In 20 years time future generations will look back on the Iraq War with a kind of bemused disinterest. In much the same way my generation view Vietnam or Korea as rather odd footnotes to a grand narrative rather dramatically called the Cold War, these generations will feel nothing of the polemic passion of 2003, just a strange sense of confusion.
Not so with PFI. The Private Finance Initiatives agreed in the Tony Blair years won’t feel like abstract oddities of a bygone era. They will be real and pressing concerns for a generation still paying the price for the last two decades of spending.
Blair was the greatest advocate of Private Finance Initiatives (PFI) in the history of Britain. He consistently supported using private capital to develop social services and within a few years of coming to power it was basically the only way that public sector organisations could get funding for projects.
There are accounts of hospitals shortly after 1997 putting in claims for money to refurbish their current building and being refused on the basis that all funding needed to help the wider local economy. The only way funding was granted was if they moved to a new building and got the money through PFI schemes. This was indicative of the Blair years – quick cash to build new shiny schools and hospitals but with little thought of the long-term issues.
Today’s Telegraph report begins to illustrate just how short-sighted these ideas were. The article documents the hospitals that will take 60 years to pay for, by which time they will be all but useless, the buildings that cost more to build than they are worth on the market and the interest rate payments that will leave hospitals all but crippled. PFI will be the legacy of generations of overspending.
Last year I began researching a story that I never wrote about PFI in Islington in London, which was one of the first Boroughs in the country to really embrace the scheme. The council now pays out between £3-7 million per month to Partners for Improvement in Islington and Partners for Improvement in Islington II, the two private companies charged with leasing, managing and doing up all the council’s housing.
These companies have proved to be spectacularly unpopular in the area as they are seen to be both exploitative and corner cutting. Freedom of Information Requests by local residents revealed that they did very few checks to ensure the quality of their work.
And the interest rates being paid on these deals were up to 14.5% (though this was admittedly not on the majority of the debt). I have been trying to get the exact figures out of the Council but they have so far refused to release the information.
These repayments are largely non-negotiable and therefore when a Council receives a real terms cut of, say, 10% then the cost to services are actually higher. In the same way that the government’s decision to ring-fence the NHS means that the cuts in other departments are greater, the non-negotiable PFI repayments means that other budgets have to be squeezed further.
And the contracts are long-term – up to 30 years in Islington alone. Up and down the country there are badly planned PFI deals that will be costing the taxpayer money for another 50 years. The Telegraph has to be congratulated fot highlighting an issue which, partly because it is rather complicated and technical, has often failed to make the mainstream media. But these reports are just the beginning, PFI repayments should be a story for the foreseeable future. The bad deals done in the rather honourable rush to do up schools and hospitals across the country will haunt Tony Blair long after Iraq is condemned to history.