Link to this page: http://www.socialistparty.org.uk/issue/489/2457
Private Finance Initiative
A double bonanza for big businesss
A NEW industry buying and selling refinanced Private Finance Initiative (PFI) assets is proving to be enormously profitable for companies wanting to make a quick almost risk-free buck. The House of Commons Committee of Public Accounts has recently produced a report and recommendations on PFI debt refinancing.
Adrian O'Malley Branch Chair Wakefield & Pontefract Hospitals Branch (Personal capacity)
While expressing concern at the vast amounts being made through refinancing, the Committee Chairman, Edward Leigh MP, puts the trend down to "a painful lack of commercial experience" on the part of the public officials involved and says that they have been "outwitted by their commercially sophisticated private sector counterparts".
This report shows what trade unionists have known all along, ie that PFI is about siphoning tax payers' money into big business bank accounts. But this transfer of wealth from workers to the very rich is not accidental or due to a lack of experience, but is at the very heart of the privatisation of public services carried out by this Tory Labour government as it was under Thatcher.
The "PFI industry" comprises 750 schemes costing £54.5 billion, but at a long-term cost to the tax payer of £160 billion. Having already ensured enormous incomes from these schemes, finance companies are selling them on at even more astounding profits.
The government was forced to take action when the Norfolk and Norwich Hospital PFI scheme was refinanced at a lower borrowing rate, making the private sector consortium involved, Octagon, £115 million profit, increasing the rate of return from 16% to 60%!
Despite attempts to tighten up the procedures via a "voluntary code" and ensure a cut for the tax payers of up to £200 million, this report shows that only £93 million has been collected.
This sickening display of corporate greed being satisfied is made even more galling when you consider that Gordon Brown is insisting that public bodies make 2.5% "value for money" efficiency savings every year resulting in threats to workers' jobs.
Anyone looking at this report hoping for recommendations which will end this rip-off will be disappointed.
The 11 recommendations are mainly about tighter control of the refinancing side of PFI and more training for public sector managers in dealing with the private sector. No more can be expected of a committee comprised solely of MPs from the main pro-PFI parties who stand for capitalist policies of putting big business profit first.
The billions of pounds siphoned off in profit would be better spent on improving services to working people and on a living wage for public-sector staff. Socialists must argue for the abolition of PFI and re-nationalisation of the schools, hospitals, roads, prisons etc. currently managed by PFI consortia.
PFI = bosses gain + workers lose
THE PUBLIC Accounts Committee reports that no less then 40% of PFI contracts have been sold off by their original owners for vast amounts of money. The PFI Infrastructure Company Ltd, for example, set up by Richard Jewson, owned stakes in 22 schools and hospitals across Britain. It is being taken over by a private equity company Infrastructure Investors, run by Barclays and French bank Société Générale.
This will net Jewson a fortune to go with the money he makes as chairman of Octagon Healthcare (see article above). Jewson's fellow director David Steeds was in on PFI from the word go, running the Tories' version. By coincidence, reports Private Eye magazine, the group buying his operation is headed by Sir Adrian Montague, who masterminded PFI under Chancellor Brown in 1997.
These 'infrastructure' experts are in for a fortune. Workers and users of public services are likely to pay.
In The Socialist 31 May 2007:
G8 Summit protests
Socialist Party campaigns
International socialist news and analysis
Socialist Party news and analysis
Socialist Party feature
War and terrorism
Marxist analysis: history
Socialist Party LBGT
Socialist Party workplace news