Thursday, February 12, 2009

Schools Refit Shambles Exposes PFI Sham

One of the greediest of Brown's economic policies, the PFI sham, is starting to eat itself, as a damning report on the government's over ambitious plan to refit every secondary school reveals it is up to £10 billion over budget and almost two years behind schedule. 

The schools scheme shambles exposes a shameful legacy of the New Labour years, as the discredited PFI scheme, used to help create the con of the boom years, comes back to haunt them.

The government's shambolic handling of its project to refurbish or rebuild every secondary school in England means it will now cost the taxpayer £10 billion more than planned. 

Figures for the school refit programme are staggering. According to the spending watchdog, the estimated cost of the BSF programme to rebuild or refurbish 3,500 secondaries in England by 2020 will be up to £55 billion - a 23% increase, £10 billion more than was estimated at the outset.

The government's flagship £45 billion school building programme was hailed as a cornerstone of the Blair years but even back in 2006 it was hit by delays, with Blair's delivery unit forced to  step in to get the BSF project back on course as the government continued its obsession with buildings of all style and no substance.

Ministers originally said that 200 schools would be open by December last year but by the end of last year - five years into the schools programme - just 42 schools had been built, instead of the 200 planned, according to the National Audit Office (NAO) report. 

The PFI and PPP schemes are one of the most shameful legacies of the New Labour years. 

Introduced by the Tories with strict warnings and controls, they were pounced upon by New Labour and expanded with almost religious zeal as a neat way of keeping public building works off the public balance sheet, as part of the boom con.

Cost calculations were fiddled with spurious weighting to always make the PFI scheme come out cheaper. 

But as the economic gloom of the recession sounds the death knell for the whole PFI fiddle, taxpayers  are set to be saddled with a new debt burden. 

Banks stopped providing funding for the schools in October as the recession set in and the government has sought emergency funds from the European Investment Bank to finance some buildings. 

Urgently need investment with still have to go through the fiendishly complex maze of the "building schools for the future" process but with investment now drying up, the only way to raise private cash is for government - and that means the taxpayer - to guarantee the bankers money. 

So the chancellor is set to burden the taxpayers with more off-balance sheet debt by guaranteeing bridging finance for PFI schemes, pretending it's all part of a soon to be announced multibillion-pound rescue package of building works, involving schools, hospitals and motorways.

It was always the idea that PFI meant the private sector should shoulder the risk. Now PFI deals at PFI rates means it's the taxpayer who takes the risk. 

The answer is simple. Just use public borrowing for public investment, it's quicker and cheaper. But the government is caught between the devil and the deep blue sea. The politically flattering PFI used to great creative accounting effect for the past 12 years cannot be scrapped, as to do so would admit failure. 

Still it's nice work if you can get it. Despite the problems, executives at Partnerships for Schools (PfS), the government agency that oversees the programme, received 11%-18% bonuses for meeting targets last year. 

It's not just schools and taxpayers who suffer in the PFI con. Hospitals in particular have being hardest hit and saddled with massive debt which will take decades to pay off as patients and services suffer. 

Banks now own the PFI contracts but after the bank bail-out, it's the taxpayer who has bought large shares in the deals in a whole raft of PFI/PP projects, which range from schools and hospitals to prisons.

Some 54 schools are due to open this year and 121 next year, under the Building Schools for the Future (BSF) programme but to meet the unrealistic target that will need to be doubled in the run-up to 2020. And there's fat chance of that happening.

The report concludes: "Original expectations of how quickly schools could be built were overly optimistic. PfS will find it very challenging to include all 3,500 schools in BSF by 2020."

'Overly optimistic' is one way of putting it. A hugely expensive, arrogant and shameful deceit to fool voters into thinking they were getting big, shiny new schools on the cheap, is another. Small is beautiful and that should apply to schools too.

UPDATE: Brown told MPs today the treasury is about to bring forward proposals to accelerate the scheme with 100 schools in progress. Big, unwieldy new secondary schools, paid for with a PFI debt burden for decades, without getting the basic teaching and resources right,  goes against the grain and the mood of the country.

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