Brown set up the private finance initiatives as a system of fraudulent accounting; one that might be criminal if committed by outsiders. Brown objected very loudly when Maggie Thatcher went down this road. She was selling the family silver and so on. Actually doing it to BT paid off quite well. It made the company interested in profit and better service. But when Brown got control of the trough he wanted expenditure hidden and financing from private firms so that he could waste more and hide the truth. This report on the humungous waste that was forced onto the Ministry of Defence is typical. It is megabucks every time unless, of course it is gigabucks.
This is from Private Eye 1255/28 They tell the truth. The rest? Believe them if you want.
DEFENCE HOUSING
TIMES are tough in the property game, where even the top suits are feeling the squeeze - but not if they are in charge of Annington Homes, the property company that gets its income from the desperately over-stretched defence budget.Recently- filed accounts for the company that owns Britain's dire military family accommodation (see last Eye) show that chief executive James Hopkins trousered £2.56m, including bonuses in 2008/09, more than 100 times a squaddie's pay and more than twice the basic wedge of even an RBS chief executive. The year before Hopkins earned £2.65m; and in ten years since joining Annington from Hanson plc he has raked in north of £ 17m.
Annington acquired £1.7bn worth of military housing from the Ministry of Defence (MoD) in 1996 in a deal that the National Audit Office found shortchanged taxpayers by around £140m. Under the contract Annington leases the properties back to the MoD (which still has to maintain them) even if they are empty, so guaranteeing Annington's income.
In 2008/09 this increased by 2.5 percent to £153m, despite a fall in the number of properties following earlier sales. This was because under the contract's generous ongoing rent reviews, payments to Annington were put up by 22 percent over the five years to 2007 (having been hiked by 48 percent up to 2002).
As part of its cushy contract Annington sells properties when the MoD judges them surplus to requirements, repaying the taxpayer a declining share of the profits, fixed at 15 percent last year. This arrangement has generally provided the MoD with around £10m a year; but in the sluggish housing market of 2008/09 it generated just £0.9m - the poorest year yet on an already dire deal.
This makes Hopkins' remuneration and the barely less generous deals of fellow directors Barry Chambers and Nick Vaughan, who together with the non-executives earned £7.7m, look all the more extraordinary. For example, the chief executive of Britain's largest private residential landlord, Grainger plc, which owns a similar amount of property and has a higher turnover but without anything like Annington's captive market, earned a fifth of Hopkins' wedge - a still healthy £0.5m -last year. The enormous Annington pay packets nevertheless seem to have passed muster with chairwoman Elizabeth Filkin, one time scourge of excess as a tough parliamentary standards commissioner (Eyes passim).
The rent paid out of the defence budget that doesn't end up in Hopkins and co's pockets is paid out to the ultimate economic owner of Annington, Japanese investment bank Nomura, removing all but a few pounds of taxable profit from Britain (and leaving a tax bill of just 0.1 percent of Annington's operating profit). Nomura's interest is managed offshore by Armington Management Guernsey Ltd, part of the Terra Firma private equity group whose directors are themselves the nominal shareholders of Annington's parent company, Le Grand Annington Ltd, and thus the legal owners of Britain's military housing.
The offshore management arrangements make the fees earned by Terra Firma from running military housing both secret and highly tax efficient, just like the personal tax affairs of its boss, Guy Hands. Last year he did his patriotic bit for fiscally-strapped Britain by moving to Guernsey in protest at personal tax rises.