The ghost of PFI

In a county council somewhere in Middle England, County Solicitor Douglas Ludlow reflects on his long local government career, until the ghost of PFI returns to haunt him….

Douglas Ludlow sucked thoughtfully on his pipe looking out at the dancing fountains of the peace gardens surrounding County Hall. He’d been among the last of the dwindling band of smokers to break the tobacco habit. He’d done it the hard way without the aid of nicotine patches, hypnotism or vaping yet he couldn’t quite consign his faithful old briar (unlit and empty) to his desk drawer.

He liked early mornings, before the hurly burly. He took a sip of his café latte and sat back in his swivel chair feeling comfortably nostalgic. Had he really been in local government for 30 years? So much had changed since the early 80’s when he started as an articled clerk. Trainee solicitors they would be called these days.

Dictaphones were the essential ‘must have’ back in the day. Those little tapes with Douglas’s precious utterings would disappear into the central typing pool for weeks or sometimes months.

No world wide web. No computers, laptops or mobile phones. Unlike now when councillors can reach you at any minute of any given day. Instead, he remembered with a chuckle, how proud the council had been of its ‘state-of-the-art’ document flow system whereby memos were split into three tissue-thin coloured copies. Tearing one off for the file, the other copies would be rolled into a thin tube and whisked away with a flush of compressed air, down a tangle of steel pipes into a mysterious central sorting office deep in the basement. There the remaining copies would be divided for central filing and onward transmission to the client.

A familiar face wearing a cycle helmet popped round the door. “Morning Douglas”, came the cheery greeting “Been here all night?”

Nigel Stott, Assistant Director (legal), waved a newspaper in Douglas’s direction.

“Seen this? I just saw the Leader as I passed the members lounge. He’s on the warpath again”.

Douglas groaned as he read the head-lines:

Carillion’s liquidation sparks surge in bad debts and construction failures. NAO castigates value for money of expensive PFI projects. Labour pledge to bring all PFI’s back in-house”.

“Here we go again” grumbled Douglas ruefully.

He was the last man standing as far as PFI was concerned. All the other chief officers, members, external advisers, even the council’s director of finance – retired or moved on. The corporate management team who had joined since 2010 were blissfully unaware of the effort that had gone into bidding for the pot of gold that was on offer then from government.

Ironically, it had been Douglas who had warned of the dangers of entering into long-term complex contracts. The challenge, as he had tried tactfully to point out to the (now departed) chief executive, is managing the contract and making sure what is promised in the great sounding business case, is delivered.

But such words of wisdom went unheeded, lost in the stampede for additional PFI funds. He’d been told in no uncertain terms to stop ‘whinging’ and instead develop a ‘can-do’ attitude. The sole object was to ‘steal a march’ on the neighbours, all of whom were competing to secure some part of the PFI pot allocated to local government. PFI credits, became the magic money tree under New Labour - the only game in town.

In the event, Douglas discovered he had a gift for organising the armies of chief officers and advisers needed to secure the funding and procure contractors through competitive dialogue. Once he’d got the knack, the council went back for more PFI grant again and again. The street lighting PFI (£90m), was followed by the grouped schools PFI (£160m), which led to the waste treatment plant PFI (£200m) and finally the relaunch of County Hall as a joint service and leisure centre, complete with swimming pool and gym in the basement (displacing internal audit) (£80m).

Somewhat to his surprise, on time and on budget, bright new street lights lit up the County’s highways; spanking new secondary and primary schools came on stream across the County, easing the burden on the remaining dilapidated schools’ estate;

The waste treatment plant, despite the planning objections, finally took shape and, the jewel in the Crown - County Hall, a listed 1930s art deco building, was transformed into a gleaming one-stop-shop health and social care services, library, leisure centre and swimming pool.

Unprecedented investment. Wonderful buildings but…

It didn’t take long for the criticisms to flow. The local press for one wanted to know why the council had ‘feathered its own nest’ by refurbishing its HQ and providing a swimming pool when everyone else in the County had to make do with facilities built in the Victorian age?

Could anyone have anticipated the academy schools programme and the forced migration away from the County of ten of its 15 gleaming new PFI schools, immediately followed by the axing of the Building Schools for the Future programme? The county council had been left with an odd mix of ‘have and have not’ schools across its estate.

True the waste incinerator (for some reason no-one could since fathom) had been specified at a capacity more suited to servicing the whole of Northern Europe. But, as the PFI contractor had been quick to point out, that was hardly its fault that the council had got its waste estimates wildly wrong.

Now, eight years after the last PFI had been signed by the county council all this current Leadership want to do is ‘Bring the PFIs back in house’!

It didn’t seem to matter (as Douglas had pointed out) that they were never the county’s assets to begin with and that there had been precious little investment of any kind in the public estate since PFI funds had dried up. All the sensible arguments that terminating the PFIs without good cause would simply ‘gift’ the PFI providers with massive compensation windfalls which the council could ill afford, fell on deaf ears.

“Cheer up Douglas” said Nigel breezily. “What we need to do is convince the Leader we can manage these contracts to deliver savings. We did that with the joint service centre – remember? The pool sprang a leak? The government continued to pay us the PFI money, but we didn’t need to pay the contractor for fifteen weeks until they had sorted out the problem. We used the windfall as an emergency fund to fill the pot holes in the roads. That cheered the members up no end.”

Douglas tapped his empty pipe on the desk - “And how do you propose we do that when we have never been able to properly resource these contracts from the start?” he asked, not unreasonably?

“Simple” said Nigel.

“We use technology. In the health sector UCLH have delivered huge savings by getting the contract on-line, harvesting the obligations and allocating the responsibilities for delivery to the relevant parties across all their major contracts. Overall, it’s saved them a King’s ransom”.

“Oh, and by the way” added Nigel struggling with his cycle helmet chin strap, “Take a look at this Report from the Dept of Business, Energy and Industrial Strategy. It says the PF2 or PPP model could be used to procure district heating networks across the UK. Only this time there’s no extra money to oil the wheels. Austerity and all that.”

“Over my dead body” muttered Douglas, mentally calculating how long he had left until retirement.

Douglas looked at his watch and wondered whether he could fit in a quick swim before facing the onslaught he knew was coming.

Rob Hann is a local government solicitor, author and consultant. He is author of Local Authority Companies and Partnerships - see www.hannbooks.com

For the UCLA case study see here.

For the BEIS Report see here.