PFI swindle to end
Labour’s Conference welcomed Shadow Chancellor John McDonnell’s pledge to bring back Private Finance Initiative (PFI) contracts back in-house. No wonder. PFI has been a long-running scandal, sucking taxpayers’ money into subsidising enormous profits for private firms.
PFI was devised by Tory Prime Minister John Major but reached its peak under Tony Blair and Gordon Brown in the New Labour years. Instead of the government borrowing money to build and upkeep hospitals and schools, a private consortium was given the job of raising the money. In return they would receive an annual charge from the government (that’s us) for up to forty years.
In effect it was a hire purchase deal, buying on the never-never. What was the point? The money borrowed doesn’t count as government debt because the consortium borrows the money instead – but it’s still borrowed! So it’s off the government’s balance sheet. This is massaging the figures, a sleight of hand. ‘Now you see it, now you don’t.’
The downside, as we soon discovered, was that private borrowers have to pay a higher rate of interest than the government would. At present the government can borrow at interest rates way below the rate of inflation. It is effectively free money. But the PFI consortium doesn’t mind the higher rate they pay because it just passes the cost off to the taxpayer as part of their fee.
And, boy, have they done well out of PFI! The Centre for Health and Public Interest (CHPI) thinktank has worked out that, over the past six years, PFI projects have milked the NHS of £831m. Half of this, which could have been spent on patient care, went straight out as dividends to PFI shareholders. And get this. Many of these consortia are registered in tax havens, so the money they’ve looted from taxpayers is tax free!
PFI has proven to be a licence to print money. Treasury figures show that the capital value of current projects is £58bn. We owe £232bn to pay for this – four times as much as it cost. The CHPI calculates it’s even worse for the NHS. PFI –acquired assets are £12.4bn but we’ll pay £80bn. This is usury. It really is as choice within the NHS of patient care or paying the PFI pirates.
Margaret Hodge, as former Chair of the Public Accounts Committee, lists some of the rackets PFI operators used. £900 to put up a Christmas tree, £8,154 to fix a blind…the list goes on and on. This is old news. It’s high time we put an end to this. Just a thought – why should we pay a penny in compensation to consortia who’ve taken many times more than they’ve put in and then squirrel their ill-gotten gains away in tax havens?