By John Pickard
Public information published on the Treasury’s own website is a crushing vindication of the truth that Private Finance Initiative (PFI) schemes are a scam that are crippling the NHS and other public bodies. A few years ago it was possible to find the official Excel spreadsheet on the Government website that contained all the current PFI projects and it was possible to see how much money is being made by the private sector.
The most recent spreadsheet which in my possession, given the file path pfi_current_projects_list_march_2013 was downloaded from the Government’s Treasury website. It is hard to find an up-to-date spreadsheet now, perhaps because the Tories’ policy of “transparency” opened a can of worms that they are now trying to close.
In any event, even the 2013 spreadsheet is extremely revealing. It lists over 700 projects, each one showing important data, including the project name, the government department involved, the parliamentary constituency in which the project is being undertaken, the date of ‘financial close’ (the effective start of the contract), the final date of construction and the first date of operation and the period of operation of the contract in years. The longest contract is 50 years, the shortest under five, but the average is over 26 years.
Crucially, the spread also shows, for every one of the projects in operation, the initial capital costs and the charges paid out every year up to the end of the contract, the latest shown being the financial year 2049-50, thirty years from now. Anyone who knows how to insert formulae into a spreadsheet can find some very interesting data.
Roseberry Park Hospital, Middlesbrough
We can take a couple of examples. Roseberry Park Hospital in Middlesbrough, the spreadsheet tells us, was build for the Tees, Esk & Wear Valleys NHS Foundation Trust. It was opened in March 2010 and was constructed with an initial capital cost of only £74.5m on a contract for 29 years. In the first ten years of its operation, up to this year, the private contractors have received £82.5m in payments. In the next 18 years another £194m is due to be paid.
That means on an initial capital cost of £74m, the contractor will receive nearly £270m over 29 years. It is true that some of the ongoing payments relate to ‘services’ like cleaning and maintenance, but even on a wildly minimal reckoning, this is represents a monstrous scam that is fleecing the NHS. What is worse, is that at the end of the period of the contract, the hospital will not be the property of the Foundation Trust and payments will have to be negotiated again from scratch.
Selly Oak Hospitals in Birmingham
Let us take another example, from a larger project. Selly Oak and Queen Elizabeth Hospitals, in Birmingham, was a much larger contract. It involved several buildings and sites. It started operations in June 2010 and is contracted to run for 35 years with an initial capital outlay of £627m.
In the first period of the contract, eleven years, £554m has already been paid to the contractors. But there are still has 25 more payments to be made and these will amount to an additional sum of over £2.17bn. Imagine taking out a mortgage on a house, at exorbitant rates of interest, over 35 years, with the small print in the deal meaning you will not even own your home after the mortgage period! That sums up the scam that is PFI.
New Labour continued Thatcher neo-liberal tradition
PFI deals were first introduced by the Tory government of John Major, but it was the New Labour government of Tony Blair, with Chancellor Gordon Brown a key player, who used PFI on a massive scale, to build hospitals, prisons, fire stations and many other new facilities.
Borrowing money from the state (the Public Loans Board) – even at market rates of interest – would have been a far cheaper way to finance construction. But the neo-liberal traditions of Thatcherism had been willingly embraced by the leaders of New Labour, meaning that the ‘market’ was always going to be favoured against state planning. The private sector, therefore, was bank-rolled at the expense of the state. In any rational society, the policy of New Labour on PFI would have constituted a massive fraud perpetrated against tax-payers. It is interesting that the latter-day supporters of New Labour, those who still infest the Parliamentary Labour Party, have little to say about this huge confidence trick played on the public.
Parasitic nature of modern capitalism
There is a wider discussion to be had about the role of capitalism in the modern era. It may have been true in the nineteenth century that capitalist entrepreneurs took ‘risks’ and ‘ventured’ to put up their own capital to make profits at a later point. But the idea that capitalism today is based on ‘risk’ or ‘venture’ or entrepreneurship is a complete myth. The overwhelming majority of profits made by big corporations today rely on a parasitic attachment to the state, leeching off state contracts and hand-outs. It is a process reinforced by a ‘revolving door’ of careers between the boardrooms of business, parliament and the tops of the civil service. The policies of Boris Johnson, throwing rich contracts to all his business friends on coronavirus-related contracts is only the latest illustration of that.
Owning equity in PFI contracts is such a lucrative business today that there is even a secondary market in PFI equity: owning shares in a PFI contract is a golden ticket to easy money.
The net result is that there is a river of money flowing every month from the NHS into the private sector. Not only is the NHS crippled by this burden of debt, but so too are local education authorities (for PFI schools), local fire services (new stations) and the Ministry of Justice for prisons.
Using formulae to tot up the data on the government spreadsheet shows the following. The total capital outlay on all the 720 projects itemised amounts to £54.7bn, but over the total period of payment – some up to 2050, remember – the total payments amount to well over £300bn. That is some scam!
Labour should make the PFI scam a key issue
The Labour Party needs to make this issue a key issue for the NHS and the public sector. According to a recent public opinion poll, 76 per cent of the public support a ‘fully public’ NHS. That needs to be written into Labour policy.
The 2019 Labour manifesto only hinted at righting this particular wrong. It correctly referred to stopping the public being “ripped off” by PFI, but then it talked about taking back all PFI contracts “in time”. But what does that mean? Two years? Thirty years? It is not good enough. Labour must call for the complete cancellation of all current PFI contracts without any further compensation and the facilities should be turned over to the NHS, local authorities and other public bodies.
Nowadays, it is difficult to find the latest version of the official government spreadsheet on PFI projects. I have tried and failed. No doubt any Labour MP can get it by asking the Ministry of Health. As an alternative, if any reader wishes to e-mail the editor of Left Horizons, we will arrange to have a copy of the 2013 spreadsheet sent. As we have shown above, it is still very revealing. Anyone can use the spreadsheet to find their local hospitals and schools and can raise the issue in their local Labour Party and trade union branch. This scam has got to end!
Cancel all PFI scams and bring all hospitals, prisons, schools and PFI projects back into the public sector with no further compensation.
August 11, 2020
