Farewell PFI ? It’ll be a long goodbye

Tuesday 26th September 2017

The Shadow Chancellor’s pledge to bring existing PFI contracts ‘in-house’ as he put it at the Labour Party conference, yesterday,  is another hope over experience journey for Her Majesty’s Opposition.

John McDonnell said that the public/private partnerships were set to cost the taxpayer £200bn over coming decades and that private companies were making ‘huge profits’.

However, it transpired that this sweeping change may not be quite as thorough as McDonnell suggested. While the delegates might have gone away from his speech with the idea that another huge nationalisation was on the way, it was left to the Labour MP for Darlington Jenny Chapman – who’s also the Shadow Minister for Exiting the European Union – to fill in the detail.

It turns out that far from dragging the whole PFI programme into public ownership, Labour will take them back , she said,“where we can, where it’s most appropriate – they aren’t all uniform deals.”

Well, quite.

PFI works like this –  private firms pay for the cost of building say a hospital or a school, and in return the state makes payments over as much as 25 years for their use. It’s hideously complicated – but then again so is everything to do with  public finance. PFI was brought in by a 1990’s Conservative government and enthusiastically adopted by the Blair administration as well.

Apart from the labyrinthine disentanglement of the present deals, and not to mention who makes the choices of what’s ‘appropriate’ or not, Labour is sending all the wrong signals at a time when, like it or not, the UK needs the support of business investment. Apart from anything else, the compensation bill would be eye-watering.

It also would send all the wrong signals to the international debt markets – who, once again, like it or not – fund our over borrowed way of life. Not only have the international ratings agencies –  third time, like it or not – downgraded the UK’s economic standing, but international hot money  would be off somewhere else , and a stranded Treasury would have to lean on the Bank of England to raise interest rates significantly. Taxes would have to rise, too. With Britain delicately balanced on the brink of Brexit, that’s  a narrative we don’t need any time in the forseeable future.

None of the above is particularly brain-stretching. We just, as ever with breezy political announcements , are left to try to sift the facts from the bluster and search for the cost. Which we will all pay.


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