Thursday, 2 October 2008

PFI: People Filched Indiscreetly

Politicians' lack of foresight never ceases to amaze. On climate change, even when a former Chief Economist of the World Bank advises to "spend 1% of global GDP to address climate change now or global GDP will be 20% lower than it otherwise would be", still the wheels of change are turning so slowly, if at all.

On Public Finance Initiative (PFI), New Labour has since 1997 enthusiastically embraced John Major's idea to open up the public sector to private competition. This is in spite of the fact that schemes run under PFI tie the tax-payers of tomorrow into decades of payback and end up costing far more than they would had they been directly paid for by government in the first place. As things stand today PFI contracts in the NHS alone will provide private companies with £23bn profit over the next thirty years.

In Wales there are 42 PFI projects with a capital value of over £1bn. Neath Port Talbot Hospital was built under PFI at a cost of £66m. The tax-payer will end up paying the private company £300m, nearly five times the original cost. St David's Community Hospital in Cardiff will cost nearly eight times as much to the tax-payer as the private company spent on its development.

It seemed that the One Wales government had seen the iceberg as it ruled out the use of PFI in the Welsh health service during the third term. (It is unclear why One Wales rules out PFI in the NHS and says nothing about its drawbacks when it comes to building roads or schools.) Now, sadly, Captain Morgan might be tempted to steer the good ship Cymru onto the rocks. The National Assembly's Finance Committee has produced a report stating that Wales "needs to develop partnerships with the private sector" in order to deliver "the investment and modern public services that Wales needs."

Government both local and national has long contracted private companies to build roads, prisons, hospitals, schools, etc., paying for them directly out of taxation. PFI works by getting private companies to build roads, prisons, hospitals, schools, etc. and then renting them to the government, which pays the rent with taxation. As any property developer knows, over time renting will bring in much more cash than selling.

Registered private companies have a legal duty to their shareholders to maximise profit. In other words, profit comes before everything else, including people. Profit comes before not only the people who use these services but also those who work there - the teachers, nurses and doctors. In the public sector, which is historically where most schools and hospitals have been, people come first.

Government, elected by the people, also should put people first. One might argue that it is concern for people that leads to PFI being used to construct new roads, prisons, schools and hostpitals. Yet ultimately the people will pay more - far more - than these things are worth. As with life under the credit boom, we are told that we can have it all: put it on the card! Eventually though we'll have to pay for it, most likely through higher taxes. Yet higher taxes now could have meant paying £66m for Neath Port Talbot Hospital directly in the first place rather than £3oom a few decades down the line.

It's short-sighted, it's irresponsible, and it sucks.

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