Did Margaret Thatcher really roll back the State or the State merely roll over?
For financial reasons, the 1992 Maastricht Treaty imposed severe restrictions on member states with regards to public borrowing and, subsequently, the Thatcher government devised a method of funding which no longer showed on the balance sheet as such.
This was the plan to involve the private sector in large public service infrastructure projects ie. schools, hospitals, prisons etc under a new Private Finance Initiative.
Though beginning under the Tories, it gained momentum under the Blair government and since those early days, it seems a monster was created, a monster with a ravenous appetite for taxpayers’ money.
According to reports, examples are many and breathtaking and as early as 2001, a Blairite MP and former local government adviser warned that “Every 1p raised for PFI schools, hospitals, prisons etc is paid for by the public purse, plus profits. “
It doesn’t lever in private finance.
It merely allows private shareholders to dip their large ladles into an increasing stream of tax revenues”.
Nevertheless, the PFI scheme went full steam ahead with many projects proving disastrous and costly to taxpayers. There must be many such but below is a very small sample:
2009: Taxpayers were landed with a £4 billion bill when they were forced to step in and bail out a £21.5bn programme for new schools, hospitals, roads because private funding had dried up during the recession.
2010: An 18 month delay in awarding a contract for the M1 meant an increase of £660m. The final bill of £3.4bn was ultimately laid at the door of the taxpayer.
The BBC revealed the NHS will pay £65.1bn to private contractors for 103 schemes originally valued at £11.3bn.
The MOD spent £10.1bn on ICT between 1997-2009. In 2007/8, of the total ICT bill, approximately 43 per cent was spent on PFI service charge. The then Lib Dem Defence spokesman said: “The MOD appears to be signing up to PFI schemes without thinking, then throwing away millions abandoning them years later.
2011: Vince Cable declared: “PFI has now broken down and we are in the ludicrous situation where the government is having to provide funds for the PFI”.
The BBC later reported that at least £2bn had been earmarked by the Treasury in loans for struggling consortia.
BBC Radio 4 reported that, within a few years of contracts being struck they were being sold on with financiers yielding profits of 66.7 per cent and making more money selling on contracts than in construction.
2015: There were 728 PFI projects, of which 671 are operational with a capital value of £57bn. In return the Government is committed to paying £232bn by 2049/50 (a profit of approx £175bn to Corporations). Over the next 18 years repayments will be approximately £10bn per year.
Barts hospital had a deficit of £94m. It paid out £115m in payments of which 43 per cent was interest.
Result: staff cuts and down-banding to the point where people left and agency staff had to be brought in, creating further financial problems.
Under PFI schemes, the private sector was supposed to carry the risk. Instead, the public sector is carrying the can, in some cases being forced to fund correction of major problems and flaws discovered after completion of projects.
No doubt there might be success stories but who is paying the price for PFI failures?
Not the construction companies, financiers nor their well-paid army of advisers etc but the very taxpayers who funded the schemes in the first place.
Over recent years we have had public/private partnerships, PFI and now we have the relatively new concept of the Third Sector coming ever further to the fore and being handed money from the public purse but maybe it is time for the taxpayer to demand the spending of their taxes be openly accounted for.
Enough has been lost and perhaps they should emulate the stance of Margaret Thatcher in Europe and demand some of it back.
Deerlands Avenue, Parson Cross, S5