With Private Finance Initiatives, the UK owes £300bn on assets worth only £50bn. This failed policy of the Blair years is finally being exorcised by the party.
John McDonnell announced today that a Labour government would bring PFI contracts back under public ownership. The policy championed by Blair has already cost British taxpayers £100bn, mostly in interest payments.
Private Finance Initiatives, by which new public buildings are built and owned by private companies and rented back to public bodies, will be scrapped if Labour wins power, the shadow chancellor John McDonnell said today.
McDonnell said that existing PFI-built schools, hospitals and other public buildings would be brought “back in house” and no new PFI deals would be made.
“I can tell you today, it’s what you’ve been calling for”, he told Labour conference in Brighton, adding:
“The scandal of PFI, launched by John Major, has resulted in huge long-term costs for taxpayers whilst handing out enormous profits to some companies.”
Although PFI was introduced by John Major’s Conservative government in the early 90s, the schemes were massively expanded by Tony Blair and Gordon Brown.
Overall, the UK has about 700 PFI projects and the debt owed on them stands at around £200b — and it will take 35 years to pay off. £100bn has already been paid to the private providers.
PFI deals will have cost the UK taxpayer around £300bn, once they’re finally paid off in about 40 years.
Out of this we’ll have gained assets — hospitals, schools, roads etc. — worth about £50bn. So, essentially PFI is costing the British public £250bn in interest on badly thought through private loans.
The NHS is particularly overburdened with PFI debt. Over 100 hospitals have been built under PFI since the 1990s and the charges NHS tursts are paying on these are often crippling.
Overall, NHS trusts pay about £2bn a year in loan repayments and maintenance charges to the private companies that own and service these hospitals.
Some NHS trusts like Sherwood Forest are ploughing over fifteen per cent of their annual budgets into these PFI repayments.
Not only is PFI a huge waste of money, but the buildings its paid for have often been incredibly shoddily built, with contractors cutting corners everywhere — leaving PFI-built schools and hospitals often woefully unsafe.
McDonnell’s announcement is a clear break with one of New Labour’s biggest economic scandals. It’s encouraging that Labour are having an honest and frank discussion about the party’s past failures. The neoliberal dogma of the Blair era seems well and truly over.
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