Private Finance Initiative – chickens come home to roost!

As the cuts in public spending, jobs, wages, benefits, services etc., resulting from the crisis of over-production, still only in the early stages, begin to bite harder, the lie machine of social democracy (the agents of imperialism within our ranks who seek always to lead us down the road of voting for the Labour Party in bourgeois elections as the only cure for all the ills that afflict us) kicks into action. 

We are being told that these ‘evil’ cuts are the work of the Con-Dems, whereas Labour would have only initiated ‘nice’ cuts that we would hardly have noticed and certainly wouldn’t have harmed us in any way.  The bogus nature of this line, which assumes we are all morons with the memory of retarded goldfish, is being mercilessly held up for scrutiny and ridicule by this paper and the CPGB-ML, among a few others. 

But if anyone should entertain any doubts that the Labour Party in office is just as ruthless in protecting the interests of the ruling bourgeoisie as its accomplices in the Tory and Lib-Dem parties, we would ask them to ponder on the disastrous PFI contracts that were thought up, and forced upon, the NHS and education services (not to mention prisons and fire stations etc.) by the previous Labour governments, and which are playing their part in the present cuts by taking much-needed cash in large amounts and handing it to the private financiers of these exceedingly dodgy schemes.

The Private Finance Initiative (PFI) was the brain-child of the Labour Party in government. While many workers in both the NHS and education predicted disaster as a result of this very weighty albatross that was being hung around their collective neck, the Labour government, with the backing of the majority of trade union leaderships (even some of those who raised timid doubts at the time), won the day against the anti-PFI campaigns which were usually run by those workers, many rank and file trade unionists among them, and other interested parties.  This is the beginning of the PFI scandal, whereby many school and NHS buildings, that perhaps only required a couple of thousand pounds of renovation work, were instead pulled down and replaced by new buildings paid for by private money and which, in the long term, would cost up to ten times the amount it would have cost to build them with public money.  There are some variations to the scheme, one of which is privately to build the school/hospital on private land and then tie the appropriate authority into a contract whereby they rent it (at an escalated price of course) forever even if they stop using it.  Most, however, were ‘sold’ to the relevant authorities under a sort of hire-purchase (HP) scheme, under which after paying over the odds for around 40 years, during which time many varied and unusual clauses in the contracts keep the haemorrhage of cash running from the public purse into private pockets, the hapless authorities become the proud owners of the school/hospital just as, owing to poor building techniques, shoddy materials and poor maintenance, it becomes fit only to be pulled down so that the whole scandalous process can start again.

The Daily Mail and Daily Telegraph, for the purpose of keeping the Tory versus Labour farce running, have both been carrying some very good reports lately on the cash-draining results of various PFI schemes to council education departments and Health-Authorities.

According to Andrew Gilligan (‘PFI: £70m bill for schools that had to close,’ Daily Mail 26 January 2011),  “At least three PFI schools have closed because of falling pupil numbers. But education authorities must continue to pay the contractors millions of pounds each year for them until 2035”.  One of these schools, Bishop’s Park in Clacton, had only been open three years before closing.  “About £10 million has already been paid for the school but the PFI contract still requires payments of £1.8 million to be made for the building each year until 2035. In total, taxpayers will have to repay about £55 million for the school, more than twice what the building would be worth even if it was in full use”.

Gilligan’s article, aimed more at the Daily Mail’s lower middle class readership, raged that “taxpayers were having to pay more than £200billion for schools, hospitals and other projects whose capital value was little more than £50billion.”  Of course, the money does come originally from taxes, but these swindles are not only the concern of these ‘tax-payers’: the long-term sick, low waged, the  unemployed and their children are just as affected by the flood of cash from public need to private greed. However, despite his one-sided view, the examples he gives are a good reflection of the state of the PFI schemes.

He cites many minor cases of contractual strangulation whereby a school cannot alter its heating without giving three days’ notice, meaning that often children sit in classrooms with no heating while it is freezing outside or where the heating is blazing away on hot days, with the schools paying for heating they don’t want.

Another example is given of a headmaster unable to adjust the lighting in his school affecting the showing of films and after-hours activities/clubs.  He also wrote of a school in Birmingham which “was refused permission for an after-school club after parents were told the caretaker would cost £70 an hour and the playing field could only be used for seven hours a week.

These contractual provisions seem small compared to the PFI schemes themselves, yet even these can be disastrous in the present climate. Gilligan quotes one headmaster as saying “In the old days if I needed to save some money, I’d cut back on painting to save a teacher. Now I’d have to cut the teacher and keep the painting.”  And this drain on the schools’ resources is relentless, as any change to the buildings or the timetable as set out in the contracts can be costly in the extreme. 

One school in Merseyside is reported as having had “to pay £302.30 to install a plug socket – more than five times the cost of the appliance, a DVD player, that it wanted to plug into it”.  In Bradford, which has three PFI schools, an NUT branch Secretary complained that “Our new schools are already starting to look shabby because the builders didn’t understand the robustness needed in facilities used by children,” he said. “Kids bang doors, they run up stairs. There have been several million pounds of remedial work needed in schools which have only been open two years.”  The Bradford experience also shares with other PFI schools the inability to turn off lights which burn all summer, with schools picking up the tab.

