When the Labour party won the 1997 general election, they
inherited a Britain where schools and hospitals had suffered from decades of
neglect and under investment. Not all of this was Thatcher’s fault. However the
trashing of the economy, creating firstly the deepest recession and secondly
the longest recession of the 20th century alongside a public
expenditure cuts policy certainly did not help. Apart from selling off state
assets and spending the money on current expenditure rather than infrastructure
investments, we may have emerged from Thatcher’s experiment with some benefits.
We got rid of some old inefficient industries, freed the financial world from
many constraints and moved on with a new confidence.
In the last years of John Major’s government a new idea was
born, the Private Finance Initiative. The Conservatives were cautious but the
new Labour government seized on PFI with enthusiasm. In accounting parlance,
PFI is usually off balance sheet, according to GAAP (Generally accepted accounting principles). A huge advantage, as you do not have to admit
to what you are spending, even to yourself.
A couple of years ago I had reason to spend a few days in my
local hospital. The experience was so much better than I expected. The hospital,
all shiny and new, showed what was possible under a well funded health service.
At the time I thought it the best hospital in the world. The hospital was
completely rebuilt on PFI funding, with a 30 year contract. The hospital valued
at £312 million would be paid back at £50 million a year rising to £100 million
by 2041. That’s a total repayment of £2,500 million. Maybe it was the best
hospital in the world. It’s certainly one of the most expensive.
When the coalition took over in 2010 they immediately
cancelled all PFI developments that had not been contractually committed, and
froze other contracts in progress to await review.
So, why did two governments take such a radically different
view?
Consider the need to cut the deficit in 2010. In 2010 alone
the taxpayer was committed to paying:
Year 12 of
New District Hospital, Newark
Year 11 of
New District Hospital, Swindon
Year 10 of
Cumberland Infirmary, Carlisle
Year 9 of
Russell Hall Acute Hospital, Dudley
Year 8 of
Calderdale Royal Hospital
Year 7 of New District Hospital, Coventry
Year 6 of
Newbury & Thatcham Hospital
Year 5 of
Central Manchester University Hospital
Year 4 of
Derby City Hospital
Year 3 of St
James University Hospital, Leeds
Year 2 of
Wakefield & Pontefract Hospital
Year 1 of
Penbury and Maidstone Hospital
Now you
start to see the picture. Just when the banks had pillaged the economy and we
needed to cut our expenditure, we were contractually committed to massive PFI
payments. Only it’s much worse than my example of 12 projects as there are over 170 NHS PFI
projects and over 700 PFI projects across all government departments. The
biggest of these is PRIME and it is worth £9.5 billion. PRIME outsources all D
of E offices, job centres and such. These PFI contracts are not just for new buildings
but for maintenance of the whole property portfolio on a 20 year contract.
The amount being paid to private capital suppliers is rising
each year, and will peak in 2029/30.
Between 2001 and 2008 536 PFI deals were signed off in the
UK. These were valued at £61 billion. In Europe over the same period there were
215 PFI contracts valued at £37 billion. So the UK had almost twice the
contracts in place than all the other EEC countries put together.
The Dutch government use PFI but with strict controls. Only
50% of a project can be funded this way and the maximum term is 4 years.
If we look at Labours 13 years in government, the deficit in
2007/8 before the crash was lower than in the last year of John Major’s
government. At one point Labour even ran a budget surplus. Superficially it
looks like only the banks imploding caused the deficit to spiral out of
control. But given the impact on the economy in 2008, PFI is the inflexible
yoke around our necks.
Still we have some nice new hospitals, some new schools etc.
What a shame we cannot afford doctors, nurses, teachers........
Footnote: When the coalition dropped all new PFI contracts
and where they could froze those already underway, they inadvertently killed
the recovery that began under Labour and caused a further recession until 2012
when they relaxed austerity (while denying in public that they had moved away
from plan A). Sometimes it really is that complicated. George Osborne is
currently championing PF2. You can’t make this stuff up.
It’s difficult to find out about PFI projects in the UK.
They are regarded as commercial in confidence and excluded from freedom of
information. The Hong Kong government are less secretive.
History of NHS
Open Democracy Report (a must read if you value our
democracy)
No comments:
Post a Comment