Every UK citizen owes more than £3,400 to PFI companies – this might be the solution we desperately need.
Public Finance Initiative (PFI) deals – that have left Britain in a crippling £222bn of debt – are notoriously difficult and expensive to cancel, but Labour today put forward a solution: introduce a tax on the PFI companies’ profits.
“Buy now, pay later” PFI schemes to fund new hospitals, schools and other public buildings, first introduced by the Major government and expanded by Tony Blair, will cost the UK £222bn over the lifetime of the deals.
To look at it another way, every UK citizen owes more than £3,400 in PFI debt – and this drain on the Treasury will go on for 35 years.
Because of extortionate interest payments, PFI funded projects can cost up to 40 per cent more than schemes funded directly from the Treasury, the National Audit Office recently found.
And this for public buildings that in many cases have been shoddily and dangerously built – an investigation last year found that up to 40 hospitals built by PFI had serious fire and safety risks due to bad construction.
The problem is that PFI deals are extremely expensive to cancel – the government having to pay off the private contractor for the building and maintenance work up front. But there may be another solution.
Labour are proposing a new tax to take back some of the PFI companies’ profits into the public purse. Responding to the news UNISON said:
“The enormous profits being racked up by Private Finance Initiative (PFI) companies should be subject to a new windfall tax, so much-needed resources can be put back into the UK’s cash-strapped public services.”
“A new windfall tax could prove a lifeline to under pressure public services. It would mean PFI firms are forced to pay back some of the billions of pounds they’ve been raking in at taxpayers’ expense, says UNISON.”
UNISON general secretary Dave Prentis said: “Eye-wateringly high PFI payments are threatening to overwhelm our already cash-strapped public services.” He continued:
“Local communities may now have shiny new schools and hospitals but at huge cost. The repayments on PFI debt have to be made first, and are so steep that teaching assistants are losing their jobs and patient services are being cut back.
“Meanwhile the shadowy PFI firms just keep on hitting the jackpot, making millions more than they’d ever hoped to because George Osborne slashed their tax bill a few years back.
“There’s no time to lose. Crippling PFI debts are pushing local services to the brink and costing taxpayers dear. It’s time for a windfall tax on the companies cashing in at our expense. It would bring some urgent and much-needed relief for the services we all rely upon.”
Actions in Westminster this week could pave the way for this new PFI tax. On Wednesday, MPs will vote on two amendments to the Finance Bill, tabled by Labour’s Stella Creasy, which could introduce such a levy.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by becoming a Left Foot Forward Supporter today.