Following CBE’s awarded in the Queens Honours list to heads of PFI consultancies

Like the accountants Price Waterhouse Cooper, we now seem to have entered the era of the ‘enabling’ state which actively seeks private sector involvement "per se" in a wider and wider scope of its activities. As such it goes much further than outsourcing services, it has ‘…re-designed the functions of government so that business is directly involved in the provision of essential services.’ With it come statutory regulators who are supposed to monitor the service. The first question any ‘user’ should ask is:

Does it matter who delivers the service? Who is ultimately accountable for failure to deliver?

In the case of Network Rail successor to the failed Railtrack, the taxpayer and the shareholders have paid a high price to remove the profit motive from an organisation that never valued safety before profits. If the only expectation was that it would be completed better than the state could deliver that would be a straightforward matter. The reality is that it could be better it could be worse or more often truly abysmal, and we aren’t consulted anyway. It was not part of any election manifesto that I can remember that PFI would be continued, even extended by the incoming Labour government. Clearly though it has expanded – from a value of £7Bn in April 1997 to nearer £25Bn in October 2000.

A major aspect of the process is its secrecy – from commercial confidentiality through to ‘revolving doors’ where industry chiefs become regulators. This happened recently when a former Virgin Trains manager went to work for the Strategic Rail Authority who compensate Virgin Trains for lack of availability of improved track.

It was interesting to read – in the Sun of all places – that Network Rail now actively seeks members of the public to become involved - when previously the profit motive ruled out any involvement from those with knowledge and experience in Railtrack that it replaces.

Clearly the State has used various mechanisms to curb public expenditure and force uptake of ‘partnerships’ with the private sector. It is also clear that this is only a game in which big boys can apply as capital and borrowing requirements are massive on the sort of sale and leaseback type contracts – contracts are all for £100 million plus. Policy making has been centralised and competition regimes, laid down in the outline business case are hurdles designed to militate against public expenditure, with long term contracts and some responsibilities. Of course, when things go really pear-shaped as they have for Jarvis at Hatfield the taxpayer still picks up the bill. Users are converted to customers, often with loss of previous rights or accountability, as for example tenants in council housing (102 towns have held ‘stock transfers’ so far), or employees with decimated pension entitlements.

Trouble at Mill

However, there is every sign that the process is faltering as now some of the company players, led by AMEC, are sounding warnings that it is not as profitable as they once thought. Last month, AMEC warned it might pull out of the bidding process because of its ‘slowness’. With 8 contracts in hand, that might sound odd. The company claim that they are spending £5 million a year on the paperwork and it takes too long.

A further nail in the coffin is a government QUANGO called CABE. This is a regulator of building standards in the once ‘public’ sector. Six months ago it delivered an apparently damning report to the Treasury on the poor standards of design and construction which the PFI process has delivered on a number of large projects. It has still not been published.

The Long-term…

No wonder the service economy is so successful in this country – but if it is all a form of hire purchase are we going to generate enough wealth to pay it all back?