PFI debt for the British taxpayer is more than £300bn for infrastructure projects, with a value of £54.7bn. To put it into perspective, the PFI debt is four times the size of the budget deficit used to justify austerity
By Youssef El-Gingihy and cross-posted from The Independent
Sir Howard Davies, chairman of the Royal Bank of Scotland (RBS), recently made an astonishing admission on BBC1’s Question Timewhen he stated that private finance initiatives (PFI) had been a “fraud on the people”. Beyond seemingly populist rhetoric, the real story of PFI reveals that RBS alongside other global banks, notably HSBC, were instrumental in what Sir Howard has effectively labelled a great heist.
The past month has seen the demise of construction giant Carillion followed by the collapse of Capita’s market value: both firms having built huge empires by providing outsourced services to public authorities. These initial tremors might be the canary in the coal mine. Profit warnings have been issued for other government contractors, such as Interserve. The domino effect has shades of the 2007-08 financial crisis even though it is clearly not of the same magnitude.
All this has thrown up searching questions, not least around staff redundancies and pensions, bailouts, inflated dividends and executive remuneration.
Yet even in the throes of this PFI and outsourcing crisis, public-private Partnerships (PPP) are far from dead and buried. On the contrary, the Naylor Review – a report recommending the disposal of NHS land and assets to generate investment – is rehabilitating PPP…