Christmas and the PFI Scrooge
The curious case of the Treasury Christmas tree sounds like a cheery festive fable, but is in fact the stuff of financial nightmares. It began when George Osborne, the Chancellor, ordered his civil servants to buy a £40 tree to adorn their office in Whitehall. They discovered, however, that this was not allowed under the terms of a Public Finance Initiative (PFI) contract, signed by Gordon Brown when he was Chancellor to raise cash to refurbish the Treasury building. Dozens of public infrastructure projects, such as hospitals and schools, have been built or renovated using PFIs, which typically spread repayments over 20 or 30 years.
Doubtless this method of public financing sounded like a good idea at the time; but the country has been landed with costs that far exceed the value of the assets. It is estimated that £260 billion is owed for the provision of £60 billion of investment. In addition, decisions about spending on fixtures and fittings are taken by contractors. So when the Treasury asked for a Christmas tree to be delivered, it was presented with a bill for £875 – at which point Mr Osborne stepped in and demanded something cheaper. After much huffing and puffing, the supplier agreed to donate a tree for free, but declined to decorate it.
Stories like this are legion. Jesse Norman, the Tory MP for Hereford, recently told how his local hospital was charged £963 to install a TV aerial. Other public bodies have been billed hundreds of pounds simply to change light bulbs. Since they don't own the buildings, they are over a barrel. Maintenance charges can be colossal, and simple improvements, such as putting up a shelf, can lead to a bureaucratic rigmarole requiring weeks of consultations and "risk assessment".
Mr Norman has now launched a campaign to get PFI contractors to reduce their contract fees by 0.05 per cent, which would save about £500 million as a contribution to the public sector austerity drive. The Chancellor is sympathetic to this idea – though whether the contractors are willing to renegotiate their lucrative deals is another matter.
But this is not just about the PFI initiative, which is only one of the more egregious examples of the insanely profligate way in which we run our public services. Yesterday, Eric Pickles, the Communities Secretary, announced that local authorities in England and Wales will be expected to make average real-terms savings of 4.4 per cent next year, and about the same in coming years. From the reaction of some council leaders, the unions and the Labour Party, you might have thought this the greatest act of municipal vandalism since the Blitz. It has been described, with a singular lack of proportion, as an "apocalypse", which must lead to the shutting down of libraries, the slashing of social care, roads going unrepaired and rubbish uncollected. The country will be plunged into a dark age of shoddy services, filthy streets, high local taxes and angry residents (no change there, then).
But even if the biggest cuts will be at the start of the process, essentially Mr Pickles is only proposing to peg council spending roughly to what it was in 2006 when, if memory serves, there were libraries, care homes and binmen. Why all the bleeding stumps, all the shroud-waving, all the talk of front-line service cuts, when such modest spending restraint is being suggested?
The reason is that the most startling development in local government in recent years has not been the expansion of its services, but of its management and so-called support staff. Indeed, this is true across the whole of the public sector. Extra tiers of bureaucrats were brought in to administer the last government's mad, target-based approach to service delivery.
As a consequence, the costs of providing services shot up, while productivity declined because front-line workers such as health visitors and police officers had to spend so much time ticking boxes and filling in forms. This process was massively expensive. The public sector payroll ballooned by nearly a million and the new cadre of administrators sought to justify their existence by imposing ever more onerous requirements on front-line employees.
Now the party is over – but these very people are being asked to carry out the cuts. Understandably, they are inclined to regard their jobs as more important than those of the people who actually perform the services.
Andrew Lansley, the Health Secretary, intends to take almost £2 billion out of administration costs in the NHS, yet a recent survey of doctors found that managers are chopping front-line care while recruiting "change facilitators" and "sustainability officers". Salaries for performance support officers, staffing resource facilitators and website editors often exceed £40,000 – twice that of a junior nurse.
Ministers are adamant that the cuts can be made without hurting the services that the public is happy to pay for. They believe it is possible to deliver more for less – and they are right, because so much spending in the public sector is unproductive and wasteful. The problem is that managers are reluctant to admit that the functions that are needed least are often their own, and are therefore tempted to whack the front-line first, whatever ministers and the public want. As the saga of the Treasury Christmas tree demonstrates, it can be hard to save even a few hundred quid when so many vested interests are at stake.
TYCOONS, HOOKERS AND OUR COUNCIL FATCATS PARTY IN CANNES
A host of British low
life level politicians, town hall fat cats and quangocrats recently four days wining and dining business tycoons and ladies of negotiable affection at the world’s biggest property fair in Cannes, Southern France. The Coalition government's Minister for Sport, Hugh Robertson was the most senior of ...