Liebrary: PFI saves us virtually nothing, if you believe the NAO’s figures. If you believe the Commons Treasury Committee, it costs us a vast amount that nobody has yet quantified

Private Finance Initiatives (PFI) were first used by the Conservatives in 1992, were enthusiastically embraced by Labour when they came into power in 1997, and continue to be cuddled and kissed by the coalition government of 2010. PFI involves the government entering into contracts with the private sector, where public infrastructure (hospitals, schools etc) are handed to the private sector for development and management and effectively rented back. A report by the National Audit Office (NAO) helpfully explains this:

"The private finance initiative (PFI) is a way to finance and provide public sector infrastructure and capital equipment projects. Under a PFI contract, a public sector authority pays a private contractor an annual fee, the ‘unitary charge’ for the provision and maintenance of a building or other asset. The unitary charge may also cover services such as cleaning, catering and security in relation to the asset."

Government ministers of all odour promised better services and greater savings from PFI. The reality, stated in a House of Commons Treasury Committee report in 2011 is very different:

"Private finance has always been more expensive than government borrowing, but since the financial crisis the difference between the costs has widened significantly. The cost of capital for a typical PFI project is currently over 8%—double the long term government gilt rate of approximately 4%. The difference in finance costs means that PFI projects are significantly more expensive to fund over the life of a project. This represents a significant cost to taxpayers."

The same Treasury Committee report complained that analyses justifying PFI contracts made unjustifiable assumptions without which the contracts would never have been signed. These included:

• Understating the internal rate of return (IRR), i.e. the profit the private sector partner would extract.
• Overstating the cost of the government simply borrowing money to pay for capital investment, instead of paying rent to a private sector partner
• Underestimating the whole life cost of the contract.
• Overestimating the cost of keeping the work in the public sector
• etc. etc.

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U-turn: Osborne will, after all, cap the cost of payday loans. What’s made him change his mind?

Fee and Chris explain it all to KJ...

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Rip-off News round-up. Our pick of the last week's media (Thu 28th November)

Energy row erupts as winter deaths spiral 29% to a four year high of 31,000

Campaigners say Government should be "ashamed" as official figures reveal thousands of over 75 year-olds perished in Britain during the coldest winter for nearly 50 years. Dot Gibson, national secretary of the National Pensioners Convention, said "How can colder Scandinavian countries avoid this annual toll while we simply wring our hands?” Ed Matthew of the Energy Bill Revolution campaign group said it was mystifying that Germany could "retro fit" a quarter of a million homes a year while in the UK only 219 homes had been insulated under the Government's 'Green Deal'. The figures came a day after Ofgem, the energy industry regulator, said profits at residential supply arms of the Big Six energy suppliers leapt 75% last year after a near 20% increase in gas and electricity prices. TELEGRAPH

Hospital A&Es swamped by 500,000 elderly diverted from failing community care services

Half a million elderly people a year are being unnecessarily admitted to hospital as emergency patients because of stark failings in community care, an official Government report has warned. Almost one in 10 over 75s had been taken to hospital with avoidable conditions – a rise of over 20 per cent in just five years. The conditions include malnutrition, pressure sores and urinary tract infections. The findings suggested that some GPs, care homes and community health services were failing to treat vulnerable people “in the way they deserve”. Inspectors found safety concerns in one in five nursing homes. Problems included failing to give out medicines safely, not carrying out risk assessments and understaffing. The report also identified a link between high staff turnover and number of reported deaths of residents. INDEPENDENT

U-turn: cap on Payday loans unveiled by George Osborne

Announcing a major and politically significant U-turn, George Osborne said the cap on the overall cost of credit was the next logical step as the coalition sought to regulate what had been a wholly unregulated market. The timing of the U-turn led observers to conclude that politics as much as policy had driven the decision. Both the government and the regulator the Financial Conduct Authority (FCA) had been resisting the move despite strong pressure from Labour and individual Tory MPs eager for their party to be doing more to be seen on the side of hardworking people. Only last month, the FCA said there was no need for a cap and the issue had been referred to the Competition Commission for further discussion. GUARDIAN

Half-blind woman crippled with back pain killed herself after benefits bosses stopped her disability payments - following a TWO MINUTE assessment

