Julian Huppert: Why I’m supporting calls for a PFI Rebate

Ask most people about the Private Finance Initiative (PFI) and they will associate it with just one individual: Gordon Brown.

In fact, the PFI was introduced by the Conservatives as long ago as 1992, when Norman Lamont announced it in his Autumn Statement. On the surface, it was a simple idea, aimed at increasing the involvement of the private sector in the provision of public services. Rather than simply building public facilities, the PFI enables the design, financing and operation of public services to be carried out by the private sector.

There were obvious benefits to be gained from such partnerships – if they are administered correctly, risk is transferred to the private sector, and the taxpayer does not guarantee the scheme against loss.

Unfortunately, and perhaps unsurprisingly, things didn’t quite work out like that. The huge expansion of such projects under Labour gave the PFI an unenviable reputation for unaccountable profligacy.

In late November, in a bid to increase transparency, the government released a bewildering amount of public spending data. It showed that the bill for PFI contracts had swelled to a staggering £267bn, due to be paid back over the next 50 years. That is a worrying figure on its own, given the state of the public finances, but worse is the likelihood that much of that money will be paid in connection with facilities that are long past their sell-by date. As the British Medical Association warned in 1997: ‘The NHS could find itself with a facility which is obsolete in 10 or 20 years’ time, but for which it will still have to pay for 30 years or more.’

George Monbiot, in a typically forceful article in the Guardian, summarised the situation well: “The cost and inflexibility of PFI is an outrage, a racket, the legacy of 13 years of New Labour appeasement, triangulation and false accounting.” Sadly his proposed solution is typically unrealistic; he suggests we should consider the money we owe ‘odious debt’ – a legal term more usually connected with dictatorships.

As much as I’d like to apply such a term to the regime run by Blair and Brown, such an approach is a non-starter. That’s why I am supporting the Campaign for a PFI Rebate, led by Jesse Norman, the Conservative MP for Hereford and South Herefordshire, and supported by over 50 MPs from all sides of the House. The campaign calls for a voluntary rebate from PFI companies like Serco, Balfour Beatty and some major banks (which are, lest we forget, currently in public ownership).

This is worth supporting because the goal is realistic: a rebate as small as 0.5% could generate hundreds of millions of pounds. And it is important to note that because this money would come from existing contracts, it would not disappear into the Treasury coffers; it would go back directly into the public facilities to which it relates, like hospitals and schools.

I hope you will agree that this is a worthwhile campaign. If you do, please consider writing to one of the companies involved to let them know how you feel. You can find more information on the campaign website, www.pfi-rebate.org.

The PFI scandal is just another example of the toxic legacy that New Labour left behind them earlier this year. It is unlikely we will be able to repair all the damage done, but we can make a start by clawing back some of the money that the previous government was so keen to throw at companies to keep at least some of our spiralling debt off the balance sheet.

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5 Comments

  • I hate PFI as it is obvious profiteering at tax payer expense. In an ideal world I would simply nationalise all PFI contracts and stop paying commercial rates for them saving the taxpayer vast sums. However a PFI rebate is certainly better than nothing, I would also like to see a government commitment not to issue any new PFI contracts.

  • PFI is an elephant in the room. It is public borrowing.
    PFI was one of the most stupid ideas ever invented. A private company may manage a construction project better than a local authority, but what private company can borrow money more cheaply than a government?
    In addition we have situations where, for example, we have primary schools where teachers are not allowed to put pictures on the walls. Not permitted under contract terms.
    Jon is right the whole problem must be dealt with.
    If we are all in this together PFI contractors must contribute to reducing public debt !

  • PFI rebate! Yeah! Chase down the dirty capitalists and, erm, ask for some money back! Woo! Let’s go!

    You are missing the bigger picture, though. I think it is outrageous that bond holders who bought 8% gilts at par continue to receive this exceptionally high level of coupon payment. I think they should give at least 2% of that back. Not to mention the massive capital appreciation that these DIRTY BANKERS have made on our poor beleaguered government. Shall we start a campaign?

    And back in the real world… if you are the UK government and you enter into contracts which you now deem to be unsatisfactory, um, renegotiate them, or buy them out. Stop fannying about.

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