THROUGHOUT the PFI saga the same faces and names kept coming up.
Like a soap opera, characters would appear, then vanish for a while, perhaps killed off as they fell out of favour with the government of the day, only to be resurrected later on.
Alan Milburn
One such figure is former Labour health secretary Alan Milburn. He famously summed up New Labour’s devotion to the PFI god: “It’s PFI or bust.”
Milburn began his political life as a student radical but later was to be the “epitome of Blairite centrism” in the words of New Statesman political editor George Eaton.
After a stint in a Treasury under Gordon Brown (below), he was promoted to health secretary, a position he held between 1999 and 2003. He was responsible for the creation of NHS foundation trusts and an advocate of their right to borrow private cash.
Brown at the time was against this, arguing it left central government on the hook for hefty sums without any say in potential risks trusts wanted to take on.
Although he was seen as something of a bright spark in the top Labour team and may have expected promotion, he decided to return to the backbenches.
Fortunately, his fall from the government payroll was cushioned by a £30,000 gig with the consultancy firm Bridgepoint Capital.
Bridgepoint Capital would go on to buy Leeds Bradford Airport from five councils in Yorkshire and private care firm Care UK, which made the bulk of its money in outsourced contracts from the state.
Milburn has since made a Dirty Den-style comeback, after a brief stint working for PFI-cheerleaders PwC, and will advise the new government on, ahem, NHS reform.
He’s recently been advocating to force people on long-term sick benefits back into work.
Capita
Capita was formed as part of the not-for-profit Chartered Institute of Public Finance and Accountancy and later became a separate company through a management buy-out led by its first executive chairman Rod Aldridge.
As the former name suggests, these were people who knew their way around a public sector balance sheet, something that would no doubt prove useful as the company grew alongside the Government’s increasing appetite for partnering the public with the private sector.
Capita took on the management of Lambeth council’s housing benefit system and other projects, which by 2003, had gone so badly wrong the BBC felt comfortable describing them without qualification as “disastrous”
Other projects it was involved in included running London’s congestion charge scheme, tagging prisoners, operating a telephone line for the jobseekers’ allowance scheme and administering the teachers’ pension scheme.
As luck would have it, Aldrige was close with Tony Blair and new Labour and even lent the party a cool £1 million before the 2001 election. He rejected claims the dosh had helped his firm cash in on PFI contracts but, unhappily for Aldrige, people found out about the loan and he quit Capita over the revelations.
Carillion
Carillion had their fingers in just about every pie going before the firm’s spectacular collapse in 2018, which resulted in more than 3000 job losses and left liabilities worth around £7 billion.
The company wasn’t just interested in PFI but seemingly any contract they could get their hands on.
They built hospitals, the Royal Opera House, HS1, HS2, Nottingham Express Transit, the Sheppey Crossing, the headquarters of both the British Armed Forces and GCHQ, Heathrow Terminal 5, the Library of Birmingham, the expansion of Anfield Stadium, a number of apartment blocks in Manchester and the Rolls Court in London. That is, by the way, not an exhaustive list.
Carillion’s collapse was seismic. Its rise and fall was described by a parliamentary committee as “a story of recklessness, hubris and greed”. It went on: “Its business model was a relentless dash for cash, driven by acquisitions, rising debt, expansion into new markets and exploitation of suppliers.”
So major was the firm’s demise, that then-chancellor Philip Hammond (above) announced in the 2018 Budget the Government would instigate no new PFI projects, even though the practice had long since fallen out of vogue.
The big four
PFI’s biggest cheerleaders were not to be found just in the Government, though they dwelt in Whitehall as well, to be sure.
The so-called “big four” accounting firms – that’s EY, KPMG, PwC and Deloitte – helped “stitch up” contracts, according to the public sector union Unison.
In 2003 report, the union said it had identified numerous instances where there was “significant risk” of conflicts of interest arising with the big four’s involvement in the award of PFI contracts.
It found 45 cases where the companies had acted both as financial advisors to public authorities while auditing companies which were bidding for contracts.
One example where accountants faced suggestions of improbity was in the case of a National Audit Office (NAO) review of the PFI contract for the West Middlesex Hospital. The hospital trust and its advisers KMPG initially found financing the redevelopment project would cost “slightly higher than the cost of conventional procurement”.
KPMG went away and “reappraised the figures” and, according to Private Eye “shoved in some highly questionable risk factors”, only to find that on second look it was in fact cheaper to award the PFI contract.
