So I’ve had a few trust finance people offer explainers.
Just to be clear I have no background in finance this is just what I’ve read and reflection of conversations with people that do
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Just to be clear I have no background in finance this is just what I’ve read and reflection of conversations with people that do
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One trust finance director described it thus (I paraphrase, but the ‘f’ word is part of the original description):
‘Its the equivalent of someone paying off your mortgage but then reducing ur income by the same amount. It makes F all difference. Worse still they’ve ignored PFI’
‘Its the equivalent of someone paying off your mortgage but then reducing ur income by the same amount. It makes F all difference. Worse still they’ve ignored PFI’
Another ex-finance Director has broken it down for me (brace yourselves):
‘In accounting you have to balance the sheets. The debt has to go somewhere, and PDC is the only choice’ /2
‘In accounting you have to balance the sheets. The debt has to go somewhere, and PDC is the only choice’ /2
Cont...
‘The old loan system is 2-4% interest, the PDC is 3.5%
If a trust is in surplus it will pay some of this off. If not, then the 3.5% will be added to the debt rather than the trust paying out the cash’
/3
‘The old loan system is 2-4% interest, the PDC is 3.5%
If a trust is in surplus it will pay some of this off. If not, then the 3.5% will be added to the debt rather than the trust paying out the cash’
/3
Cont...
‘Some of 13bn will be found by redistributing excess cash within the system - so if ur Trust A with 100m in bank (and there are some) then u will use ur excess cash to repay. Then trust B will be given it to use to repay its debts - out of one pocket into another’ /4
‘Some of 13bn will be found by redistributing excess cash within the system - so if ur Trust A with 100m in bank (and there are some) then u will use ur excess cash to repay. Then trust B will be given it to use to repay its debts - out of one pocket into another’ /4
Cont...
‘So if the question is - is the announcement all it seems? - no but don't forget that the fact that trust a had debts is because it had no choice other than to spend more than its income in the past. The main reason for that is PFI’ /5
‘So if the question is - is the announcement all it seems? - no but don't forget that the fact that trust a had debts is because it had no choice other than to spend more than its income in the past. The main reason for that is PFI’ /5
Cont...
‘The plus point of PDC is this - if even notionally public capital was free, then every decision we took based on a financial evaluation would be skewed - so whilst imperfect - used sensibly it forces us to use public money well’ /6
‘The plus point of PDC is this - if even notionally public capital was free, then every decision we took based on a financial evaluation would be skewed - so whilst imperfect - used sensibly it forces us to use public money well’ /6
So in summary of their explainers:
- It is complicated
- It is not all it seems
- It is one of the only options
- PFI is a bigger problem and erasing that would have helped more than this
My brain hurts
End
- It is complicated
- It is not all it seems
- It is one of the only options
- PFI is a bigger problem and erasing that would have helped more than this
My brain hurts
End
Adding:
Some may ask what’s the problem here? There’s a few:
1. Trusts that we’re paying 2% interest now have to pay 3.5%. A 1.5% increase annually.
2. Well off Trust fear having the cash balance "haircut" to help pay for this
Some may ask what’s the problem here? There’s a few:
1. Trusts that we’re paying 2% interest now have to pay 3.5%. A 1.5% increase annually.
2. Well off Trust fear having the cash balance "haircut" to help pay for this
