In a school, about 80% of the budget is staff. I guess it’s a little different in hospitals because of the costs of machinery and so on. But staff are easy to cut. It’s easier to get rid of a nurse – or just fail to reappoint when they move on – and fill their shoes with an auxiliary. Services get stretched thin. Staff get stressed. Terms for repayment get renegotiated and you’re the loser again. You need to find more funds.
You’ve got two choices. You stop paying and default, with all the consequences, or you go cap in hand and ask for more money from the Treasury. Central and local government put you in this position, but they’re now slapping your hands as if you’ve been willingly messing about with your budget. They give you more. But unfortunately, they don’t have bottomless pockets, so that means somewhere else, a cut has to be made.
And guess what? All the hospitals who have been putting up with shit buildings, decrepit units, MRSA-discos-in-the-making, those hospitals and Trusts who’ve been frugal – the Government take from them to give to you. The government robbing the ants to give to the grasshoppers.
Imagine it this way. Your neighbour bought a shiny new car. He bought it on ridiculous finance. You told him other ways to borrow the money, and actually even advised him to save up until he had enough to pay for it, but he ignored you. He bought it on a credit card with 21.9% APR with a 10 year term. It was affordable. They’d pick up the costs if things broke. It seemed sensible, even though he’d be paying thousands of pounds more than it was worth, and thousands of pounds more than he’d have had to pay if he’d have bargained with another credit company, or even if he’d saved up.
Soon, he lost his job and had to downsize. You watched him struggle. Unfortunately, if he defaulted, he’d have legal proceedings to face. He went to the finance company to say ‘take it back’ but they can’t or won’t. They force him to keep paying. In fact, they pass him on to a ‘debt consolidation unit’ who allow him to pay 20% APR over 20 years. It feels less, but it’s much, much more.
But the economy turns for the worse again. Now he can’t afford those payments either. He’s already eating beans on toast every night and now he can’t buy new shoes for his children, so he goes cap in hand to the dole office.
The dole office do this. They see that you’ve got £5,000 saved up. You’ve been putting it aside because you worried something like this would happen. You were saving for your retirement, as you’d been advised to do. You only have debit cards and you never buy anything you can’t pay for outright. You’ve been driving an old banger because you were saving up to buy a new one, and you’ve been making-do and mending as long as you’ve been a grown-up. You do everything right.
The dole office take your £5,000 to pay off some of your neighbour’s new car.
This is in essence what has happened with the health care trusts and the schools. Ridiculous, isn’t it?
This would never be legal on a personal level. You couldn’t just raid your neighbour’s bank account if you were stupid enough to sign up for one of those 1279% APR loans. But this is what the government are doing. Plundering the pockets of the ants who have saved and stored and made-do in order to pay for the shiny atrium in the grasshopper’s house.
It’s so disgusting, I’m personally surprised Bono and Sir Bob aren’t involved in it and we haven’t got Midge Ure trying to get everyone together to raise money and awareness.
And this is what your leaders do whilst you try your best to follow their advice about debt.
In a way, I don’t blame the organisations like Innisfree who profit from these schemes. I think that they should renegotiate. I think they are unconscionably greedy if they don’t. I think they should do the right and the honest thing. But you can’t blame them for having rock-solid contracts that allow them to double their profits. They’re a business. That’s what businesses do. At least businesses and banks are honest, if not always transparent, in their motivation. Their aim is to make money. Nothing more. Nothing less. They will do so in the ways that make the most, and that means cutting costs, cutting corners, being barely legal. Don’t ever expect more from a business. They are dependable and forthright in their aims. We know what they’re about.
No, it is the government that allowed this to happen. Businesses only exist where there is a need. And businesses should not be above the law and above governance. We’ve got this bizarre system where banks and businesses operate outside the law and are ungovernable. The only way it can work is if they are limited by all governments. For if we don’t limit them in England, they’ll go somewhere like Macau where they can.
But then, who’d want the governments to be in charge of stuff when they’re the idiots who signed us up to this in the first place??! Would we really want these idiots to be in charge of stuff when they can’t see Ponzi schemes for what they are and when they’re too stupid to realise that if you rob Peter to pay Paul, you’re never going to make ends meet. Sooner or later, you’re going to run out of people to rob.
Really, they need me to be in charge and to rip up contracts and say “‘that was a ridiculous, unconscionable deal and we’re not honouring it. You’ve been lucky to have what you’ve had. We’ll pay you 2% above inflation and that’s a good profit. Now fuck off.”
After all, who are they going to complain to?