Despite being in almost constant agony, Jacqueline Harris, 53, was told she was told fit for work in November 2012 following a Government health assessment. Widow Ms Harris was only able to walk with the aid of sticks after she suffered slipped discs in her back and neck. Her sister Christine Norman says arthritic Ms Harris was asked just one question in the 'lightning-speed assessment', carried out by private firm Atos Healthcare. Mrs Norman said they asked her one question: "Did you get here by bus?" Jacqueline replied with one fateful word - "yes". Her assessment lasted just two minutes. In January her benefits were stopped. But Ms Harris had contested the ruling and her first appeal against the decision failed.  A second Department for Work and Pensions tribunal hearing in Cardiff was due to take place on November 15. However, Ms Harris was found dead at her home on November 2, having taken a suspected overdose. DAILY MAIL

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Graphs at a glance: the regional impact of excessive debt

In November 2013 The Money Advice Service, set up by the UK government, released a report on the debt burden. The report states:

Across the UK approximately 8.8 million people are over-indebted. These are individuals who have been at least three months behind with their bills in the last six months or have said that they feel their debts are a heavy burden. This large and diverse group represents 18% of the UK adult population

Most startling is the concentration of debt stress in certain cities and certain regions. In areas more than 4 in 10 people (more than 40% of the local population) are over-indebted.

Money Advice Service

It may also be surprising that only 1 in 5 (20%) of over-indebted people are those dependent on benefits. The great majority are working people earning salaries.

Money Advice Service

It is said that a drowning man will grab at any straw. "Austerity" is the straw our government enthusiastically waves like a cheer-leader's baton because it is not their own voters who are drowning.

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RBS accused of making money by forcing small and medium-sized businesses into bankruptcy

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Graphs at a glance - Who do MPs represent? What did they do before becoming MPs?

In an earlier post we published graphs showing the unrepresentative number of private school and Oxbridge types among our MPs. One could argue that going to private school and Oxbridge is largely an accident of birth. Your parents need to be able to afford the fees to get into private school, and that gives you a great advantage getting into Oxbridge (UK students from private schools (6% of all students) make up 42.5% of undergraduates at Oxford and 36.7% at Cambridge). 

On the other hand, what you choose to do for a living is down to you.

According to a Parliamentary report, there has been a great leap forward in the number of "political organisers" (local politicians and other political creatures) becoming MPs. At the same time there has been precisely equivalent collapse in the number of people the report classes as 'manual workers'. 

Former "political organisers" now outnumber those coming from other professions as follows:

• 10 times more political organisers than doctors
• 3.7 times more political organisers than school teachers
• 2.8 times more political organisers than manual workers

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Liebrary: Does Government "Help To Buy" help house buyers on modest incomes get 95% mortgages? Shelter, the housing charity, reveals that people on average incomes can't actually afford repayments on 95% mortgages

UPDATE JAN 2017: One of the government's flagship home ownership programmes, the Help-to-Buy Mortgage Guarantee scheme, ended on 31st December 2016. It has helped more than 100,000 individuals or couples onto the property ladder. The Council of Mortgage Lenders said it had worked "exceptionally well", making mortgages more available when it started in October 2013.

However Shelter argued that the scheme helped to push up house prices, and only helped those who needed little or no help. They said: “Drawing on official statistics and analysis, this research finds that Help to Buy has added around £8,250 to the average house price. In other words, it has helped a small number of people to buy, at the expense of worsening the overall affordability crisis for everyone else.”

Meanwhile, the Tory’s more recent 'affordable' starter homes programme kicks off in 2017. But Shelter points out that these “affordable homes” will cost up to £450,000! No doubt the perverse results will be the same. READ ON...


The Conservative led government's "Help To Buy" provides £12 billion of guarantees allowing people to buy houses with just a 5% deposit. This government guarantee enables them to take out a 95% mortgage. 

We pointed out in an earlier post that this subsidy is available to people buying homes for up to £600,000 - i.e. not aimed at those on modest incomes, nor at first-time-buyers.

We were scolded by some, who said that while £600,000 was the upper limit the subsidy was also available for those on modest and low incomes aspiring to less than a 4 bedroom detached house in Surrey. 

Shelter's "Homes for Forgotten Families" report

A report by the housing charity "Shelter", released in August 2013 shows this is actually not the case.

Their report shows that in almost three quarters of England families on an average (median) income could not afford the repayments on a 90% mortgage (let alone a 95% "Help To Buy" mortgage) for an average 3 bedroom home in their area.

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Tory leak says the prime minister is going round Number 10 saying: 'We have got to get rid of all this green crap!'

