PFI (Private Finance Initiative) has to be the biggest con in history, they represent without doubt the worst of fiscal management and are the biggest deception on the British people in history. A big claim yes, but nonetheless any plain thinking straight talking person has to arrive at the same conclusion.
Started in and around 1993 by the then John Major Conservative Government, originally an idea from Australia, these contracts were promulgated and flourished uncontrollably by the subsequent Blair and Brown Labour Government throughout their term in office.
PFI is a methodology of creating `public-private partnerships’ by funding public infrastructure projects using private capital, this, you would think, is a sensible approach in these cash strapped austerity crippling times to providing much needed buildings and services that a growing population would need and demand. However…
PFI and the mind boggling sums involved have been left off the balance sheet, the monies being re-paid, often over 25 year periods are quite simply a debt. These debts are not reflected within national debt figures which are already stupefying. The debt involved has therefore been kept quiet, under the radar and although, it would be claimed by those involved, in the public domain, the truth is that this debt has very definitely been kept out of the public eye.
For instance, a recent freedom of information request I made to the South Tees Foundation Trust came back with the following:
In 1999 the then South Cleveland Hospital was to be re-built and the contract with Mowlem (John) and Co was signed, although the PFI contract started in August 2003, when the hospitals moved to the new site.
The amount borrowed was £151million. Paying this debt back (excluding VAT) at RPI rates costs £55 million a year. The total amount repaid for the £151million worth of hospital is………are you ready…….£985 million pounds.
South Tees hospital trust could have built six hospitals for the price they will pay for one.
The national audit office looked into PFI in 2003. They concluded that they provided good value for money overall. The Parliamentary `Treasury select committee’ recently thought that PFI should be brought into the balance sheet…….God forbid as the addition to the national debt would simply be uncountable. They went on to say that the Treasury should remove any perverse incentives unrelated to value for money by ensuring that PFI is not used to circumvent departmental budget limits, (which of course they most certainly do). The committee also called on the OBR (Office of Budgetary Responsibilities) to include PFI liabilities in future assessments of the fiscal rules. (They couldn’t and wouldn’t dare as the national debt would double, fiscal forecasting would be swayed and bear no resemblance to current forthcoming planning).
St James Hospital in Leeds cost £265.2 million to build, re-paid over 25 years the total cost for this one hospital will be £945.9 million. This is a profit to the money lenders of 356.7%
The Wharfedale hospital cost £17 million to build, the total cost for this hospital will be £70 million a 411.8% profit………pay day loans are cheap compared to this. The money lender at the corner of the street in your neighbourhood would dream of profits on this scale.
These PFI contracts are not limited to hospitals, oh no, police stations, fire stations, railway stations, schools and the Ministry of Defence are involved. The most expensive PFI contract is with the MOD, the Future Strategic Tanker Aircraft (FSTA) has a capital cost of £2.7 Billion and by the end of the contract 2034-35, £105 billion will have been paid.
Amyas Morse, the head of the National Audit Office on 17th June 2010 concluded;
“Our examination of hospital contracts indicates that most are well–managed and achieving the value for money originally envisaged. This is a positive result. In the longer term, trusts will need support from the Department of Health to ensure that current good performance is maintained, that efficiencies are sought and that an appropriate share of benefit comes back to the public sector”.
In other words, the words of a down to earth Yorkshireman, the NHS hospitals who are under a PFI contract are making the re-payments on time but they will have to make cost cuts to maintain the debt and ensure the payments are kept up to date. They will need to keep cutting costs to maintain these enormous debts for some years to come.
The total debt owing on 719 projects is……. ready……..£301,343,154,097….. Staggering.
Local authorities and NHS trusts, the MOD and others have entered into arrangements which are beyond normal comprehension.