Handing over public services to the banks
There is a scandal unfolding quietly in Britain which poses an existential threat to our most critical public services. It is called the Private Finance Initiative (PFI). This dangerous circle of self-interest means our government is making the taxpayer pay the bill for private service providers and banks to take over our schools, hospitals and other core public services.
PFI schemes were initially designed by Tory Chancellor Norman Lamont in 1992 and were rapidly expanded under New Labour. They are touted as a form of Public Private Partnership. The government uses private finance, rather than borrowing in the usual way, to raise funds for projects. Since 1992, our hospitals and schools have been built this way. PFI loans are at least twice the rate of interest of ordinary government loans, and repaid over 25-30 years.
A recent report by the Treasury Committee condemned PFI as ‘always… more expensive than government borrowing’. The report continues: ‘we have not seen clear areas of savings and benefits in other areas… quality was lower in PFI buildings (and)… PFI is also inherently inflexible, especially for NHS projects’.
The majority of PFI debt does not appear in government debt or deficit figures – the government can therefore use it to bury the true debt burden. Departments can use it to increase their own budgets without dipping into their allotted funds for capital investment.
PFI also allows the private sector to develop the infrastructure to deliver national services while shifting the costs and the risk to the taxpayer. It is the loan provider of the PFI scheme (the bank) which retains ownership of the asset (the school or hospital) for at least the term of the loan, or in the case of default.
Banks are seeking to make profits on the financialization of our public services, and successive governments seeking to put a gloss on their spending figures. The simple interests of the taxpayer – to get what they pay for – have been quietly abandoned amid this circle jerk of the state, private service providers and the financial services sector. The only people who are not benefiting from PFI are the people actually paying for it.
Already, 22 of the 103 NHS trusts to enter PFI are facing financial difficulty due to the exorbitant repayments. Some hospitals are having to handover a fifth of their annual budget on paying for the deal.
In education, it was revealed that we are due to have a shortfall of 250,000 school places for our children by 2014, whilst the tax payer has picked up a £70 million ($106.6 million) bill for PFI schools which had to close.
A recent report by the European Union Services Strategy Unit, showed that the average profit for banks in PFI projects is over 50 per cent.
Some might well ask – so what? If the services are still free at the point of use, what do we care who provides them?
Our taxes pay for the services. PFI, by the Treasury Committee’s own report is proven not to provide value for money for the tax payer.
As the recent health care disaster in Mid Staffordshire, and the unfolding NHS 111 scandal have taught us – prioritising the financialization of a service over its core purpose (helping people) costs lives.
Despite being an entirely manufactured cost inefficiency for the benefit of private companies, the PFI scandal is being used by those vested interests as a case for more privatisation. It is turned into proof that publicly run services are inherently inefficient, bureaucratic and costly.
British Prime Minister David Cameron recently told the 300 delegates at the Global Investment Conference 2013 that he believed it was time stop ‘endlessly bashing bankers’ because the City was one of Britain’s greatest strengths.
According to the National Audit Office, The UK National Debt rose by £1.5 trillion as a result of the bank bailout. This is twice the nation’s total annual budget. For this amount, Britain could have funded the health service for 14 years, the entire education system for 40 years or over 300 of Job Seeker’s Allowance.
‘Banker bashing’ by the public will not, and cannot, end until this sector and its cronies in parliament are held to account properly.
The British public needs to face up to a terrifying but empowering reality. We have no advocates. This is not a Conservative, a Liberal Democrat or a Labour issue. This is a democratic issue. All three major parties have participated in these scams; they are all in it together.
We need to really get it in our bones that the cavalry is not coming. We are it. Only our newly emerging people’s campaigns and institutions can resolve the crisis, because our existing institutions not only created it, but exist to serve it.
For a longer version of this post, along with ideas for taking action see the Scriptonite blog. Crossposted with the author’s permission.