What’s wrong with PFI?

Mar 22, 2011

PFI Projected cost in UK

Classical economics holds that the private sector is more productive and efficient than government because of competition. But this is simply false. And there are aspects of PFI that completely disprove this assumption.

PFI projects always spend more money than government would on servicing debt. This is because PFI consortium’s credit ratings are always worse than the UK government’s. A UNISON report says that while the state enjoys low interest because of its AAA credit rating, PFI projects typically have a BBB rating, meaning they spend more money repaying interest.

Another supposed benefit of PFI is that it transfers risk to the private sector. However, failing PFI projects have been bailed out with public funds. Two years ago ministers agreed a PFI bailout scheme to help consortiums who were struggling in the credit market. The BBC reported that at least £2 billion was ear-marked by the Treasury in loans for struggling consortiums.

Vince Cable said then: “PFI has now largely broken down and we are in the ludicrous situation where the government is having to provide the funds for the private finance initiative.”

The terms of PFI contracts can distort the priorities of provision of service. George Monbiot has written that when in debt, PFI hospitals “must be re-shaped around contractual, not clinical, needs.” If struggling to make repayments, PFI hospitals are forced to make cuts to frontline services like beds, doctors and nurses instead of less vital work like construction maintenance.

This has led academics like Professor Allyson Pollock, director of the Centre for International Public Health Policy at the University of Edinburgh, to describe PFI as “the gift that goes on taking”, noting: “Its genius is how it diverts public resources to private interests”.

Our campaign.

Understanding the internal mechanics of PFI is difficult. The specifics of which companies are involved and how the public has been consulted (if at all) are tricky to unearth. There are some clues which are routinely published by Partnerships UK (an arm of the Treasury) but there are many missing pieces in the puzzle.

Two key weapons in our armoury are the Freedom of Information Act (FOI) and the Environmental Information Regulations (EIR). The effective use of these two laws will grant us access to previously private government information and let us unravel the web of profit being spun with public money. GR is excited to be back amongst it and announce the start of a comprehensive investigation into the murky world of PFI.

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