Thanks for the explanation......but if it ends up costing more in the long term......why do it?
Because it's the only way that governments can make ends meet now. They sold off all the "state industries" during the Thatcher days to raise money, some went for a song. Maybe the most obvious was privatisation of the rail service, which is already costing the taxpayer an arm and a leg in subsidies to the operating companies. They have no industries left to sell, so they are selling other state owned assets and renting them back at vastly inflated costs (e.g. the HM Revenue and Customs real estate was sold to an offshore company), or getting private companies to build new hospitals then leasing them back. That way, capital projects (hospitals/schools etc) can be initiated now, which is what they want/need, and paid for later. In the services, and I stand to be corrected, many of the logistics operations and other ancillary operations are now carried out by private companies (e.g Halcrow move tanks, ALL services training is about to be handed to a private company). There are some very dodgy accountancy processes whereby a new PFI project is justified (versus maintaining the status quo). The real costs of PFI kick in later, so in years to come 1) the state will own no assets and 2) there will be an enormous debt burden to sustain. However it's all Good Stuff for the Chancellor, as the cost of PFIs somehow goes off the balance sheet and therefore keeps government debt below the magic 40% of GDP (currently £35bn is "off balance sheets", and rising). Many hospitals are having to lay off staff and defer other projects in order to service their PFI debts. And lastly as an example, the HM R&C deal mentioned above was initially costed at £1.5bn, over 20 years. It's recently been confirmed that it will now cost £3.4bn, before inflation. No wonder there is a healthy market in buying and selling existing PFI deals.
btw I am no expert on this stuff. I'm sure there is another side to the argument, and I this is not anti-Labour - the Tories started PFI.
I really should get out more...
