CHANNEL FOUR’S Dispatches programme on 14 August gave a detailed
exposé on the costs of PFI to the public
services. For example, the government can borrow money relatively
cheaply, whereas PFI means that the public sector has to pay a higher
rate of interest.
Derek McMillan
However once a hospital, road or school has been constructed a much
lower rate of interest is possible. This enables PFI companies to
refinance their loans and make millions, sometimes hundreds of millions.
Under pressure they might sometimes pay back a fraction of this to the
taxpayer.
Liam Halligan compared PFI to going on a shopping spree with a
ludicrously expensive credit card. The amounts do not appear on the
government’s books but there will be an almighty payback in the future.
Any student with a loan will know just how that feels.
Financiers openly talk about "sweating" resources. Once they have a
guaranteed income stream from the government they can seek to minimise
their costs. The programme showed many examples of corners being cut in
PFI projects. The public institutions can complain as much as they like,
they are locked into 25 or 30 year contracts with the private sector!
The programme also showed in detail how companies like HSBC legally
avoid paying UK taxes on public-sector contracts. For example, they
transferred a £311 million Home Office contract into an offshore fund.
They also detailed how companies tell their shareholders they’re
making a profit and the taxman they’re making a loss. The profits seem
to disappear into subsidiaries which have no employees but manage to
provide "management services."
Some of these companies are making an extortionate 123% on capital
investments. Instead of locking them up for profiteering, New Labour
award them further contracts. Liam Halligan has done an excellent job
exposing this public scandal. How interesting that HSBC and other
financial institutions refused to buy advertising space around this
programme!
