The case against (and for) private finance initiatives

Readers and union officials air their views on PFIs in the wake of Carillion’s collapse

A dinner lady at a primary school

‘Refuse collectors, hospital porters and school dinner ladies see their wages redistributed as corporate profits,’ writes Andy Prendergast.
Photograph: Don McPhee for the Guardian

George Monbiot (Opinion, 17 January) asserts that the PFI bosses fleeced us all. Twenty years ago there were exceptions. Oxfordshire county council and many other councils recognised its deceptive creative accounting and avoided using PFI.

Central government does not distinguish between irresponsible borrowing for revenue and responsible borrowing for capital. Both are in the public spending borrowing requirement (PSBR) which central government wished to present as low (a high PSBR leads to austerity to reduce it), so it restricted local government’s borrowing and used PFI to disguise its own borrowing.

Councils saw PFI as wasteful, so financed new care homes by setting up charitable trusts which were allowed to borrow, schools by selling playing fields for housing, and similar devices. So we avoided being fleeced by PFI and got value for money in our building projects.
Dermot Roaf
Hon alderman, Oxfordshire county council

The drastic 40% cut to local government since 2010 is one factor in the many problems facing our public services. The onslaught on local education authorities (LEAs) is a major motive for expanding academy trusts (Failing academy trusts ‘stripping’ school assets, committee says, 18 January). The pressure to use PFI funding has hit schools, stripped of LEA support, as well as hospitals and universities. The attack on local government financing is ideological and austerity-inspired. Yet, like PFI, it is ultimately counter-productive, increasing costs, and decreasing quality of service.
Sheila Cross
Newby Wiske, North Yorkshire

May I suggest that George Monbiot could have expanded his paragraph about the origins and development of PFI to emphasise that the increasing use of such projects by successive governments was mainly to disguise necessary capital spending by keeping it off the UK national accounts. While we have all been fleeced, not all of us have been taken in by this sleight of hand on apparent reductions in tax and spend over the last 25 years. However, it is perhaps the prime example of a majority of voters being seduced by promises of Scandinavian standards at American tax rates. What hope that such impossible realities may feed into a more informed discussion about Brexit in 2018? 
Hugh Whatley

I am surprised that Larry Elliott (Opinion, 18 January) does not link John Major initiating PFI projects with his ratification of the Maastricht treaty which imposed limits on public spending in 1992. The treaty effectively outlawed public borrowing on major infrastructure projects, allowing the City of London to successfully lobby the government to introduce PFI.
Ted Watson

There is certainly a case to be made against the PFI deals we have – both Larry Elliott and the substance of your front page article (18 January) reporting on the National Audit Office’s investigations make good points. But your headline on the online version of that story (Taxpayers to foot £200bn bill) takes no account of what we get for our money (hospitals, schools and services), nor of the fact that a large chunk of the headline figure would have to be paid anyway. It then ignores the fact that the actual value of the cash to be paid over the next 25 years erodes with inflation. To make matters worse, you compare it to the cost of financing the NHS for 20 months, without pointing out that one of the reasons for the PFI bill is that it is financing the hospitals and services of the NHS.
Stephen Wilcox
Amersham, Buckinghamshire

Though Larry Elliott makes a number of good points, it is a pity that he seems to accept without question the argument that taxpayers get a good deal by getting the private sector to provide services more cheaply. As a union official with a significant amount of experience in dealing with companies delivering public services under PFI deals, we find that any savings are almost exclusively at the expense of the workers on the contracts, with cuts to pay, terms and conditions and pensions. Though Elliott concedes that the services delivered by these badly paid and unmotivated staff are almost always worse, he neglects to mention that when the additional costs associated with higher in-work benefits for workers who previously didn’t need them are factored in, even the modest claims of savings made disappear. As such, PFI represents nothing more than the latest in a long line of government initiatives whereby refuse collectors, hospital porters and school dinner ladies are seeing their hard-earned wages redistributed as corporate profits and executive bonuses. As policies go, I can think of few quite as regressive.
Andy Prendergast
Senior organiser, GMB

A feature of PFI is the ability of companies to “flip” their assets by moving or selling them to investors based in tax havens so the UK government will still have to pay leasing costs to overseas firms that bought Carillion assets, or risk being sued. Far from being deterred by Carillion’s demise, the international financial community is keen to invest in public-private partnerships being promoted by the World Bank to fund what the G20 refers to as the “infrastructure gap”: massive projects to facilitate the extraction of oil, gas and minerals from the global south. It is estimated that $50tn to $70tn will have to be raised by 2030 for this purpose, hence the re-engineering of infrastructure finance to make it more attractive to institutional investors by the inclusion of state guarantees and the ability to securitise and package the lending portfolios for trading. In the context of a global derivatives trade that is already worth $1.2 quadrillion, the potential for financial meltdown in this mega-PFI scheme will be apparent.
Bert Schouwenburg
International officer, GMB

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