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PFI is Dead – Long live PFI

July 25, 2012

So the Tories having castigated Labour for latching onto David Willetts’ bright idea are now continuing PFI for different reasons – see private Eye leader below. Gordon Brown’s motive was to make the government borrowing figures look better (at great cost). By borrowing to lend to the PFI companies this presentational  advantage is lost. Will it save the taxpayer money? Not unless the contracts are renegotiated. The Tories couldn’t be doing it merely to help their friends could they?

From Private Eye No. 1319, 27 July – 9th August 2012, leader

THE resuscitation of the dreaded private finance initiative was craftily hidden in George Osborne’s announcement last week that he was using his “fiscal credibility to unveil new infrastructure investment”.

Grabbing the headlines was a speculative initiative, generously estimated at £40bn, for the Treasury to guarantee private investments if the right projects come forward. But more realistic was a plan to lend taxpayers’ money to ensure that 30 public/private partnership infrastructure projects worth an estimated £6bn in the next 12 months can go ahead”.

This subtle re-wording hid the fact that these schemes are actually PFI projects -listed as such on the Treasury’s website – and almost all were drawn up under the last government. Far from dismantling what in November 2009 Osborne called Labour’s totally discredited” use of PFI, he is breathing new life into it.

The slight difference is that the PFI companies running the contracts will now borrow not from the markets but from the taxpayer, then rent the infrastructure back to the taxpayer for 30 years or so. The companies will become very expensive middlemen.

So why doesn’t the government simply use the £6bn to construct and run the various hospitals, schools, roads and sewage systems itself? The truth is that those building infrastructure and their many consultants have, after mainlining PFI for around 15 years, become hooked on it. And notwithstanding Osborne.s position of three years ago, the
Treasury retains an alarming faith in the scheme
. As the Eye has regularly pointed out, the Whitehall unit responsible, Infrastructure UK, is staffed entirely by PFI industry stalwarts.

Worst of all, the money to fund the £6bn of PFI schemes will come from “existing departmental capital budgets”. This means there will be no more in the various Whitehall pots for infrastructure above the £6bn in the pipeline anyway. So the £6bn simply goes from one pocket to another and one with a big hole in it, at that. So much for “fiscal credibility”.

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