PFI – what it is
and what it’s not.
The PFI is ultimately a kind of project finance, a form of private
sector delivery of infrastructure that has been used since the Middle Ages. The
current private finance initiative was developed in in Australia in the late
1980s and introduced to the UK by John Major in 1992. Tony Blair was persuaded
by the treasury to use it as the main form of funding for public sector
projects. The Trade Unions and the left of the Labour Party always opposed it.
All Parties in Kirklees opposed it but accepted it as the only way to get much
needed capital spending in schools.
Wiki
Definition.
George
Osborne approved 61 projects worth £6.9b in his first year in office.
What it is;
An over
simplified explanation of how it works.
You want to
build a school. The conventional way would be to borrow the money (central or
local government). The school would be built then would pay the running costs
plus the interest and capital on the loan.
The wheeze
with pfi was that a private company borrowed the money, built the school and
was awarded (in many cases a very generous) contact to run the building, the
payments to the contractor pay day to day running costs and interest and
capital payments.
The
“advantage” for government was that it didn’t show up on public borrowing. The
advantage for the banks was that they got a higher interest rate lending to a
private company rather that the government.
The
advantage to the private company, in most cases, is that they could screw the
maintenance contract for excessive profits. (all within the law of course).
The
advantage for the World Bank (who think they are a great idea) is that
Capitalists get to screw the public sector.
What it is not;
A good idea.
If the
service or need does not change it is at the best a costly (though not at the
levels claimed) way of running a facility. Where it becomes disastrous is where
the needs change (as with the Huddersfield and Calderdale Trust), because the
costs of buying out the private company or so high, the operators of the pfi
are restricted falsely from making the “right” decisions.
The
fundamental problem with the NHS. That is a case of central government
underfunding where costs and demand are rising way over inflation.
CONCLUSION
Not all pfi schemes have been a disaster, but most have proved much more
costly than if conventional funding had been used. The Conservative and Labour
Parties are both guilty of an over-reliance on them. Understandably as far as
the Conservatives are concerned, they are a party of Capital, less so as far as
Labour are concerned, they did it please the Capitalists because they wanted to
be seen as right wing.
The government promised a review of pfi schemes, but little has emerged
so far, too many firms associated with pfi might be upset if their guaranteed
excess profit is questioned. What is needed is a program of legal challenges on
the excess, legislation to make the excesses a criminal offence, and
cancelation of bad contacts.
..and it goes without saying – no new pfi contracts.
