The Emperor's New Clothes

In 1999 Richard Smith, then editor of the British Medical Journal, denounced PFI as Perfidious Financial Idiocy.

The Guardian financial columnist said of PFI:

Of all the financial scams pulled by the Conservatives in 18 years of power - and there were plenty - the Private Finance Initiative was perhaps the most blatant.

The Cost of PFI

The bill for PFI constructed hospitals alone is set to rise above £79-billion. The actual cost of building the hospitals was £11.4 billion.

The total PFI tab for the taxpayer stands at over £300-billion for infrastructure projects with a capital worth of £54.7-billion. That is enough money siphoned off to the private sector to cover the entire NHS budget for approximately 2 years.

PFIs come with strings attached such as restricting maintenance work (which includes changing a plug socket or a light bulb) to only approved contractors. One hospital was charged £52-thousand pounds for a job that should have cost only £750.

In addition to maintenance; cleaning, catering, portering, security and the right to franchise retail outlets and car parking services are often included in the PFI contracts for hospitals.

Risks Carried by the Public

PFI supporters will say that the private investors take on the risks of construction, but in case after case this has been shown to be false. The investors pass the risks onto the construction companies that they sub-contract. This is an important detail, because the consortium have effectively washed their hands of the risk, if something goes wrong the costs fall to the public because the essential services being made dependent upon PFI cannot be allowed to collapse.

Opaque and Fraudulent

PFI contracts and the process through which the final deal is negotiated are always opaque. In some cases, even where local union reps have battled for years to invoke their rights to see the finished text of PFI contracts under the Freedom of Information Act, they have been handed only heavily redacted versions, often missing the very sections of most interest to them.

A report by the European Services Strategy Unit shows that as many as 270 PFI projects are based offshore avoiding millions in tax. These involve more than 70 NHS projects. The tax loophole to enable this was put in place by the government. This means that money for the health service is first stolen through the mechanism of the PFI contracts themselves, then the corporate structure of the provider opens further opportunities to steal money from the public purse - through tax avoidance - that could otherwise be put back into the health service, or other public services.

The Case Against PFI

• It's more expensive than public financing.
• It locks hospital trusts into paying for buildings over 30-60 years in which time needs change radically.
• It changed local planning from the health needs of local populations to those of private capital.
• The cost of repayment has to be met out of the operational revenue, meaning smaller hospitals with fewer beds and less staff in order to reduce costs. For example University Hospital of North Durham (UHND) is a PFI hospital costing £97-million. It was built with too few beds to handle local demand. As a result the hospital Trust was forced to divert money to pay surgeons to treat NHS patients in a nearby private hospital to stop waiting lists spiralling out of control.

The First PFI Scam

PFI was pioneered in the UK as a way to transfer money from public funds to private capital. The scam has been exported by British companies to countries as far apart as Finland, Canada and South Africa, causing hardship and disruption through its application to hospitals, roads, prisons and waterworks etc.

The first PFI scam - the pilot for all other PFI scams since - was the construction of the Sky Bridge in Scotland. The bridge was opened in 1995 and in the same week it opened the government-run ferry service which was free for foot-passengers was stopped. The whole point of PFI is to enable the private investing consortium who are invited to fund the project to make big profits. So in the case of the Sky Bridge this scam took the form of charging a toll for the use of the bridge. The residents of Sky had little choice but to pay the highest toll price per meter of road in the world - in 2000 this was over £5 in each direction for residents, over £11 for tourists and over £15 for public buses.

To cut a long story short, the citizens of Lochalsh and Skye formed a protest group called 'Sky Bridge Against Tolls'. The protesters refused to pay the tolls, some went to jail and some were heavily fined. However, they persisted and the toll was finally abolished in 2004. The consortium of private companies responsible for the bridge was given ~£27-million by the government, they had collected ~£33-million in tolls and all for a project that should have cost ~£25-million. This extortion is modest compared to subsequent examples of PFI used within the NHS, but it also shows that we the people can rid ourselves of PFI - and corporate tyranny more generally - if we organise!