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The Idiocy of Private Finance Initiative Funding

The Centre for Health and the Public Interest (“CHPI”) has recently published a report called The return of PFI – will the NHS pay a higher price for new hospitals?

The report reveals the extent of the cost and idiocy of PFI deals by governments.

In Wolverhampton several years ago New Cross tried to enlist the support of the then 3 MPs (messrs Turner, Purchase and Marris) for a massive PFI scheme there.  We point blank refused, because PFI is an expensive millstone.  We succeeded:  apart from the relatively small PFI for Radiology (signed before the 3 of us were MPs together), as far as I am aware there is still no PFI at New Cross.  (Contrary to what some think, the Heart/Lung Centre was not PFI-funded.)


CHPI describes itself as “an independent think tank committed to health and social care policies based on accountability and the public interest.  The Centre seeks to frame the policy debate in a way that is evidence-based and open and accessible to citizens.”  They found that:

  • About 2% of the NHS budget is spent each year an making the annual payments for PFI hospitals and medical facilities
  • NHS hospitals with a PFI contract have had to cut their spending on staff and equipment because of the burden of PFI repayments
  • NHS hospitals with a PFI contract are more likely to get into financial difficulty
  • There is profiteering in some PFI schemes, with some investors getting a 40% to 70% in annual returns (= interest)
  • The Coalition government continues to hide PFI deals, by not counting them as public expenditure nor as part of the fast-rising National Debt 
  • The Coalition government’s reform of PFI is called “PFI.2”, and it will be even more expensive!

PFI is a nonsense.  Under PFI, a private company itself pays for a government building etc., and then runs it.  In return, the company makes an annual charge to the government for that facility.  The lengths of the agreements range between 30 and 60 years.

Basically, it’s a landlord/tenant agreement, with the landlord being the company and the tenant being the government.  Like any tenancy agreement, the owner of the property gets it paid for by the tenant.  That’s why so many people want to buy their own homes, so they’re not paying rent for evermore.

The alternative is much cheaper:  the government borrows the money – at a much lower interest rate than a private company can – and builds and runs the facility itself.  For government, the drawback is that such borrowing would have to be revealed as part of the National Debt. 

Conversely, PFI is not listed as part of the National Debt.  So successive governments have used PFI to disguise their real borrowing.  Disastrously, the costs are far higher, and will haunt future generations.  It’s a bit like telling your mum that you did not spend £150 on that new jacket.  You hope that you can avoid telling her is that you bought on the drip (meaning the ultimate cost will be about £300 ... ).

The Labour government used PFI extensively; again, to hide government borrowing.  I always publicly opposed PFI, and demanded that such borrowing be counted as part of the National Debt.  They refused. 

When they were in Opposition, the Conservatives also rightly demanded that PFI be counted as National Debt, and complained about its cost.  They promised that in government they would not use PFI, and that the existing schemes would be counted as National Debt.  As is sadly so often the case, now they’re in government the Conservatives have broken both of those promises:  they have been using PFI a great deal; and they do not count it as National Debt – no doubt because (even without counting PFI) the National Debt has risen by over two-thirds in just 4 years under this government.

Now, the Tories have introduced an updated version of PFI dubbed “PFI.2” – which the CHPI report finds will cost even more.  

You couldn’t make it up …

Rob Marris, Labour Candidate for Wolverhampton South West

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