For more than the last decade, a selection of informed voices have warned about PFI/PPP. But they have done so from the wilderness because every stripe of government bar the SNP at Scottish or UK level has regarded ‘Public/Private Partnerships’—whether rebranded as ‘Private Finance Initiatives’ or not—much the same way as gluttons regard their lunch.
None of the 85 PFI projects in Scotland have been pretty sights. None have gleaned awards or even positive comment, other than in local council or NHS patsy sheets and internal bumfodder. Because almost all were done behind closed doors due to ‘commercial confidentiality’; because punters did not have their pockets felt directly, because your average politician falls over themselves to get another swimming pool or health centre for their patch—whether needed or not—the juggernaut, once started, was effectively unstoppable. It was credit-card-junkydom, shopaholism on a national scale.
It’s hard to blame the huge shoal of businesses that swam towards the smell of major money to capitalise on the many PPP opportunities created by the Thatcher and then Major governments—or even the pod of business sharks who swam in with them. And, fair’s fair, the Tories have always had a penchant for privatisation by hook or by crook whether or not—like the railways—it winds up being an expensive pig’s breakfast for which the public are still over-paying a quarter century later.
And you can almost forgive politicians (whether at the Treasury or the Town Hall) for pushing this wheeze. The former got to provide capital ‘off the books’ so that Irn Broon could claim the UK met debt criteria; the latter got to announce shiny new pork-barrel babies, knowing that poor shmoes running that council decades later would pay for it. Who cared that, in the long run, it cost £3 or £5 or £8 for every £1 of investment. None of the beneficiaries would need to pay for it. Sweet.
For Old Guard Labour, the fact that their party embraced it with such enthusiasm came as a bit of a shock. But Labour members are nothing if not loyal. If rebranding PPP into PFI and peddling the same snake oil to the masses under a different label was going to keep them in power in both Westminster and Holyrood, well…Sweet again. This was, after all Blair’s Third Way; some shibboleths were going to get hurt.
Because the Lib-Dems were complicit under Dewar/McLeish/McConnell in pushing a total of some £5.7bn in PFI in Scotland and, since 2010, have been similarly complicit in Westminster, we have the unedifying prospect of 95+% of our MPs being held shtum about the worst financial deal ever foisted on the public for political expediency.
Wasting public money is usually a headline-grabber, with the MoD leading the field in this particular parade of shame (remember the £4bn write-off of Nimrod replacement aircraft?). But PFI takes the biscuit in both scale and in silence. When’s the last time you saw it mentioned on TV/in the press/by anyone?
Yet, every man, woman & child in Scotland will wind up paying £4,400 each. For nothing.
Let’s discuss the scale of this in Scotland alone. There are 85 live or completed PFI projects across the country. The sum of their capital investment in public infrastructure is £5,692.8 million. By the time all projects are complete, the public purse will have paid £30,755.5 million in so-called ‘unitary charges’ to the private consortia who run the various PFIs. In some cases, the public won’t even own the buildings they paid for.
Now, every investment comes at a cost. The normal public process would be for councils or NHS Trusts to go to the Public Works Loans Board (PWLB) to borrow the money and be charged interest on it. Current rates for a 20-year load are around 2.75%. If all projects had been financed this way, the total interest would be around £2,372 million. Call me innumerate but that looks like more than a £22,000 million over-charge—or a sucker rate of 400%. Not so sweet: even pay day loan companies are a better deal.
And the real horror is that we’re stuck with this bum deal. Several attempts have been made to ‘buy out’ the PFI by offering a lump sum payoff, financed through the PWLB. None have gone any further the falling-down laughing-before-dragging-another-sack-of-dosh-to-the-bank phase. Why would they?
But who’s being dishonest here? It’s not the consortia who are running the PFIs, however greedily and/or ineptly. It wasn’t their fault that McConnell’s executive pitted naive bureaucrats against their slick negotiators, who reamed the public big-style. You make the best deal you can: it’s business—always has been run like that. And it’s not the fault of officials losing an ever-larger slice of their budget, armour-plated against any savings in the unitary charge, who were given much choice in the first place. They got telt.
But those Labour, Tory and Lib-Dem politicians who seized this blinkered opportunity for short-term advantage and—like Brown, Major, McConnell, Kerr, Howe and Lawson—mostly buggered off before the ricketiness of this fiscal house of cards became apparent are the real cuplrits. Some are even directors in companies now raking it in. None are apologetic for mis-selling this fiscal lemon.
But even among those few whose conscience is now uneasy, nobody who’s anyone wants to talk about it at a UK level and, as a result, UK media are largely silent. It is similar to the media approach to disasters: a plane crash in which 100 people die is front-page news for days; the fact that just as many die on Britain’s roads every fortnight gets no coverage. Bias by a thousand omissions.
Only the SNP Scottish Government speaks out and used what limited fiscal wiggle room it had to form the Scottish Futures Trust to provide more sensible financing. Yet even this is caught up in the general unionist tirade of misery about independence and dismissed as posturing. Stewart Hosie MP poses insightful questions in the Treasury Select Committee but he’d be as well going up Soho for a good time for all the coverage.
There are another thirty years to go before the last PFI signed (Dumfries & Galloway Council’s £109m schools project) will be paid off in 2041. Everyone hopes this recession won’t last until then. But it’s lasted four years so far, with no sign of reprieve. How long can councils/NHS Trusts/SEPA/etc afford to keep giving fat lump sums to overpay for public projects as Westminster, the source of this wheeze-gone-wrong keeps paring their income and the equally-squeezed punter simply can’t be charged more to make up the shortfall?