Category Archives: banking

Can it really be so hard?

Latest news: South London NHS trust declared bankrupt.  Unaffordable PFI liabilities blamed.

Setting aside the apportionment of blame (PFI liabilities were presumably one ingredient in a toxic mix), PFI liabilities more widely are being reported as a huge proportion of UK off-balance-sheet public sector debt, and thus a great pillar of the overall debt burden.  How has it come to this?

The original rationale for PFI was a good one.  Put the risk of cost overruns with the contractor, and it takes away the race-to-the-bottom where the contract goes to whoever can put in the most unrealistically-low bid, and raise it only when the contract is secured.  The idea that contracts inevitably go ten or twenty (even 100 in murkier corners) times over budget really shouldn’t be the norm.  Indeed, shouldn’t even happen in politically-driven vanity projects like the olympics, but that’s clearly too much to hope.

Trouble is, it became a vehicle for magic money: a manifestation for our times of Mephistopheles’ credit bubble[1].  Public sector commissions new projects, but hides the cost off-balance-sheet.  Current incumbents build empires: bask in the glory of shiny new hospital (or whatever).  By the time the emperor’s wardrobe malfunction can no longer be hidden, it can be made someone else’s problem.  If indeed the idea of payment ever crossed their mind in the first place.

Now, someone tell me what’s wrong with a simple solution: at the same time as a PFI contract is signed, issue a bond to cover the cost over the lifetime of the project?  Such a simple act of keeping the liabilities on-balance-sheet could prevent abuse, while retaining the genuinely useful aspect of the PFI concept.  Of course the financial wizards won’t like it (they lose a fun and profitable toy), nor will politicians and civil servants deprived of their ability to raid the future without telling the beancounters.  So a good outcome all round: just need to rewind that time machine a few years.

[1] Googling the story of Mephistopheles’ brilliant boom-and-bust based on credit notes for as-yet-undiscovered mineral riches that, when discovered, would rightly be claimed by the Emperor, finds an interesting essay.  One that not only tells the story, but claims that this part of the Faust story has been more-or-less systematically dropped since 1945, and so is not widely known.  Interesting insight or nutjob conspiracy theory?  Maybe both?  Here’s the story: read it and judge.

Online banking failure

I’ve been banking online for quite a few years with generally good results.  But I’ve just run up against the limits to it when I tried to access the information to transfer my cash ISA to another provider.  The account number is not available online, for bogus “security” reasons!  And when one thing fails, it seems everything falls apart.

Well, not quite everything: I was able to use an online messaging facility to get an answer after 48 hours.  But with lots of gratuitous hurdles on the way.  The followup online message I just sent them should be self-explanatory (it was slightly shortened to get within their 1000-character limit, so I had to lose things like the initial Thank You).

I regard a paper trail as a high risk, so I welcome paperless banking.

Paperless banking fails when I cannot access essential information online.  Doubly so when [bank] has closed our local agency so I have no branch access as backup!  Even if you blank out numbers in the overview, some means of accessing them is clearly essential!

Your phone service proved worse than useless.  I gave up at the point where it required me to enter the very account number I was trying to find out (surely a far bigger security risk than anything online, since that would have disclosed the number in an ultra-easy-to-read form over an unencrypted medium)!  In the absence of an option to speak to a human and identify myself using other information (such as my [current] account), this online message facility was my only option within your system.

Finally, this message service is defective.  I composed a reply only to lose it when the system erroneously logged me out.  It presented me a dialogue box from which I selected the option to stay logged in, but that led to the worst kind of failure: when I hit “send” it invited me to log back in and my message was lost without warning.

Grrrr ….