Dispatches on PFI

Dispatches on Channel 4 on Monday 14th August was a detailed expose on the costs of PFI to the public services.

The government can borrow money cheaply, PFI means that the public sector has to pay a higher rate of interest. However once a hospital, road or school has been constructed a much lower rate of interest is possible. This enables PFI companies to refinance their loans and make millions, sometimes hundreds of millions. Under pressure they might sometimes pay back a fraction of this to the taxpayer.

Liam Halligan compared PFI to going on a shopping spree with a ludicrously expensive credit card. The amounts do not appear on the government’s books but there will be an almighty payback in the future. Any student with a loan will know just how that feels.

Financiers openly talk about “sweating” resources. Once they have a guaranteed income stream from the government they can seek to minimise their costs. The program showed one example after another of corners being cut in PFI projects. The public institutions can complain as much as they like, they are locked into 25 or 30 year contracts with the private sector willy nilly!

The program also showed in detail how companies like HSBC legally avoid paying UK taxes on public sector contracts. For example, they have transferred a £311 million Home Office contract into an offshore fund .

They also detailed how companies can manage to tell their shareholders they are making a profit and the taxman they are making a loss. The profits seem to disappear into subsidiaries which do not have any employees but manage to provide “management services.”

Some opf these companies are making an extortionate 123 percent on capital investments. Instead of locking them up for profiteering, New Labour award them further contracts.

Liam Halligan has done an excellent job exposing this public scandal. How interesting that HSBC and numerous other financial institutions refused to buy advertising space around this program!

It was not his job to provide a political alternative to PFI but this is all grist to the mill for the Campaign for a New Workers Party.