Just when you think it can't get any worse you find out that you are wrong. Brown took to fraudulent accounting like a duck to orange sauce. He calls it Privatization. When Maggie did it to BT Labour moaned loud and long about selling off the family silver. Her work has lasted well. Brown's approach is a system of post dated cheques which will be paid off eventually by our children and theirs.
This particular disaster is about flight refuelling for the RAF. It is not quite as easy as putting a Jerry can and hose pipe in the back of an aircraft but when the price goes over a billion it is obvious that we are being ripped off big time. Given that advisers are being paid £27 million to get it right they should be in prison along with Brown. This is to ignore other, more satisfactory options like hanging, drawing and quartering.
Private Eye 1260/28
EADS you lose
There is no more fitting symbol of 13 years of financial mismangement in Whitehall than the 27-year deal to lease air-to-air refuelling and troop transport aircraft from the Airtanker consortium led by the European defence company EADS.This long-running PFI disaster is now the subject of a damning National Audit Office report and it does not make pretty reading.
Back in 1997 George Robertson identified the need for a new fleet of in-air jet refuelling aircraft. Three years later. told that paying for these in the normal way would cost £1 billion over four years, his successor Geoff "Gissa Job" Hoon plumped for a PFI deal that would cost more over the long term but have less impact on immediate finances and so for political expedience could be deemed "more affordable"
As things stand however, thanks to the PFI the Ministry of Defence has ordered warplanes that can't actually fly into war zones and safety has taken a back seat. Sources close to the deal tell the Eye that when aircraft were exposed to Serb surface-to-air missiles during the Kosovo intervention in 1999, pleas from the military for "defensive aid suites" to be added to the new Airtanker craft were refused by the Treasury and Ministry of Defence officials since they would be unsuitable for the private charter flights that PFI suppliers would want to use the planes for when the forces did not need them. A few years on Afghanistan shows that they are indeed necessary and the MoD faces an extra bill for hundreds of millions of pounds to adapt the new aircraft.
To justify the use of PFI, the mother of all accounting fiddles was deployed. Under Treasury rules when the value for money of the PFI deal came up for review in 2007, future leasing costs should have been discounted by 3.5 percent a year when comparing them with the cost of public ownership of the planes. Yet the Treasury allowed the MoD to use a long discredited and excessive discount of 6 percent, even though its senior economic adviser admitted that had the correct figure been used, in the NAO's words "the PFI solution would not represent value for money".
PFI meant huge additional complexity and delays too. By 2004, even the MoD project team recommended scrapping the deal, but still the MoD ploughed on. The cost is now put at £12.3 billion, payable at £390m a year, plus the MoD's own costs (just what a desperately stretched armed forces budget needs right now). Of the £390m just £80m is the annual cost of running the planes (£310 pays Airtanker's financing and its profit). Over 27 years, that's £2.2bn, which would with a non-PFI cost of buying the planes of £1 billion would have given a total of £3.2bn - around £9bn cheaper than the PFI alterative but magically made to look more expensive by Gordon Brown's Treasury-mandated fiddling.
Some have done well, of course, with £27 million paid to advisers on the deal years before a single plane takes off. The MoD's main consultant KPMG, the same firm that in 2007 produced a report for the Treasury saying that PFI worked well.
Had public ownership not been rejected, the £9bn extra burden would not existed - but the planes probably would. Three years ago the Eye (1188) reported that an EADS executive, asked by parliament's defence committee whether the PFI deal had proved "expensive in terms of money or in terms of time?" replied "all things". He Cited a non-PFI contract for Similar aircraft for the Australian forces. In three years, he said "we went from the proposal to seeing the contract: similar aircraft; a similar type of product." Instead British forces are stuck with what the NAO called "ageing and increasingly unreliable" planes for a while yet. And even when the new planes are delivered, success is not guaranteed: although the PFI contract between the MoD and the EADS-led Airtanker consortium is secret, the NAO reveals that "the payment mechanism contains a complex hierarchy of variables, requiring considerable expertise to master". So there's plenty of work for lawyers and consultants but no reassurance for the forces.
And the lesson for voters? Amid all the talk of waste-busting, no mainstream party promises to end PFI.
PS Just in case you think this is a one off rather than normal have a look at:-
GOVERNMENT COCK-UPS
AMID the electioneering little attention was paid to two major cock-ups exposed just before Easter which gave a fair picture of government by management consultant and banker.
Management consultants could be found swarming all over the Communities and Local Government Department's disastrous FiReControl (sic) project to convert 46 fire and rescue control rooms into nine regional centres. The project, reported a parliamentary select committee, was the brainchild of consultants Mott MacDonald but has since been mismanaged by armies of consultants from PA Consulting. The result is a scheme that has been "inadequately planned, poorly executed and badly managed".Costs have increased from a planned £120m to a predicted £423m, making the project around £240m more expensive than any other alternative...............
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