This weekend I’ve been mulling on the idea of a political drama involving a popular banks-type ‘Bail Out Our NHS’ movement and its confrontation with the powers-that-be. It would be based on credible propositions set in the near-future like The Crunch, done from multiple perspectives to get the issue’s complexities.
That’s because thus far my impression has been that there are no real baddies on the campaign side with which Groundswell is dealing, just some bad acts. Everyone wants to save the NHS. They just have differences in strategy. The bad acts are the ones intended to inhibit critical thought and corrall policy development.
At an early stage in writing The Crunch I met a former Big Swinging Dick of the debt market world. He was an engaging, forthright guy, middle-aged in that world, who gave a good insight into a privateer’s vision of the world. When he’d been earning $15-20 million a year as a Big Bank chieftain he’d had “to leave that part of my brain marked morals at the door” as he entered his workplace. The terrifying velocity of IT-driven financial trading meant he couldn’t really know what was happening “in a single day, let alone a week, month or year”. When he hired a manager he “just had to trust him” – his work references were unsurprisingly male.
I called him today to check out the notion of a ‘Bail Out Our NHS’ scenario as a means of unburdening the NHS of its huge Private Finance Initiatives (PFI’s) repayment costs and of covering its running costs. He quickly identified governments’ ‘Keynesian’ resort to sovereign (Treasury) debt as the major problem of the last 50 years. To get elected “they’ll keep on promising more money”, creating “a death spiral of overspending”.
He referred approvingly to a publication The Triumph Of Socialism Over Reason. “It’s getting worse. They’re doing it to avoid contraction”. He chuckled at the recollection of a friend recently saying “It’s democracy that’s the problem! How to get rid of the politicians is actually the problem!”
He startlingly said that “the NHS is the second largest business in the world” – second only to the Indian railways. The PFI’s were required by governments unwilling to take the risk of covering the rapidly expanding costs of healthcare. They wanted ‘experts’. “It’s the old story that a government that drives a business will drive it into bankruptcy…Governments don’t know how to run projects”.
He volunteered that the first 5 years of the PFI’s were “not great deals” for a Tory government that had been too intent on skimping on getting proper advice. “They completely screwed up, handing a cheque to the equity (investor) guy.” But in the last 10-15 years they’ve been “competitively structured”. Of the annual costs to the public about 1/3rd is interest. The rest are ‘project management’ and actual hospital operating costs. The yield on their shares is a modest 4%.
PFI’s have been “incredibly successful – 90% on time, 95% on budget…a great trade for the government”. The UK PFI scheme is “the crown of how PFI works. Every country is trying to emulate it”. Commentators are ignorant about how the system actually works. “The whole thing is a confederacy of dunces!”
But could a government actually bail out them out? Yes, it could be done but the costs would be “colossal”. 90% of PFI’s are debt rather than equity (shareholding investment) financed, comprised of bonds and bank debt ‘swaps’. These have shot up in value since the advent of Quantitative Easing, the buying up of bonds by central banks and the resulting ultra-low interest rates. There are also contractual penalties for early redemption of the debt. He speculated, self-admittedly uncertain, that a government buy-back of the £54 billion of all PFI’s, including the NHS and other public services, could cost £75 billion. Governments know the “terrifying complexities”, hence their compliance.
“You’re stuck with it. You can’t get out of it.That’s the beauty of the capitalist system! There’s always somebody on the right side of the trade and somebody on the wrong side!”
So there you have it. From the belly of the beast.