A Labour government would bring contracts signed under the Private Finance Initiative back into the public sector, shadow chancellor John McDonnell has announced.
Mr McDonnell told Labour’s annual conference in Brighton that it was a “scandal” that PFI deals will see nearly £200 billion paid to private companies from the public sector over the next few decades.
Under Jeremy Corbyn’s leadership, Labour has already promised not to sign any new PFI deals.
But Mr McDonnell won loud applause as he told delegates: “We will go further. I can tell you today, it’s what you’ve been calling for. We’ll bring existing PFI contracts back in-house.”
The PFI scheme was introduced in 1992 by former Conservative prime minister John Major, but was stepped up significantly under Tony Blair’s administration, when it was used to fund the construction and operation of public sector infrastructure like hospitals.
Under PFI, a private sector consortium funds, builds and maintains a facility on behalf of a public agency, then receives payments over the term of the contract, typically lasting 25-30 years.
The scheme has led to complaints that the NHS and other public bodies are forced to pay many times the original value of the property over the course of decades, while the contracts are frequently sold on by the original consortium.
Mr McDonnell told the Labour conference: “The scandal of the Private Finance Initiative, launched by John Major, has resulted in huge long-term costs for taxpayers, whilst handing out enormous profits for some companies.
“Profits which are coming out of the budgets of our public services. Over the next few decades, nearly £200 billion is scheduled to be paid out of public sector budgets in PFI deals.
“In the NHS alone, £831 million in pre-tax profits have been made over the past six years. As early as 2002 this Conference regretted the use of PFI.
“Jeremy Corbyn has made it clear that, under his leadership, never again will this waste of taxpayer money be used to subsidise the profits of shareholders, often based in offshore tax havens.
“The Government could intervene immediately to ensure that companies in tax havens can’t own shares in PFI companies, and their profits aren’t hidden from HMRC.
“We’ll put an end to this scandal and reduce the cost to the taxpayers.”
Mr McDonnell also announced plans for a cap on credit card interest, which would limit total charges to 100% of the original amount borrowed, as a means of helping three million people in persistent debt.
He called on the Government to apply the cap in the same way currently used with payday loans, adding: “If the Tories refuse to act, I can announce today that the next Labour government will amend the law. You can call it the McDonnell amendment.”
And he announced plans for a Strategic Investment Board, made up of the Chancellor, Business Secretary, Governor of the Bank of England and the new National Investment Bank, to channel funding into keeping Britain up to speed with the “fourth industrial revolution”.
The shadow chancellor was cheered as he confirmed that a Labour government would scrap university tuition fees, overturn Conservative trade union legislation and nationalise rail, water, energy and the Royal Mail.
Buoyed by Labour’s performance at the June 8 general election, Mr McDonnell said that the party was ready to be “a government that can set the political agenda for a generation”.
“We have proved that we are an effective campaigning party,” he told cheering activists. “We now have to prove that we will be an effective governing party. A Government that can set the political agenda for a generation.”
He hailed previous Labour governments which have presided over periods of great change.
And in an apparent bid to heal rifts between the party’s left and centrist wings, he praised not only the administration of Clement Attlee, which created the NHS and welfare state, but also those of Tony Blair and Gordon Brown, often the targets of fierce criticism from Corbyn supporters.
“In 1997, after 18 years of Thatcherism, when whole industries and communities across our country had been destroyed by the Tories and our public services were on their knees, it was the Blair/Brown government that recognised and delivered the scale of public investment that a 21st century society needed,” Mr McDonnell said.
“We should never forget that we are part of that great Labour tradition and we should be so proud of it. So as we now enter the next, new era, the era of the fourth industrial revolution, I tell you it is a Corbyn Labour government that will rescue our country from the long years of austerity. And it will be up to us to lay the foundations of the new world that awaits us.”