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Saturday, January 29, 2011

Irony and PFI

Given the many hours of rhetoric and hot air that is expelled in the Welsh Assembly by Labour politicians in condemning PFI and private finance, I cannot overlook the irony of a Tory Cabinet Minister seeking ways to bring contractors to heel if they have made excessive profits at public expense under the previous Labour Government.

The Daily Telegraph reports that Francis Maude, the Cabinet Office minister, has claimed that many PFI deals were "ghastly" and imposed an unfair "penalty" on schools, hospitals and other public services. They add that it is understood that Cabinet Office and Treasury officials are examining PFI contracts worth billions of pounds, looking for ways to claw back money for taxpayer:

A campaign led by Jesse Norman, a Conservative backbencher, is calling for PFI firms to pay a £500 million "rebate" to the Exchequer. PFI was introduced by the last Conservative government and expanded under Labour. Private contractors meet the upfront costs of building hospitals and other facilities and then operate them, recouping the money from the taxpayer over many years.

The Daily Telegraph has this week disclosed the long-term burden for taxpayers, who will pay contractors many times the original construction costs. Treasury figures show that taxpayers will spend £229 billion on projects that cost contractors only £56 billion. The biggest single PFI contractor is Innisfree, which employs 14 people but owns or co-owns 28 NHS hospitals and 269 schools. Its chief executive has built a personal fortune of more than £50 million since founding the company in 1995.

The profits made by some PFI firms are unacceptable, Mr Maude said. "Some of the deals done were ghastly. Some of the deals we've come across, the people on the other side must have been laughing all the way to the bank," he said. "We are looking to see whether there are things we can do." Establishing where the final ownership of PFI contracts lies is "very complicated" because many contracts have been sold on and refinanced by other investors, Mr Maude warned. But he insisted that ministers were determined to challenge contracts that are harming public services. ''None of this is easy, but we're looking to see what can be done, because there is a penalty being paid by schools and hospitals. Some have a millstone of a PFI around their neck."

It is a sign of just how right wing and out-of-touch the previous Labour Government got that they are being outflanked in this way.
How much of the gap in spending per pupil is due to the excessive PFI overheads on school provision in England?
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