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Rip-off News round-up. Our pick of the last week's media (Thu 21st November)

Government admits fiddling figures to hide failings of fit for work test

Work and Pensions Select Committee member Sheila Gilmore MP has today revealed that the number of sick and disabled people wrongly declared ‘Fit for Work’ by a Government benefits test could be far higher than previously thought. This followed a letter from Tory Work and Pensions Minister Esther McVey in which she admitted figures are ‘not clear’ and promised to ‘ensure greater clarity in future’. Gilmore said: “Up to now we thought that the assessment was getting about one in ten fit for work decisions wrong – far too many in most people’s eyes – but now we know the Government have been fiddling the figures, the reality could be much much worse.” SHEILA GILMORE MP

Top Executive pay rises by 14% as awards linked to shares soar

FTSE 100 executive pay increased by 14% last year to £2.1m.  Companies are accused deflecting public scrutiny of directors' spiralling pay by moderating rises in the well known and more widely quoted salary and bonus figures, but quietly increasing share-based awards. While basic salaries rose 4.1% and annual bonuses fell by 8.8%, the total pay package for an average FTSE 100 director rose sharply by 14% through a 58% surge in the value of long-term incentive plan (LTIP) awards being cashed in. Latest labour market statistics show average UK annual wage increases of 0.7%. Frances O'Grady, TUC general secretary, responded: "The time has come for legislation to put ordinary workers on the pay committees of companies. This is the only way to bring some sanity to the way in which directors are paid." GUARDIAN

Boris Johnson says super-rich are ‘put-upon minority’ like homeless people and Irish travellers

Mr Johnson accused “everyone from the Archbishop of Canterbury to Nick Clegg” of bullying the group he defined as “zillionaires” – and said the most rich of all should receive “automatic knighthoods”. INDEPENDENT TELEGRAPH

JP Morgan Chase agrees record $13bn settlement in the US over toxic mortgages, and opens door to criminal prosecutions

The fine in the US, the biggest civil settlement with any single company, ends several investigations and lawsuits brought by the US authorities related to the sale of home loan bonds between 2005 and 2008. Crucially, and unlike settlements and fines in the UK, the bank’s admission of wrongdoing is a major victory for the US Justice Department. Banks have fought shy of such statements fearing yet more legal actions from investors. The settlement leaves open the possibility of potential criminal charges. While this agreement ends a troubled chapter for the bank, other issues remain. A criminal investigation of the bank over mortgages will continue. The bank is also under scrutiny for its hiring practices in China, its massive “London Whale” trading losses and its relationship with Bernie Madoff, the Ponzi scheme fraudster. GUARDIAN

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At the lavish annual Lord Mayor's Banquet, Cameron says Britain needs cuts. Permanently

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Graphs at a glance - Who does Parliament actually represent?

As we watch the government make our lives harder with cuts in pay, pensions, benefits, the creation of 'two tier' services and generally soaring inequality we tend to forget that it is we who put them there. They are not our rulers, they are our representatives.

Rulers rule in their own interests. They hold their power and wealth by force of law and arms. The spoon belongs to them, and they ladle out goodies to whom they wish.

Representatives in a democracy rule in the interests of those they represent. They hold their power because we give it to them in elections. The spoon belongs to us, and we trust them to ladle out goodies in all our interests.

Inevitably, whether it is Ruler or Representative holding the ladle, it is the closest people who get served most generously and those furthest away who get the dregs.

We provide some graphs using data from a House of Commons report to show who is closest to our representatives in Parliament. Perhaps they provide a clue why successive Tory and Labour governments have steered Britain back to Victorian levels of inequality:

a) According to Department of Education data, just 1% of England's school leavers in 2009/10 went to Oxbridge, compared to a quarter of MPs. 48% of England's school leavers did not go to university at all.

b) 6% of children are privately educated. In contrast, over half the Tory MPs and over a third of all MPs from the three main parties went to private schools.

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On election, Cameron said the cuts were temporary, and not ideological. Now he’s saying they’re permanent, and ideological

Chris meets an enthusiastic supporter of the lean state...

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Rip-off News round-up. Our pick of the last week's media (Thu 14th November)

Has Cameron just admitted Austerity is a cover for permanent cuts?

