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Wednesday, 7 March 2012

Overblown, over budget, over here

In 2004, Tony Blair's Labour government said it would establish cost-saving centres to save £159m by sharing "back-office" functions such as information technology, personnel and procurement between Whitehall departments.

The initial start-up costs were budgeted at £900m.

Assuming a cost of funding this at about 6%, which was the gilt rate in 2004, this would have given a payback over 7 years, which frankly isn't that fantastic.

By 2011, the total establishment costs had risen to £1.4 billion, so that if we still believe the purported savings the payback period with interest has jumped up to 13 years and we are still 5 years away from seeing any saving. The most amazing statistic is that increases in the budget for this £159m cost saving exercise were running at over £70m a year.

Moral: when a politician says they can fix a problem, don't.believe a word.  They have neither the ability nor the commitment to do so when they are chasing the next soundbite. And don't believe the Treasury when they measure value for money on PFI schemes

1 comment:

A K Haart said...

Most people in the public sector know perfectly well that their own job is a cost. They behave accordingly.