The Royal Liverpool Hospital PFI is to be scrapped and the investors ‘bailed out’. This is a reward for failure which we have known is coming for years. People vs PFI says that the government must end all PFI deals now before the public purse is burdened any further with extortionate compensation deals.

In May a major academic paper revealed the low cost of nationalising the special purpose vehicles, the companies which sign the private deals with hospitals trusts, local authorities and other public bodies. At the same time the report showed the annual savings each public body could make by bringing the contracts in-house and refinancing the loans.

The Labour Party has already committed to ending PFI contracts with nationalising the SPVs the ‘presumed preferred approach’.

COSTS OF PFI

Not only have PFI deals cost about double what publicly-financed infrastructure would cost, they have produced poor quality buildings, delayed and costly maintenance and service provision. At the Royal Liverpool Hospital we already know that combustible cladding was used by Carillion and a report by construction engineering company Arup is expected to show up more structural problems. Up to a dozen other PFI hospitals are known to have major structural defects

The collapse of Carillion has merely exposed the tip of the PFI iceberg facing public bodies and the devastating effects on public services, not to mention a host of smaller sub-contractors. Other contractors like Carillion are also reported to be in difficulties, while continuing high costs of financing PFI deals is part of the perfect storm of financial constraints facing public authorities. Are bailouts to continue or can we end this now?

On Friday headteachers are staging a march on Westminster protesting about ‘unsustainable’ budget shortfalls. One element of schools budgets now are PFI costs and heads complain about the constant headache of chasing up maintenance contractors. Costs for simple jobs, such as supplying a new key or providing a new washbasin in children’s toilets are astronomical and take constant chasing.

Nationalising the special purpose vehicles would cost £2.6bn and bring immediate savings of about £1.5bn per year. Following that it would be possible to bring the provision of services and maintenance back ‘in-house’ so that it is done by workers employed by public authorities as it used to be, and refinance outstanding loans.

References

(1) Mercer, H.and Whitfield, D. Nationalising Special Purpose Vehicles to end PFI” Greenwich University, PSIRU, May 2018. http://gala.gre.ac.uk/20016/1/20016%20MERCER_Nationalising_Special_Purpose_Vehicles_to_End_PFI%20_2018.pdf; http://peoplevspfi.org.uk/2018/05/08/how-much-will-it-cost-to-nationalise-the-special-purpose-vehicles/
(2) https://www.bbc.co.uk/news/education-45641047
(3) Mercer, H., The Private Finance Initiative: How come we’re still paying for this?’ People vs PFI (2017). http://peoplevspfi.org.uk/exhibition-how-come-we’re-still-paying-for-this?/ A pdf of this booklet is available on request.