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Moral minority

Boris has his faults. There was, however, no need to turn an attack on Brown's botched PFI contracts into a personal attack on Boris. Victoria Borwick hardly mentions the Tube ever. Andrew Boff appears to have little knowledge of transport. Why not attack them?

I have read the candidates' literature and attended the hustings. No candidate has attacked Livingstone's huge rises in bus, tube and taxi fares - or his plan to close Tube booking offices as part of his associated plan to force everyone onto Oyster cards. No candidate offered any detailed proposals to improve transport services, e.g. more late night services. All we got was the soft target of the congestion charge. The candidates were stuck in a pro-car, central zone mentality.

There are no votes in attacking the PFI contracts. But there are many votes to be gained by cutting fares and improving services. Warwick Lightfoot has shown that he is out of touch with the real needs of Londoners (rather than hacks and policy wonks in the Westminster village) and has lost my vote.

Conservative W8

At last a Conservative with the guts and knowledge to speak the truth about the PFI mess.

CCHQ Spy

I wouldn't worry about Moral minority's comments Warwick. He's negative about everyone and everything all over this site. I very much doubt you had his vote in the first place so don't worry about having lost it!

FedUpWithCameron

This is economic illiteracy. Shareholders in Metronet lost a lot of money. PFI means the private sector takes the risks and gets rewarded when it goes well.

That is called capitalism. It is what David Cameron promised to campaign for when he was after members' votes and it is what he has attacked ever since.

Justin Hinchcliffe

I don't know how any Conservative could support PFIs: they're a rip-off. If we had been voting on policy alone, Warwick would have won hands down. The Party should utilize this man!

James Cleverly

Our battle lies with Livingstone not with the other candidates for Conservative nomination.

Whatever the result of the primary it is essential that the candidates do not provide damaging sound bites against each other.

Moral minority

CCHQ Spy. I have many years experience in large PFI/PPP projects. PFI contracts are neither good or bad per se. Some are excellent, other average or bad. Their effectiveness depends on whether the risk transferred is worth the higher finance costs.

There have been literally thousands of successful private sector infrastructure projects around the world. They include major transport projects such as toll roads (e.g. Birmingham) , metro systems (e.g. UK tram and light rail networks) and high speed rail links (e.g. in Japan).

So Warwick is wrong to declare that only the public sector, financed by gilts, offers better value than PFI or PPP is wrong. The public sector has no incentive to control costs. Network Rail is a prime example. It has wasted billions, far more than the cost of bailing out Railtrack that inherited the proverbial dog's breakfast from British Rail.

The contractor's rate of return reflects the risk, especially its ability to undertake detailed due diligence. In the case of the Tube, as with Railtrack, the state of the track and stations was far worse than expected. The former state owners took a maintenance holiday to save money and give the private operators a poison pill. The contractors have got wise to that and rightly managed their exposure in the contracts.

Warwick argues that the contractors should have invested more equity. Equity is the most expensive form of finance. The contractors would have required even higher returns and profits. This argument was really a device to make the private sector less competitive to the public sector.

This article is the sort of nonsense I would expect from a leftist economist such as John Kay. It is truly prejudiced against private sector involvement in major infrastucture projects despite international evidence to the contrary.

I can only conclude that Warwick is either ignorant or disingenous for political reasons.

Moral minority

PFIs were introduced by Norman Lamont when Warwick Lightfoot was his Special Adviser. He should tell us if he advised Lamont against their introduction.

Yet Another Anon

I worked at the Treasury when John Major’s Government first explored PFI
That was at a time of course when John Major and Norman Lamont with Michael Hestletine cheering on had embarked on a huge programme of spending increases coupled with tax cuts - a balance that later came back to bite them on the ass as the Budget Deficit shot up. It is not surprising that they were eager to keep a lot of the spending out of the books because otherwise the headline figures for deficits at the time would have been much worse and the Conservatives 1997 result probably would have been much worse.

I have no faith in PFI or PPP - bureaucratic schemes that require huge amounts of monitoring and delay a lot of spending and encourage private contractors to spend their time thinking up ways of extracting money from the Treasury through novel ways of charging.

Sometimes the state will need to pay private operators to provide some kind of service for which there is no provision either through omission or as part of deliberate policy - if it is a public sector programme then the public sector should keep control of it including deciding which organisation private or public does particular bits of work, and not hand over the management of it lock stock and barrel to a private operator - if it should be handled by a private operator to that extent then full scale privatisation or transferal to some kind of not for profit charity is the answer.

