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Gordon Brown’s poisoned PFI legacy

Telegraph View: private contractors have made huge profits out of Labour's Private Finance Initiative, leaving taxpayers to foot the bill.

It was during Brown?s stint as Chancellor that the scheme took flight Photo: PA

7:40PM GMT 24 Jan 2011

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Figures obtained by this newspaper through Freedom of Information requests reveal the full, mind-boggling cost of the Private Finance Initiative (PFI) upon which the last government relied to fund its public sector infrastructure projects. More than 900 schemes have been completed with a total capital value of £56 billion – yet the amount the taxpayer will have to repay currently stands at £229 billion. That is the kind of interest rate a sink-estate loan shark would be proud of. In one particularly egregious example of how not to negotiate a contract, the Princess Royal University Hospital in Bromley in Kent cost the contractor £118 million to build but the final cost to the NHS will be £1.2 billion. The PFI was actually conceived by John Major’s Conservative government but it was during Gordon Brown’s decade-long stint as Chancellor of the Exchequer that it really took flight. By using private sector firms to build and manage public sector facilities, it allowed Labour to proceed far more quickly with its hospital and school-building programme.

It had the added attraction for the Chancellor of keeping vast amounts of state spending off the Government’s books. In theory, such a scheme makes sense – but only if the contracts are expertly negotiated and rigorously managed. Unfortunately, such disciplines are as rare as hens’ teeth in Whitehall. What we had instead was the economics of the mad house, with private companies pocketing enormous profits and leaving the taxpayer to spend the next half century paying off the bills. In an interview in September 2002, Mr Brown defended the PFI with the words: “I’ve got evidence that we are achieving value for money.” Perhaps he would care to share it with us. Last week, the Commons Public Accounts Committee reported that when considering new hospitals or housing, the Department of Health and the Department for Communities and Local Government were given no alternative to the PFI, regardless of value for money. The Treasury, to its great discredit, appeared to be working hand in glove with contractors to drive deals through.

Is there any redress? Jesse Norman, the Conservative MP for Hereford, is campaigning for a PFI rebate, calling on contractors who have done well out of this ill-begotten scheme to hand back £500 million as their contribution to reducing the deficit. The campaign deserves to succeed, but we will not hold our breath. While the public gets mightily agitated over bankers’ bonuses, they appear less exercised by the enormous sums that have been wasted in the PFI – and it is their money. Perhaps today’s disclosures will start to change that.