Worcestershire Socialist Party member
School Private Finance Initiative (PFI) debt repayments are set to soar. Already they rise by the higher measure of inflation – RPI, not CPI – but now finance companies warn that they could go up by 10% and more.
It was the Tories in the 1990s who launched PFI, but it was New Labour ‘Mark 1’ under Tony Blair and Gordon Brown that greatly accelerated its use, effectively mortgaging our future. Over a decade on from the proliferation of these schemes, we are facing the consequences.
Under PFI schemes, big business consortia were contracted to build schools, hospitals, prisons and more. These companies raised finance on the open money markets, at a much higher rate than could have been done by public sector entities like local authorities, with all the risk handed over to the public sector. Local authorities, health trusts, etc were tied into 25-30 year schemes to repay that money. Many big business consortia factored in a huge mark-up on the cost of repayments over that period.
In Bromsgrove, Worcestershire, in 2008, global investor Invesis financed the building by BAM Construction of seven new schools, catering for over 2,000 pupils, at a cost of £80 million. But by 2038, the council will have paid £300 million (up from a 2017 estimate of £240 million). Last year, the multi-national big-business Royal BAM Group, of which BAM construction is part, made €350 million profit, and paid out over €44 million in dividends to its shareholders. This is big business profiting from our cash-starved public services!
Education has faced massive real-terms cuts since 2010. Primary class sizes are the highest in Europe. And secondary class sizes are the highest since records began almost fifty years ago (1977). More than a million children are taught in classes with more than 30 pupils.
£22 million deficit
Worcestershire local authority schools now have a combined deficit of £22 million, and the ‘high needs block’, which funds provision to pupils with Special Education Needs and Disabilities (SEND), has a £40 million deficit. 30 schools in Worcestershire have year-on-year deficits, and 86 are projecting a deficit this year.
With the shortage of places in special schools, local authorities are frequently forced to commission places in independent schools set up expressly to cash in on the crisis. Yet places in independent sector SEND schools often cost more than double the places in council schools or academies.
The Tories stopped the use of PFI after Carillion went bust in 2018, so embarrassed were they by the Frankenstein’s monster they had created, which had been galvanised into life by New Labour.
PFI schemes should be ended and the buildings handed back to local authorities at no extra cost to them. However, these schemes have huge penalty clauses factored in and the big business consortia have never shied away from triggering them.
Our solution is simple: if they won’t go without triggering those penalties, they should be brought into public ownership with compensation given only on the basis of proven need. We call on a future Starmer-led government to end all PFI contracts in this way and to refund the huge amounts of debt that have grown up over the last 20 years to public sector bodies as a result of PFI.
Starmer’s Labour
However, the Labour Party has ditched all the policies it had under Jeremy Corbyn. We can’t trust any of the main parties to eradicate profiteering by big business from the public sector. That’s why the programme for dealing with PFI schemes will be part of the campaign by Trade Unionist and Socialist Coalition (TUSC) candidates standing in this year’s local and general elections.
Education unions need to make these demands in the elections. That is why National Education Union (NEU) members should vote for Sheila Caffrey for vice-president. With a fighting socialist at the head of the third-largest union in the country, the fight to expose the damage PFI has done to education and the need to end all schemes will remain a central part of our fight to secure full funding for all schools and colleges.
Vote Sheila Caffrey #1 for NEU vice-president
See ‘NEU vice-president elections: Vote Sheila Caffrey – 1’ at socialistparty.org.uk to read Sheila’s fighting programme.
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