Sunday 10 April 2016

The rip-off PFI fiasco continues

The Private Finance Initiative (PFI) has proven to be a disastrous policy for pretty much everyone apart from the profiteering corporate beneficiaries and the consultancy firms that rake in cash by helping them draw up their rip-off one-sided deals to extract vast sums of money from the taxpayer.

The idea of PFI is that instead of the government funding infrastructure projects directly (using their access to very cheap finance) they get the private sector to borrow the money at much higher market rates, then rent the infrastructure off the private sector on long-term contracts that end up costing many multiples of what the thing would have actually cost to build.

PFI is like the government turning to those parasitical Hire Purchase companies to buy things slowly at five times the price, rather than getting a low interest loan to pay a realistic upfront cost for what they're buying.

In 2011 The 
Parliamentary Treasury Select Committee finally got around to admitting that PFI is as an "extremely inefficient method of financing [public infrastructure] projects", yet one government after another has continued using them because, although they are a rip-off, they provide a means of hiding public spending off the public balance sheet by loading current infrastructure investment costs onto future generations.

The Tories began introducing rip-off PFI deals in the early 1990s and New Labour continued rolling them out because it helped them hide chunks of public spending off the public balance sheet in order to stick to Gordon Brown's absurd and arbitrary "Golden Rule" that public borrowing shouldn't exceed 40% of GDP (a rule the was quickly forgotten about when they found £1.5 trillion to bail out the banks that had gambled themselves into insolvency).

One of the recurring themes with PFI is that the opposition parties criticise it, then as soon as they're in power they begin using it to their own advantage. When the Tories introduced it in the early 1990s Labour politicians like Harriet Harman and Alistair Darling condemned it as a form of stealth-privatisation that burdens future generations with the costs of current investment. When New Labour took power these concerns were instantly forgotten about. Towards the end of New Labour, when they were signing up to one rip-off PFI contract after another, the shadow chancellor George Osborne began whinging on about PFI being a rip-off. When George Osborne and the Tories were enabled into power by the Lib-Dems, he simply re-branded PFI as PF2 and continued using the same kind of rip-off financing deals to load current infrastructure costs onto the shoulders of future generations.

Another recurring theme with PFI is the procession of disastrous projects. From NHS trusts crippled under the financial burden of servicing their PFI debts to local councils being forced to pay £millions in rent and service charges on completely empty PFI schools, PFI keeps proving to be a disaster to everyone but the corporate profiteers.

The latest in this long line of monumental PFI cock-ups is the closure of 17 PFI built schools in Edinburgh over safety concerns, which has left some 9,000 students stranded. The decision to indefinitely shut the schools came after the PFI consortium that operates the schools admitted that they couldn't ensure the structural safety of the buildings after serious structural issues were uncovered during repair work to Oxgangs Primary School where a huge section of wall collapsed in January 2016

The Edinburgh Schools Partnership consortium (Amey, Miller Construction & Bank of Scotland) who are responsible for this fiasco released a public statement that made it sound like they were doing the public a favour by investing why the schools they built are so structurally unsound that they have a tendency to collapse! They shouldn't just be accepting "full financial responsibility for investigating and resolving these issues", they should be accepting full financial responsibility for the alternative childcare arrangements made by the parents of the 9,000 kids who can't go to school because the profiteers who built and operate their school buildings have no idea if they're going to fall down or not.

It's easy to blame New Labour for this situation in Edinburgh because all of those buildings were built on their watch as part of a £360 million PFI, but it's important to note that the SNP government in Scotland has done their own huge splurge of PFI spending too:

The Aberdeen western peripheral route: Capital cost £469m, cost of PFI payments £1.45bn 
City of Glasgow College campus: Capital cost £193m, cost of PFI payments £604m  
Scottish Blood Transfusion Service HQ: Capital cost £33.3m, cost of PFI payments £100m 
● Anderson high school, Shetland: Capital cost £41m, cost of PFI payments £102m
The Tories invented PFI; New Labour created far more PFI debt legacies than any other party during their 13 years in power; the Lib-Dems enabled the Tories back into power and helped them continue using PFIs; and the SNP have signed up to all kinds of rip-off PFI deals since they came to power in Scotland too.

It turns out that the Green Party are the biggest political party in Scotland to actually oppose these appalling rip-off PFI deals. The Green candidate for Lothian Andy Wightman is calling for a full review of all PFI contracts in Scotland. Here's what he said:

"The Edinburgh school fiasco opens up a massive can of worms as to what the true legacy is of years of private financing of core public services. That is why Green MSPs, in the new parliament, will be demanding a root and branch review of all PPP/PFI contracts."
The SNP look set to win a landslide victory in the 2016 Scottish Parliamentary elections, so it looks like PFI will be there to stay. Given their pro-PFI histories it seems very unlikely that the Tories, Labour or the Lib-Dems would be able to effectively hold the SNP government to account on PFI, so if I was a Scottish resident I'd definitely be looking into who my local Scottish Green candidate is at the very least.

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