THE BLOG
20/02/2018 17:34 GMT | Updated 21/02/2018 08:15 GMT

The Beginning Of The End Is Nigh For PFI

Seven months on, Labour's pledge to replace PFI looks prophetic

DANIEL SORABJI via Getty Images

So it turns out the much publicised manpower shortage in the British Army is down to outsourcing company Capita’s failure to do its job. It’s not often I applaud The Sun on it’s journalism, but their exposé this week that the army is being crippled despite a record number of would-be recruits attempting to join does us all of us who believe in public services being brought back in-house a favour. Our 82,000 army is 4,000 short of the recruits it needs to function viably. Yet according to The Sun, of the 100,000 who attempted to join last year, only 7,500 survived the 300-day process - most dropping out because of frustration with Capita’s lengthy and impersonal procedures. Seeing this damnation of Tory outsourcing by its usually most loyal of media attack dogs is to watch their own bulldog break from its chains to savage them.

Neither Capita not the Tories’ outsourcing programme is any longer fit for purpose. The Sun’s revelations are welcome nails in the privatisation coffin. Labour’s General Election manifesto pledges to end outsourcing of our public services and replace costly Private Finance Initiative (PFI) with direct public investment was derided by the Tories as unviable last June. Our manifesto pledges are now looking prophetic. Wriggle as they might, the Tories can no longer escape the public’s wrath for the terrible value for taxpayers’ money which PFI projects provide.

Day after day, the Tories are failing the first duty of a government: to protect its people.  Outsourcing is the flip side of the austerity coin. It’s the side that delivers privatised profits to the corporates, the speculative and the downright greedy elite. Austerity is what’s tossed to the rest of us and it isn’t just hurting those at the bottom. It means Britain is now operating on an almost war-footing with just about every citizen vulnerable to becoming collateral damage. In January they imperilled us by banning all but emergency cases us from hospital waiting rooms because our ravished health service can no longer cope. This month, it’s our army that’s revealed as diminished. The collapse of Carillion jeopardises thousands of schools’ futures, halted our infrastructure building and for 20,000 Carillion workers, a future with a diminished  pension is now on the cards. Credit to Labour’s Frank Field as chair of the Work and Pensions Committee for now showing the same dogged determination to hold Carillion’s board to account as he showed to shopping tycoon Phillip Green for his failure of care to BHS employees, whose pension fund had been ransacked prior to its collapse.

The Tories remain desperate to inject some life into this dying outsourcing culture which has seen privateers laugh all the way to the bank - at our expense. From the day John Major started the PFI boom, we were repeatedly told that this was a good way to fund public investment as the private sector took on the ‘risks’. Sadly, New Labour appeared mesmerised by this nonsense. PFIs and outsourcing grew rapidly during the Blair and Brown era. Those of us who continuously argued against this costly way of delivering investment and services were cast aside as ideological deviants.

But as the collapse of our public services - including the very programme by which we recruit to our army - becomes endemic, outsourcing itself is now shown to be the ideological deviant. There are now 700 PFI projects around the UK including for schools, hospitals, prisons and motorways. There is also a very a compelling body of evidence that the costs of these deals outweigh the benefits with £200billion due back to these companies over the coming years for £60billion worth of buildings. PFI is the equivalent of taking out a payday loan to pay for building and running our public services. The annual charges for these deals amounted to £10.3billion in 2016-17 – with around half of this cost being for interest repayments and charges rather than services for the public.

Which is why my union is calling on all Labour MPs to debate and vote on amendments 1 and 3 to the Finance Bill at its third reading this Wednesday. These amendments require the Government to calculate how much would be raised by implementing a windfall tax on PFI companies. And it is for now a pragmatic stepping stone to solving our problem as well as a  means to land another blow on this bad for Britain, Tory government.

National Audit Office (NAO) research show PFI contracts have made the costs of public building projects 40% more than relying solely on government funding. Additional charges, such as insurance and cash requirements, pushes costs up even further. The NAO also highlight the failure of the 2012 Conservative government review of PFI to address any of the concerns about the costs of borrowing or overcharging by these companies. And the real tragedy is that the contracts were designed, as my union warned at the time, to ensure cancelling them would be more costly than remaining with them as clauses were inserted to ensure the lenders and the shareholders be ‘fully compensated’  and no worse off because of Authority Default than if the contract had proceeded as expected.

The contracts also require the Government to cover the interest rate swaps used to ensure that these deals were profitable. The NAO estimate this would add a further 23% to the costs of buying out these contracts. In total it could cost up to £220billion – money which wouldn’t go into our public services but back to these multi billion pound companies and their shareholders. That’s why PFIs have never been worried about calls to cancel their contracts.

We need a Labour government to legislate against this daylight robbery and bring these contracts back in-house. In the meantime, the work of Labour MP Stella Creasy and others to impose a windfall tax is a credible threat now to their excessive profits which thanks to Tory cuts to corporation tax, will continue to increase whilst our services are made more meagre.

The tide is now with Labour. No matter what desperate moves the Tories make to try and save outsourcing, privatisation and PFI, they’ll be a busted flush. The public mood is against them. All Labour MPs must now do the right thing and let the will of the people be heard in Parliament on Wednesday. Let’s hit the outsourcers where it hurts - in their profits. Let’s force them to up their taxes in the here and now whilst also advancing the cause of a more cost effective and democratic way to run our public services and investment in the future. It’s not just in our party’s interest, this is the will of the people! Let’s serve them.