From WHAT MATTERS-58 � February 23, 2002

The Naked Truth

- about the "rebelliousness and destructive mania" (Freud) driving boy George, Kenny boy and the other boys to cannibalise the US and world economies.

The E-letter will be posted as an article at http://www.whatmatters.nu/nakedtruth.html

We need to be careful about calling Bush another Hitler, albeit a smiling Hitler. Of course, there is something to it, but

there are also real differences.

Hitler was a national socialist with a message of employment, progress and prosperity for the people - and he delivered autobahns and VWs.

Now that the air is sick with the fumes from too many motor vehicles on too many motorways in the over-developed North, we have the spectacle of Bush delivering a message of hard times ahead, on behalf

Fraudulent risk costing is not the only means by which private finance is made to look as if it works. As the ACCA points out, the government allows public bodies to reclaim the VAT on privately funded projects, but not on publicly backed schemes, thereby favouring private finance by 17.5%. NHS trusts have to pay the Treasury a 6% "capital charge" on the buildings they own. Private builders have no such obligation. The government gives local authorities an annual grant of 11.5% of the value of the PFI schemes they commission, but there is no corresponding sweetener for publicly-funded projects. Private financiers are permitted to use "discount rates" way out of line with inflation.

This false accounting masks the appalling value for money offered by private finance. As the BMJ report shows, 39% of the price of PFI hospitals is incurred by the extra cost of borrowing. Governments have a better credit rating than corporations, so they can borrow more cheaply. As interest is levied across the 25 or 30 years of the project, small differences in rates contribute vastly to the cost.

So why is the government forcing public bodies to fleece the taxpayer? In 1997, it claimed that the purpose of the private finance initiative was to reduce government borrowing. But PFI does not reduce borrowing: instead it defers and extends it. In opposition, Labour was keenly aware of this deception. Alastair Darling, for example, observed that "apparent savings now could be countered by the formidable commitment on revenue expenditure in years to come." Mr Darling is now transport secretary, partly responsible for implementing Britain's most controversial PFI scheme: the handover of the London Underground. The public budget, moreover, has been in surplus throughout Labour's term in office: all our privately financed schemes could have been funded many times over from public accounts.

This also disposes of the next excuse the government made for PFI: that it can commission more projects by this means than by public funding alone. Now ministers tell us that PFI makes sense because private managers are more efficient than civil servants. Unfortunately, the available evidence suggests that while they are extremely efficient at making money, they are rather less efficient at running public services. The first few PFI hospitals to open have all been beset by disasters caused by cost cutting: the Cumberland, the North Durham and the Hairmyers hospital in Strathclyde, for example, have been repeatedly flooded with sewage as a result of inadequate drainage systems.

So only two possible explanations remain, neither of which could be said to reflect well upon this government. The first is that it is appeasing the corporate lobby groups whose members are becoming wildly rich at public expense. The second is that it is deferring costs it would otherwise carry to future governments, enabling the Chancellor, paradoxically, to sustain his reputation for prudence by maintaining a vast budget surplus. If the maturation of the schemes this government has commissioned coincides with either a recession or a serious budget deficit, then PFI has the potential to bankrupt the United Kingdom.

This article contains nine serious and specific charges of public fraud and false accounting, commissioned and directed by the Treasury. So, as there is no other means of holding the government to account on this issue, let it take the form of a challenge. If any of these charges is false, the Chancellor of the Exchequer can use these pages to repudiate them. If he fails to do so, our readers should conclude that he has no defence to offer.