The ski resort of Chamonix, dramatically overlooked by Mont Blanc, is not
quite the most expensive in the Alps – but it keeps its end up. The
flashiest restaurant, La Cabane, charges £19 for a starter and £33 for a
main course. The best room in the top hotel, the Relais & Chateaux Albert
the First, costs £420 a night.
All this week, The Daily Telegraph has been exposing a different kind of
spending – the amazing sums taken from the taxpayer under the Private
Finance Initiative. And all this week, eating in that restaurant and living
in that hotel room, has been one of the principal beneficiaries.
His name is David Metter. He is 58 years old. You have almost certainly never
heard of him – he keeps an extremely low profile – but he has made his
fortune, conservatively estimated at £60 million, out of you.
Mr Metter is the king of the PFIs, the biggest single player in the market. He
personally controls almost three-quarters of a company called Innisfree. He
employs just 14 people – but he owns or co-owns 28 NHS hospitals, 269
schools, the Whitehall HQ of the Ministry of Defence, a Scottish motorway
and a Welsh jail.
Under the PFI, Innisfree and other private investors build and operate such
facilities, then effectively rent them to the state – at a substantial
premium. The Daily Telegraph disclosed this week that for an NHS hospital in
Bromley which cost £118 million to build, taxpayers will end up paying 10
times as much – £1.2 billion – to the PFI owners.
Innisfree is one of those owners – and at Bromley alone, according to the
National Audit Office, it is making a return from taxpayers of 71 per cent.
The Daily Telegraph did not set out to target Innisfree. But in the most
controversial PFI schemes found by this newspaper, it was striking how often
the company turned up.
It owns four-fifths of the PFI school in Clacton which has now closed – but
for which taxpayers must still pay it £1.4 million a year, Innisfree’s share
of the deal, until 2035. It owns the Birmingham school where parents
couldn’t start an after-hours club to keep their kids off the streets –
because Innisfree charged £70 per hour for a caretaker. It had a 50 per cent
stake in the calamitous Defence Animal Centre deal, where each dog kennel
cost more per night than a five-star hotel room (though admittedly not as
much as Mr Metter’s suite in Chamonix.)
Innisfree has the Queen Elizabeth Hospital in Woolwich, where it effectively
locked taxpayers into a 60-year contract. And it has a quarter of the
Norwich and Norfolk Hospital – where Innisfree and its partners refinanced
their debt, lengthening the NHS’s repayment term from 34 to 39 years, but
raising their own rate of return from 16 to 60 per cent. Only a small
portion of the refinancing gain was shared with the taxpayer.
Of course, the prices we pay to PFI companies include interest, inflation, and
often support services, such as maintenance – but they also include,
numerous independent academics have warned, “significant excess returns” for
the companies and “far above market” financing costs for the taxpayer. Even
repayments on a normal mortgage, of the kind you or I could get, work out at
perhaps just three times a property’s capital value.
Innisfree insists that it risks its own money, or that of its investors, in
deals which can go wrong. But actually, it invests only tiny amounts. The
hospitals it owns or co-owns have a total capital value of £4.8 billion;
Innisfree’s share of them is worth about £2.2 billion. By its own account,
the actual amount of money it has put into those hospitals is £376 million,
or an average of £13 million per hospital. The rest is borrowed.
And from the company’s latest accounts it does not, to be blunt, look too
great a risk. Last year, Innisfree made 53 per cent profit on its turnover.
A highly successful FTSE company, such as Tesco, reckons to make 6 per cent.
Mr Metter collected pay and dividends of £8.6 million last year, and can
afford an enviable lifestyle. He has a £5 million villa in London’s chi-chi
Little Venice. Skiing in Chamonix’s expensive mountains is an annual treat
for the “PPP Forum”, his lobbying group – its brochure jokes about
“high-level networking”. Ninety people, the cream of the PFI business, went
last year, most staying at the Albert the First or the second-best hotel in
town.
All credit, some may say, to Mr Metter for spotting a wholly legal and
legitimate business opportunity, one which has lifted him from
middle-ranking property manager to multi-millionaire. But public spending is
falling and the storm clouds are gathering – interestingly, from the Right.
Edward Leigh, the Thatcherite Tory who until last year chaired the Commons’
public accounts committee, called the Norwich hospital deal “the
unacceptable face of capitalism”. Another Tory MP, Jesse Norman, now says
Innisfree has “made more money for less work than any other group of people
I can think of”.
Mr Norman leads a cross-party campaign asking PFI contractors to give back
some of their profits, or bend their inflexible contracts to the austerity
era. Mr Metter did not respond to our questions asking whether he would
consider this. Nor did he answer whether he pays UK tax.
Mr Metter may, I suppose, reckon that he has legally binding agreements and no
great reason to worry about being unpopular. But then, so did RBS’s Sir Fred
Goodwin.
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