Publicly-owned services, not PFI

A report from the Treasury Select Committee has endorsed the long-held position of the Green Party on the use of the Private Finance Initiative (PFI).

The committee’s report said that PFI is “extremely inefficient,” inherently inflexible (especially for NHS projects), and that it is an “illusion” that PFI shields the taxpayer from risk.

The cross-party report also pointed out that the long-term expense of PFI deals is now much higher than more conventional forms of borrowing.

MPs found that the cost of capital for a typical PFI project is over 8% – double the long-term government gilt rate of approximately 4%.

Finally, the majority of PFI debt does not appear in official data. If it were, the UK’s national debt would increase by £35bn, or 2.5% of GDP.

 

Green Party Leader Caroline Lucas MP said, “We need efficient, high quality and publicly-owned services provided in the most cost effective way.

“In opposition, both George Osborne and Vince Cable said that PFI was poor value for the taxpayer. The Chancellor described it as ‘a discredited model’ whilst the Business Secretary called it ‘a dishonest system of accounting, designed to hide taxpayers’ liabilities’.

“Local schools and hospitals should be publicly owned and publicly accountable – not primarily vehicles for private profit.

“Instead, with PFI, we have had businesses build schools and hospitals, and then we pay them several times over for the privilege.

The Green Party opposes private financing schemes, and calls for public funds to be used to build all new hospitals, schools and other public service infrastructure. If the renegotiation of existing privatised contracts is impossible, the government should aim to bring all affected facilities back into public ownership as soon as possible.

 Notes

1. Treasury Select Committee report: http://www.publications.parliament.uk/pa/cm201012/cmselect/cmtreasy/1146/114602.htm

2. The government is committed to paying £200 billion of taxpayers’ money in “user charges” over the next 20 years to private businesses whose capital investment will have been less than £70 billion.

3. Governments can borrow more easily and at lower rates of interest than private companies. Private companies borrow the money to build schools and hospitals at higher rates of interest and then take a profit out of it – pushing costs to between 2-5% above that of the public sector.

4. As PFI contracts usually include punitive cancellation clauses, rents will have to be paid even when hospitals and schools are no longer required in a specific area. To save money, costs will be cut elsewhere and it will be the state-run services that suffer.

5. PFIs can have a lifetime of 30 years. This means that there is no down side for businesses, whose first interest is profit. If it all goes wrong, it is the taxpayer who will pick up the bill.

Published and promoted by Penny Kemp for The Green Party, both at 56-64 Leonard Street, Development House, London, EC2A 4LT.

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