In the late 1990’s I was repeatedly ignored and often ridiculed when I stood in the exquisite debating chamber of Glasgow City Council and raged against the Private Finance Initiative (PFI) that was being promoted and pedalled by Labour, Tory and Lib Dem councillors as the best thing since sliced bread.
It was the new method to finance essential public building projects and would transform schools, hospitals and other public infrastructure. Instead of local councils and health boards borrowing from the specially established Public Works Loan Board at reduced rates of interest they would invite private companies to establish consortiums to submit tenders for jobs and borrow money privately to build and repair schools, hospitals and roads with the guarantee of lengthy and generous repayment contracts (called unitary charges) stretching over 30 to 60 years.
The expenditure would be ‘off the books’ and not appear on government accounts of public debt known as the Public Spending Borrowing Requirement. To these grown men and women it was nirvana. They would get to present major school refurbishments and new builds as the product of their great political skills and hopefully guarantee their re-election to the office for time immemorial. I wanted to call them idiots but instead patiently tried to explain that it was an almighty con, a work of economic illiteracy that would not only benefit the private consortiums to the tune of millions but end up costing the public purse significantly more than traditional borrowing.
This was a scheme devised by the Conservative government of John Major in 1992. Was that not a big enough clue as to who stood to benefit? The Tories are the party of the rich and powerful, they govern for and on behalf of big business and the billionaires. Any scheme they devise has private profits at its heart. They couldn’t give a damn about public services. PFI had nothing to do with improving public infrastructure and the associated services and everything to do with diverting as much money as possible from the taxpayer into the coffers of fat cat business concerns and the greedy shareholders.
I was a minority of one. How dare I stand in the way of progress and deny the schoolchildren of Glasgow new schools and classrooms to learn in. I was putting ideology before the interests of the people I was supposed to represent. Actually I was using my ideology to enable me to see through the smoke and mirrors punted by the Tories and then disgracefully but keenly embraced by the Tony Blair and Gordon Brown New Labour Government of 1997.
PFI was not a tool to benefit working-class communities, it was a ruse to rob them. PFI was and is daylight robbery, legalised theft, which transfers billions of pounds from the public purse into the wallets of rip-off merchants bemused at how easy it is to generate millions in profits at the public’s expense.
I tried to move amendments against the use of PFI in the City Chambers of Glasgow but couldn’t get a seconder. Of the 83 elected councillors, only one voted against the use of PFI, me. My argument was not that we didn’t need urgent investment in our schools and infrastructure but that the investment should be paid for through traditional public borrowing, not the swanky new PFI Scheme. I continued to oppose PFI being used across Scotland when I was elected to the Scottish Parliament in 1999. Some of the same politicians who derided my opposition to PFI in Glasgow continued to do so in the Edinburgh Parliament.
The Labour and Lib-Dem coalition government, with enthusiastic backing from the Tories, advocated PFI Schemes all across Scotland to build not just schools but hospitals, roads and bridges. They willfully blinded themselves to the obvious flaws in the PFI beast.
These specially formed private consortia not only submitted bids way in excess of the actual costs of building the public projects; they were also allowed to include in their tenders the costs of borrowing privately to finance the jobs which inevitably allowed them to inflate the tenders even more. These schemes were being built from money borrowed on private finance markets by private firms. Only a blind man could fail to see that they would inevitably cost more than traditional publicly financed schemes via lower rates of borrowing.
I called it the economics of the madhouse and explained PFI actually stood for Paying For Infinity but the red, yellow and blue Tories in the Scottish Parliament couldn’t give a toss. All they cared about was the cutting of the ribbons and photo ops the shiny new PFI financed buildings gave them. Being in the minority in Glasgow City Chambers and the Scottish Parliament didn’t make me wrong. The latest IPPR Report has confirmed what every independent economic assessment of PFI has stated over the last 5 years or so.
Austerity has contributed to the deep malaise the public finances find themselves in but PFI debt payments are preventing hospitals from recruiting essential staff, buying essential equipment and repairing deteriorating buildings. In the English NHS alone £13 billion worth of investment that PFI brought into hospitals will end up costing a staggering £80 billion by the time the contracts come to an end. NHS Trusts are teetering on the brink of bankruptcy because they simply can’t cope with the increased demand for staff and services while paying off PFI debts.
The Sherwood Forest Hospitals NHS Foundation Trust in Nottinghamshire has a £326 million annual budget from which it is required to pay £50.3 million a year in PFI debt payments. That represents over 16% of its annual budget. In 2005 the trust, which runs three hospitals, signed a PFI agreement to build King’s Mill Hospital in Sutton-in-Ashfield, refurbish Newark Hospital and run some services until 2043. The initial cost was £976m but in 2012 it was revealed that had doubled to £2bn and it has since risen again.
University Hospitals Coventry paid more than £89m interest last year, more than 14 per cent of its £379m income. It is the most expensive PFI project in the West Midlands and there is still around £3bn to pay off on the 39-year deal. The Report is a stark warning that simply cannot be ignored:
"PFI specifically has turned out to be a bad deal – and will eventually cost almost £80 billion for just £13 billion of assets. This report reveals that £55 billion of this debt is still outstanding – representing a huge burden on tight NHS resources if the government does not take action… There are now £3 billion worth of critical maintenance issues – including collapsing ceilings and sewage leaks – that the NHS cannot afford to fix and putting staff and service-users at risk".
Last year the National Audit Office revealed that financing public projects via PFI costs 40% more to the public purse than traditional public borrowing and the outstanding payments still due in unitary payments to the various PFI Consortia across the UK amounts to £200 billion. Think about that for a moment. It is 40% more expensive to use PFI schemes and the private companies involved are still due to receive £200 billion more from the public purse. Brexit is a picnic compared to this scandal.
Schools cannot recruit staff, purchase materials and carry out essential repairs because of PFI payments. In Scotland’s education sector alone some 10% of the annual budget which should be providing enough teachers and equipment for smaller class sizes and improved educational attainment for all is instead being stolen to pay off PFI debts. An incredible £434 million is being diverted away from the education of the children each year and poured into the pockets of private firms. The schools' refurbishment programme in Glasgow under PFI delivered work valued at £225 million but cost £1.3 billion and well over £700 million remains outstanding. The Edinburgh schools programme, dogged by problems and unsatisfactory safety, is valued at £337 million but under PFI costs £1.6 billion. Almost one billion remains outstanding.
PFI is criminal in all but name. Apparently Corbyn’s Labour manifesto will include a commitment to bring all outstanding PFI charges in-house, effectively nationalising those debts. That would certainly relieve NHS Trusts and schools from crippling payments but the debts would still exist. Much more progressive, and something the first elected government of an independent Scotland must do, is cancel these debts.
Use the sovereign power of the respective English and Scottish parliaments to cease forthwith any further PFI payments to the private consortiums across the UK and the world that have been ripping off the public services for decades.
The legendary Highwayman Dick Turpin was famous for robbing travellers on the public highways. He had the decency to wear a mask. The PFI consortiums are even bigger robbers and all they wear is smart suits and ties. These PFI debts are illegitimate and the contracts must be cancelled immediately by an incoming government of independence releasing over £30 billion of public funds for real and necessary investment in schools and hospitals not making rich businessmen and women even richer on the back of the criminal PFI Schemes. Address the PFI scandal. Cancel the payments.
*Views and opinions, expressed in the article are those of the author and do not necessarily reflect those of Sputnik.