The Daily Telegraph the following day, 27 January, notes that; “Since 2007, more than a fifth of England’s hospital trusts with active PFI hospitals have closed casualty departments, or published proposals to do so. In the same period, only four per cent of trusts without PFI hospitals have closed, or proposed to close, A&E units. Fewer than a quarter of England’s 168 NHS hospital trusts have significant PFI hospitals in operation. But these trusts account for almost two-thirds of A&E closures or proposed closures.”  The link then is very clear between PFI contracts and reduced services and jobs and increased payments into private hands for poor value returns.

The article on the 27th continues, “The Daily Telegraph has disclosed how some PFI hospitals – built and operated by the private sector, and effectively rented back to the taxpayer – will end up costing the public purse more than 10 times their capital value.

“The new Princess Royal University Hospital in Bromley, south London, cost £118million to build. It will end up costing taxpayers £1.2billion, including facilities management. South London Healthcare, the NHS trust responsible for the Princess Royal, has a second PFI hospital, the Queen Elizabeth in Woolwich.

“The trust’s annual deficit was raised to £100million by the two deals. It has closed the A&E unit at one of its non-PFI hospitals, Queen Mary’s in Sidcup.

“In internal documents seen by The Daily Telegraph, the trust stated that the ‘occupation costs’ of the PFI hospitals were roughly double those of its non-PFI hospital”. 

Just like the school PFI rip-off mentioned earlier, the hospital contracts have money draining clauses such as: “Under its PFI contract, Queen Elizabeth Hospital, Woolwich, must have 64 visits a year from pest controllers, even when there are no pests to control. When there are pests, the hospital must pay for further visits, which it did 10 times last year.” And “Food served at the Queen Alexandra PFI hospital in Portsmouth is cooked in south Wales, then driven 100 miles to Hampshire.”  But the bottom line has to be the service to the community, which we are told is the reason for the existence of the hospitals, but, as this article exposes:  “Early PFI hospitals had on average 20 per cent fewer beds than the hospitals they replaced, according to research. Because of high service charges, several PFI hospitals cannot afford to keep even these reduced numbers of beds fully open.” 

On 10 February the Telegraph Kindle edition (not on website) carried an article by Martin Beckford (‘Hospitals told to end private finance contracts to safeguard patient care’), which strongly advises local authorities to try and buy out of these contracts as, despite the high cost of doing so, it would be cheaper in the long run in financial terms and in terms of the service they will be able to provide.  The article quotes Prof Allyson Pollock who claims that “NHS bodies are laying off staff, reducing services and providing lower-quality care because they have to spend so much in interest payment on their privately-constructed buildings.  She says interest payments on the 101 PFI hospitals built under Labour now total more than £40 billion and are increasing as public spending is being cut back”. The article continued disclosing that “a mental health trust had become the first to get out of one of its PFI contracts and will save an estimated £14 million by ‘paying the mortgage off early’”. Tees, Esk and Wear Valleys Mental Health Foundation Trust recently reviewed the costs of one of its PFI deals and decided to take advantage of a break clause.  It paid £18 million to the private firm that built and operated West Park Hospital in Darlington, Co Durham, to get out of the contract, but would have paid £32 million in interest and maintenance payments over the next two decades.

Prof Pollock, who is based at the Centre for International Public Health Policy at the University of Edinburgh, in a paper published on, the website of the leading medical journal, claims that “Cuts in NHS funding and the high cost of PFI debt charges translate into staff redundancies, service closures and reductions in access to and quality of care for patients”.

She and her colleagues calculate that 101 of the 135 new hospitals built between 1997 and 2009 were paid for with PFI deals.  They say the deals should be reopened as “interest rates have risen since the banking crisis and are exacerbating the financial difficulties of PFI hospitals and the NHS as a whole”. 

In another Telegraph article on Kindle 8 February 2011, by James Kirkup (‘Civil servant in £1bn roads project joins the contractors’), it is revealed that a report by MPs criticised the Highways Agency officials who oversaw the PFI contract to upgrade the M25 for waste when it cost around £1 billion over the already excessive agreed estimate.  “The report also found that it took nine years to finalise the contract for the PFI, a period described as wasteful.  The agency spent an ‘excessive’ £80 million on consultants and advisers, firms that directly benefited from delays in the process.”  On top of this it seems that the leading civil servant who oversaw the project now works for one of the main contractors on the project, Balfour Beatty.

The last Labour Government oversaw a huge feeding frenzy of capitalist leeches sucking dry public money, supposedly there to pay for vital services.  They may not be carrying out the present cuts but through the PFI robbery they have played their part in making them bite harder.  Of course, when we say that they are not carrying out the present cuts, it should be noted that there are Labour-controlled councils who will carry through these cuts, while pleading that they are being made to do it by central government. Heaven forbid they should step off the gravy train in opposition, if indeed, they really are opposed to cuts in services to try to save capitalism. 

We must fight against the cuts to our services, jobs etc., but we must remember that all the bourgeois parties have had a hand in them and not one of them is better than another.  Overthrowing capitalism and putting socialism in its place is the only way we shall make sure that we get the services we need and that no one is creaming off the cash meant to pay for them.