PFI contracts

Begun in the early 1990s by John Major’s Conservative government, PFI (Private Finance Initiative) contracts were viewed as a means of bringing economic discipline into public infrastructure projects.

PFI contracts let private, profit-making companies take over, control and manage buildings and services usually operated by local councils, the NHS or Westminster.

Under Tony Blair’s New Labour government, the debt used to finance public infrastructure such as schools and hospitals was classified as a private sector liability. This kept it off the government’s books and kept the figures for public expenditure down.

The government made funding infrastructure by PFIs the only available choice for public authorities.

Use of PFI declined after the financial crisis of 2008. After 2010, and the election of David Cameron’s coalition government, the initiative went rapidly out of fashion. The current Conservative government won’t allow any new PFIs to be created. PFIs are also contrary to Green Party and Labour Party policy.

So what’s so bad about PFI schemes?

  • PFIs are extremely expensive. At a school in Bristol, a single blind for a room will end up costing £8,154 under PFI.
  • Communities and cities, such as Sheffield, lose almost all control over the provision of many local services.
  • PFI deals tie communities into inflexible, long-term contracts, usually for 25-30 years. In Liverpool, for example, the council has been paying £12,000-a-day for a school that has been closed since 2014. And it will have to keep on paying for decades.
  • Work is usually contracted out to non-local companies.
  • The finances of a city become trapped in the web of transnational capital, get-rich-quick investors and tax havens.
  • The quality of the services provided under a PFI deal is often very poor.
Slides courtesy of Dr.Stuart Hodgkinson, Leeds University

In Birmingham, when people noticed some streets were falling into disrepair, the City Council took Amey to court. Amey successfully claimed that the streets in question weren’t on the contract, but were later ordered by the Court of Appeal to pay the City Council compensation.

PFIs are quite simply the worst mortgages in the world. PFIs are a massive ripoff. At a time when frontline services are buckling under the strain of government cuts, PFIs are siphoning off precious resources.

Frances O’Grady, General Secretary of the TUC