Is Labour planning to do PFI again?

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I have published this video this morning. In it, I argue that the private finance initiative (PFI) was one of the worst legacies of the last Labour government. It was a massively expensive attempt to avoid incurring government debt. We're still paying the price. And it's looking like Rachel Reeves might be planning to do something similar.

The audio version of this video is here:

The transcript is:

Is Labour planning to do PFI again? The idea really worries me so let me explain what I'm talking about.

PFI stands for the Private Finance Initiative. It was an idea actually created during the period of John Major's government from 1991 to 1997, but it was expanded considerably by Labour under Gordon Brown.

And what happened was that things that should have been paid for with government borrowing were instead financed under contractual arrangements with private sector companies at extraordinary cost that left a burden of effective debt, and of that cost, on very many organisations, many of which were hospitals and schools.

What happened? Well, we wanted a new school. The government didn't borrow to pay for it. It contracted out the whole construction and maintenance programme for that school for a period of up to say 25 years to a private builder.

They raised the money, always at a cost more expensive than the government would have paid because the government can always borrow cheaper than any private sector organization simply because lending to the government is always risk free, and then the private sector contractor also set up a schedule of charges for maintenance.

Absurd charges in many cases. £100 to change a lightbulb or something like that, and I'm not kidding.

Absurd expenses for having to repaint a wall if it was damaged, which happens inside schools, hospitals or anywhere else.

And the burden of debt has been extraordinary. One of the best documented cases was Norwich Hospital, where they are still paying the price.

And in Scotland, where PFI was used enormously by Labour, the consequences have been dire. The SNP government in Holyrood has been, well frankly, crippled by the level of debt that it is servicing through the PFI initiative.

So the last thing that Labour should do is ever go near PFI again. It was a mistake, it was stupid, it was all about balance sheet engineering to pretend that debt was not rising, and actually costs were going through the roof as a consequence.

But why am I worried then? Well, rumour has it that Rachel Reeves is planning to bring in a very large number of private equity fund operators to meet with the new government when, as we believe is inevitable, Labour is in office from the 5th July, this coming Friday.

And why would she invite those people in? Because, clearly, she has a deal to make with them. What is the deal? Rumour has it that it is some form of updated private finance initiative. In other words, she wants to dump the debt that she would otherwise put on the government balance sheet at very low cost onto the private finance initiative or whatever else.

If that's the case, this is madness. I can't think of another word to describe it. It is straightforward financial folly.

I mean, what else can one say about something which has clearly not worked and yet which you're thinking about again?

So, I live in fear of this, because its exactly what a Labour government that we know is all in favour of public private partnerships, and is all in favour - as we've seen from the attitude of Wes Streeting within the NHS in bringing private sector operators in -  might do. And that is the last thing that we all need.

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