David Cameron said, in his speech at the Lord Mayor's Banquet, that the government is to forge a "leaner, more efficient state" on a permanent basis. He signalled he had no intention of resuming spending once the structural deficit has been eliminated. This is a clear change to claims made after the last general election. In his New Year's message issued on 31 December 2010, he said: "I didn't come into politics to make cuts. Neither did Nick Clegg. But in the end politics is about national interest, not personal political agendas. We're tackling the deficit because we have to – not out of some ideological zeal. This is a government led by people with a practical desire to sort out this country's problems, not by ideology." GUARDIAN DAILY MAIL

Energy customers are not “cash cows”, says Energy Secretary

Lib Dem Energy Secretary Ed Davey said: "Profits cannot come at the expense of the elderly, the vulnerable, and the poorest in our society. Customers are not just cash cows to be squeezed in the pursuit of a higher return for shareholders." He asked the energy firms to open their books to prove they were not just profiteering. But industry body Energy UK complained that a "tit-for-tat Punch and Judy show of insults" was developing. BBC NEWS

UKFI (responsible for our stake in the bailed-out banks) refuses to cut bonuses at RBS and Lloyds

Robin Budenberg, chairman of UKFI, told the Treasury Select Committee that the proposed reductions were not ‘commercially acceptable’ and had stepped in to limit the cuts. RBS and Lloyds were bailed out with £66billion of taxpayers’ money and are now part-owned by the taxpayer. Pay curbs at RBS and Lloyds have limited cash bonuses to a maximum of £2,000. But many have still received handsome share bonuses and long-term performance-related payouts. Last year 95 RBS staff were paid at least £1million, despite the bank slumping to a £5.2billion loss. The equivalent figure at Lloyds was 25. DAILY MAIL

Benefit caps and housing shortage push families from London

Figures show 129% rise in number of families housed by London boroughs outside capital, more than double the same period last year. Figures for the 12 months to June 2013 showed that 789 households were placed in 69 local authority areas outside London, including Manchester, Bedfordshire and Hastings. GUARDIAN

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Bedroom Tax: Cuts to the Spare Room Subsidy (might!) save £470m. But the new Help To Buy subsidy costs £12bn. That means it’s not about cutting the deficit

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The Home Office's GREAT Club helps top foreign business executives avoid...what exactly?

In November 2013 the Home Office launched a GREAT Club. Yes, the capitals in GREAT and C are appropriate - the name of the club is "GREAT Club", as you will see from the Home Office press release below. Clearly the Home Office has access to some really great minds to think up a great name like that. Or have they mispelled GREET, as in greeting visitors to the UK? Or perhaps GREED, as in greedy (see hypothesis below)?.

Anyway, the birth of the GREAT Club was proclaimed in a Home Office press release is:

"the launch of the GREAT Club, an invitation only service providing top business executives with bespoke support from UK Visas and Immigration (UKVI). The Club will start in the New Year as a 12 month pilot aimed at around 100 global business leaders who use the visa service and have strong links to the UK. They will be provided with an account manager to ensure their journey through the visa and immigration service is swift and smooth. The account manager will also be able to arrange visa services tailored to each individual’s needs at no extra cost during the pilot."

Now I suppose the immigration process can be frustrating. But you can be pretty sure that the 100 "top business executives" invited to join the GREAT Club will be well served by their own Personal Assistants, and their Personal Assistants' Personal Assistants (when you get to be PA to a truly top executive you don't have to make your own coffee) to lap up all the tedium and frustration of the visa application process. The Home Secretary won't be finding prospective members to invite into her exclusive GREAT Club sitting on their suitcases in Heathrow.

The reason top business executives shift their businesses to the UK has little to do with how easily they themselves can pass through immigration. It is not to avoid the inconvenience of getting a stamp in their own passports that they hesitate from relocating. However, there are other things they may be more keen on avoiding that may lure them to our shores.

And here we are persuaded to show some sympathy for tax accountants. This is not without precedent - Ripped-off Britons has already been nice to estate agents and to bankers. Now we consider the plight of the tax accountant.

The poor things are getting beaten up by MPs for helping their clients through dodgy-but-legal loopholes. And then they are getting beaten up and severly fined by a High Court Judge for not helping their clients through dodgy-but-legal-at-the-time loopholes.

First, here's the sort of beating they get from MPs from a session of the Public Accounts Committee (PAC) of the UK Parliament looking into tax avoidance schemes. In this session MPs questioned Aidan James, a director of a tax consultancy advising those who want to avoid tax:

Q103 Ian Swales: How many of the schemes you have marketed are now illegal?

Aiden James: Most of them.

Ian Swales: Most of them?

Aiden James: All of them, I suspect.

