Out­sourcers in line for £150bn PFI bo­nanza

The Daily Telegraph - Business - - Business - By Ben Gart­side

OUT­SOURCERS run­ning hos­pi­tals and other vi­tal pub­lic ser­vices are in line for al­most £150bn of tax­payer cash un­der pri­vate fi­nance ini­tia­tive (PFI) con­tracts dat­ing as far back as the New Labour era, new fig­ures show,

Com­pa­nies which took pub­lic money to han­dle key op­er­a­tions on be­half of the Bri­tish state have al­ready pock­eted £100bn since 1992 and are now set for a fur­ther bo­nanza, ac­cord­ing to anal­y­sis from the In­sti­tute for Pub­lic Pol­icy Re­search (IPPR),

It es­ti­mates that £55bn is owed on hos­pi­tal con­tracts alone, with a fur­ther £22bn and £20bn due re­spec­tively on de­fence and trans­port schemes.

PFI was launched by then-prime min­is­ter Sir John Ma­jor as a way of fund­ing spend­ing projects with­out im­me­di­ately pil­ing the cost onto the gov­ern­ment’s books. Tony Blair then took the pro­gramme up with gusto when he swept to power in 1997.

Un­der the deals, com­pa­nies are paid to build, main­tain and run pub­lic sec­tor schemes for a set pe­riod. The busi­nesses stump up the ini­tial up­front bill and re­coup the money by charg­ing the state over sev­eral decades.

How­ever, PFI has long been crit­i­cised for cost­ing the Trea­sury far more in the long run. Sev­eral con­tracts have been at­tacked for their poor de­sign, and a host of projects were com­pleted very late and over bud­get.

Then-chan­cel­lor Philip Ham­mond an­nounced the end of PFI in 2018 – but the IPPR data re­veal the long legacy of the pro­gramme at a time when pub­lic fi­nances are ul­tra-tight due to Covid.

Some or­gan­i­sa­tions are be­ing forced to spend a huge chunk of their in­come on PFI deals, the re­search shows.

At Sher­wood For­est NHS Trust for ex­am­ple, PFI ac­counts for 16.5pc of to­tal earn­ings.

The Gov­ern­ment has pre­vi­ously com­mit­ted to re­view and can­cel PFI deals wher­ever pos­si­ble, but there have been calls from some MPs and think tanks to go fur­ther.

Po­ten­tial mea­sures in­clude let­ting or­gan­i­sa­tions buy them­selves out of bad PFI deals for a fair price. In 2014, Northum­bria Health­care Foun­da­tion Trust bor­rowed £114m off its lo­cal coun­cil to axe a deal linked to Hexham Gen­eral Hos­pi­tal.

Some con­tracts still have sig­nif­i­cant pe­ri­ods of time to go. PFI pay­ments by the De­part­ment of Health and So­cial Care are fore­cast to peak in 2030, when it will hand out £2.6bn for con­tracts signed decades be­fore.

Chris Thomas, of the IPPR, said: “Like buy­ing a house with a pay­day loan – rather than a mort­gage – PFI deals were a dis­as­trous choice to fi­nance in­fra­struc­ture. The Gov­ern­ment have promised to re­view all PFI con­tracts in health.

“How­ever, this new anal­y­sis shows an ur­gent need to ex­tend that in­quiry fur­ther – to pris­ons, courts, schools and roads.”

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