Spending Public Money

The coalition government in Westminster has apparently been approached by 22 'health trusts' south of the border - claiming that services are being undermined by the cost of PFI/PPP contracts.

PFI (Private Finance Initiative) contracts started up under the last Conservative government - and were re-branded as PPP (Private Public Partnerships) the New Labour government - which came to power in 1997.

But essentially they are the same thing - paying for major hospital developments by raising finance from the private sector - and paying up the cost over say 35 years - in a similar fashion to a mortgage.

Most of the new hospital and school building programme carried out under the last Labour government - were financed under PFI/PPP.

Anyway back to the 22 improverished health trusts in England - which between them run more than 60 hospitals and care for 12 million patients - who say that patients services are being adversely affected by the cost of their PFI/PPP contracts.

If the contract has been badly drafted and represents poor value for money - it may be possible to renegotiate some of its terms - or extend the life of the 'mortgage' so that the cost is paid back over a longer period.

The problem is - or was at least - that many public sector organisations lacked experience in this area - and the expertise required to ensure that public purse was not being ripped off.

So it will be interesting to learn which contracts get named and shamed.

If the contractors involved are still in business - they have a great incentive to try and fix the problem - otherwise I suspect they won't do too well - when it comes to bidding for other publicly funded works.

That's what I would tell them anyway.

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