With regard to the London Underground it should probably be handed over to Network Rail, the alternative would be to create a new private charity limited by guarantee to run it, or to convert it to a plc and start selling shares in it either partial or whole - in the case of an asset sale, money raised could be put into it to pay for upgrading the network. Indeed Ken Livingstone's plan for the London Underground of issuing bonds was actually a far sounder idea than PPP.

Yet Another Anon

It has to be said though that the PFI\PPP contracts of the 1990s and early 21st century are mostly at far too advanced a stage for there to be more than damage limitation - it leaves a mess committing future governments to having to pay for expensive and possibly failing schemes not of their making for decades to come - costs of PFI\PPP schemes should probably be accounted for under PSBR, if they were governments would be far more hestitant to use them and far more concerned that they really were of better value with regard to the public finances and quality of work.

Moral minority

Where is my detailed post on PFI project finance? There was no abuse, just a fisk of Lightfoot's article, yet it was deleted without comment. Is Con Home campaigning for Lightfoot?

Moral minority

I am pleased that the Editor finally approved my earlier fisk of Mr Lightfoot's article.

Yet Amother Anon wrote "Ken Livingstone's plan for the London Underground of issuing bonds was actually a far sounder idea than PPP". Those bonds would have been underwritten by the London council taxpayer. Such a proposal, in practice, would be no different to Lightfoot's. There would be no contractual or shareholder discipline to manage and control costs. That problem would manifest itself if the Tube network was owned or managed by Network Rail.

PFI/PPP projects can deliver better value for money. They require

- excellent negotiation skills and management on both sides
- high quality information for bidders and
- bidders to carry out extensive due diligence.

It is easy to criticise bad deals and the Labour government has done more than it should. I note, however that Yet Another Anon failed to criticise the successful examples that I gave in my fisk of Lightfoot's article.

A large proportion og private companies use off-balance sheet financing, e.g. operating leases. It can be an excellent and affordable alternative to traditional financing methods, e.g. large long-term loans. There is no reason why government should not use it if it offers value for money.

I should also point out that most governments bind their successors contractually, e.g. in defence contracts. Is Yet Another Anon proposing that we should not replace aging defence ships, submarines and weapons?

Mike A

This article is fine in terms of its technical analysis, but it perfectly demonstrates why Lightfoot would be a terrible mayor (admittedly, not something we have to worry about).

The mayor's direct powers are limited, even with the new GLA Bill. He is most influential as a lobbyist - a voice for London. That means he needs to know when to pick his battles.

Both the treasury and Osborne have committed themselves to maintaining the current rules on debt. They are also unlikely to fiddle with the accounting rules. No stamping of the mayor's feet will change that - full government backed bonds *will not happen*.

Livingstone knew that, and fought tooth and claw anyway. The result was that, because of POLITICAL RISK (fighting between whitehall and city hall) and despite the government guaranteeing almost all the risk on lending to metronet (95%) the banks still gave the company a lousy credit rating. That made it more difficult for metronet to stay afloat, and increased the amount the taxpayer was eventually liable for.

Sometimes refusing to compromise with central government and their stupid rules makes the situation worse. A good politician knows that. Lightfoot clearly doesn't.

Rather than an attack on Boris, this perfectly demonstrates why
Lightfoot should remain an economist, and Boris a politician. If it really comes to the crunch, Boris could hire someone like Warwick, but Warwick can't buy in Boris' political judgement, charm or charisma.

In fact, looking a the bigger picture than that, it's even worse. Lightfoot knows he's lost, and probably by a wide margin. I'd imagine he'll come in third, but rather than conceding carefully and gracefully, he has chosen to try to damage our leading candidate by calling him naive.

Yet Another Anon

I should also point out that most governments bind their successors contractually
PFI and PPP provide a framework for governments to commit their successors to far more than ever before, and what then happens is that someone down the line will get blamed for the mistakes for many of these things and when anyone comes back to look at the original decisions on these things, the person who took the decisions probably will have finished their political career and may well be dead by then. Generally it is best to minimise commitments to future spending rather than mortgaging the future of the country, it's not an absolute but the use of PFI by both political parties in government seems to have been quite casual and almost routine.

sjm

The last thing we need is losing candidates knocking the winner - thanks for contributing to the disfunctional image of the Party, Warwick. Rather in line with some of your childish behaviour at one of the hustings?

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