People vs PFI gives a huge welcome to John McDonnell’s speech at the Labour Party conference today calling an end to the disaster of the Private Finance Iniative. It is recognition that PFIs not only burden public authorities with debt, they have also been a major vehicle for the privatisation of key elements of the public sector, enabled, promoted, and subsidised by HM Treasury policies.
Commenting for The People vs PFI, campaigner Joel Benjamin said:
“It’s a scandal that hospitals and schools make cuts to staffing and services, while extortionate repayments they are due to pay on their PFI contracts are ring-fenced, even subsidised by Central Government.” McDonnell promised that Labour will sign no more PFIs or similar arrangements. He also tackled the issue of tax avoidance by investors in PFIs:
“….never again will this waste of taxpayer money be used to subsidise the profits of shareholders, often based in offshore tax havens. The government could intervene immediately to ensure that companies in tax havens can’t own shares in PFI companies, and their profits aren’t hidden from HMRC.”
Many of the investment funds with shares in Special Purpose Vehicles (the companies which hold the PFI contracts with public authorities) are registered in offshore tax havens. It’s high time the companies which benefit from government contracts pay their share of taxation.
People vs PFI reported previously how HMRC’s own offices are part owned in offshore tax havens, via a PFI contract.
John McDonnell continued:
“We’ll put an end to this scandal and reduce the cost to the taxpayers. How? We have already pledged that there will be no new PFI deals signed by us. But we will go further. I can tell you today, it’s what you’ve been calling for. We’ll bring existing PFI contracts back in-house.”
There are two ways to bring PFI contracts back in-house: Nationalising the Special Purpose Vehicles through which public funds are pumped into private pockets – a policy supported by The People vs PFI, and buyouts.
Buyouts are hugely expensive and private investors can walk away with their money early to invest in more PPPs. Nationalising the SPVs puts the government, not private companies, in a commanding position, the contracts will automatically become public and various forms of profiteering can be ended. Contrary to some comments on McDonnell’s speech, such as from the BBC’s political commentator Norman Smith, nationalisation would not be hugely costly. In reality, it is the extortionate cost of present PFI financing arrangements that must be fully scrutinised.
UK taxpayers cannot be expected to pay full price when ending PFI contracts: poor building quality and fire safety failings evidenced by Edinburgh Schools, Peterborough Hospital and Chalcots Estate, tax avoidance, interest rate rigging by PFI lending banks and excessive profit extraction must all weigh in the final account.
Analysis of the cost of PFI undertaken by the New Economics Foundation found Scotland would have saved a staggering £26 billion on PFI infrastructure outlay of £40 billion with a National Investment Bank funding infrastructure.
Replacing NHS PFI financing with public finance via a National Investment Bank could have saved the public purse around £52bn across the NHS, or as much as £208bn, where replacing all PFI spending UK wide.