Q104 Ian Swales: All the schemes you have marketed are now illegal, so you are now looking for the next loophole-is that a fair description of your business?

Aiden James: That is how it works, yes.

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Cameron said 25% of the budget to build the new Universal Credit IT system would go to Small/Medium-sized businesses (SMEs). So far it’s 1%

KJ, Fee and Chris know why...

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Rip-off News round-up. Our pick of the last week's media (Thu 7th November)

More than 5 million people in the UK are paid less than the living wage

The number of those earning below the cost-of-living benchmark has risen 400,000 in a year, with women and the young worst hit. A report for the international tax and auditing firm KPMG also shows that nearly three-quarters of 18-to-21-year-olds now earn below this level. Women are disproportionately stuck on pay below the living wage rate, currently £8.55 in London and £7.45 elsewhere. Some 27% of women are not paid the living wage, compared with 16% of men. Part-time workers are also far more likely to receive low pay than full-time workers, with 43% paid below living-wage rates compared with 12% of full-timers. The charity Save the Children says the number of children living in families with earnings below the living wage has risen from 1.82 million in 2010-11 to 1.96 million in 2011-12. The charity said it was increasingly concerned that 1.7 million households struggling with low incomes would have even lower entitlements under the government’s new universal credit welfare reforms. GUARDIAN

Cable: “Extraordinary anomaly” that foreigners are exempt from paying capital gains tax on second homes

UK citizens typically have to pay capital gains tax - a levy on any profits made when an asset is sold - on non-primary residences, including holiday homes in the UK or overseas and buy-to-let investments. But foreigners are exempt from paying tax on second home transactions. Capital gains tax for high-rate UK taxpayers was raised from 18% to 28% in the 2010 Budget. Mr Cable said it was an "extraordinary anomaly" that UK citizens were liable for the tax but foreigners were not. BBC NEWS

The middle class debt meltdown: Toll of wealthy professionals in financial trouble rockets by a quarter in four years

The middle classes are plunging into debt problems faster than any other social group – and it will only get worse when interest rates rise. A leading debt recovery agency, Capquest, has revealed a staggering 25% surge in the past four years among more affluent people ending up on its books, including professionals and property owners. Both Citizens Advice and the Financial Ombudsman Service said they have been shocked by the rise in middle class families in difficulty. Citizens Advice chief executive Gillian Guy said: ‘The squeezed middle are finding that they can’t keep on top of their financial commitments... As employment floundered, workers were forced to take jobs that paid less and they’ve been unable to reverse that trend.’ Unsecured consumer debt is running at an estimated £322bn, and rising. DAILY MAIL

HS2 report overstated benefits by six to eight times

A KPMG report claimed the high-speed rail project would bring £15bn in additional benefits to the UK. But the findings, widely cited by the government used a method for estimating this figure that was "essentially made up", said Henry Overman, professor of economic geography at the LSE. Overman was an adviser to HS2 Ltd until 2012. Earlier, the KMPG partners who produced the report defended their work to MPs as robust, but admitted it was produced over four months for a total fee of £242,000. Committee chair Andrew Tyrie asked: "You don't normally do work of this scale for a couple of hundred thousand do you?" KPMG's Richard Threlfall replied: "We didn't quite anticipate the degree of debate the report would create." GUARDIAN

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The cost of infrastructure: Big Corporate has become the government's tax collector

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Graphs at a glance: Tax Freedom Day, over the last 50 years the tax burden under Labour has been lower (gasp!) than under the Tories

It is commonly assumed that the Labour Party is more into taxing us than the Conservatives. Perhaps it is down to assumptions about redistributing wealth and maintaining public services - Labour assumed to want more, Tories assumed to want less.

The raw data shows something different.

According to figures compiled by the Adam Smith Institute, taking the average over the last 50 years the nation has had to work 11 days longer to pay off our taxes under Tory governments than Labour! Crumbs!


I wonder how that could be?

Graph updated to include 2015

"Tax Freedom Day" calculates all the taxes taken by the government as a percentage of net national income, and then applies that percentage to the calendar year. It purports to give an indication of how long all our nation has to work to pay all the taxes, after which we are working for ourselves.

[We are grateful to @Zenarchy1 for bringing this data compiled by the Adam Smith Institute (who promote libertarian and free-market ideals, so not likely to bend the statistics to favour the left) to our attention].

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Both Cameron and Miliband promise to stop billions in corporate rip-offs. Oh yeah?

Fee, Chris and KJ try not to forget the oldest marketing trick in the book...

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