[jambutty]

The Private Finance Initiative (PFI) is a small but important part of the Government's strategy for delivering high quality public services.

In assessing where PFI is appropriate, the Government's approach is based on its commitment to efficiency, equity and accountability and on the Prime Minister's principles of public sector reform. PFI is only used where it can meet these requirements and deliver clear value for money without sacrificing the terms and conditions of staff.

Where these conditions are met, PFI delivers a number of important benefits. By requiring the private sector to put its own capital at risk and to deliver clear levels of service to the public over the long term, PFI helps to deliver high quality public services and ensure that public assets are delivered on time and to budget.

Or put another way it is a license to print money for the entrepreneur.

PFI drains hundreds of millions of pounds from front line services whilst at the same time creating a £4 billion-a-year industry.

If the government was to borrow the money to build a new school or hospital or whatever the interest charged on the loan would be small compared to an entrepreneur doing the same. Loans to the government are seen as low risk whereas loans to an entrepreneur are seen as high risk thus the difference in interest rates.

The entrepreneur gains a contract from the government to build, say a hospital, obtains the required funds and the hospital gets built, usually on time and within budget. Then the entrepreneur can run the hospital for 30 or 35 years and charges the local health authority to use the hospital. But the entrepreneur reserves the right to provide ancillary services like meals, cleaning and maintenance. As was shown on a recent TV programme (Dispatches, Channel 4 last Monday), the maintenance charges were exorbitant. If memory serves me well it was quoted that it cost £142 to change a power socket. Another example was when a PFI built new school wanted to screen off a room from reception the head teacher was quoted some £13,000 from a local builder. The school owner (the entrepreneur) wouldn’t allow the school to go ahead and brought in its own builder for more than twice the fee.

However that is chicken feed compared to what the entrepreneur does next. The charge to the NHS to use the hospital is based on the capital raised plus the interest due on it so that eventually it is the NHS that pays for the hospital. For NHS read the taxpayer.

Once the hospital has been built and is a going concern the entrepreneur then raises another loan to cover the cost of the original loan and pays it off. But this new loan is for what is now seen as a low risk venture (the hospital is a going concern not a building site) so the interest charged is much less. The NHS still pays up at the old rate and the entrepreneur is quids in. Millions of quids in actually and those millions are taken out of the hospital’s budget and into the pocket of the entrepreneur. And of course the millions are not available to pay for the service that the hospital is supposed to provide.

In a nutshell our taxes are being used to line the pockets of entrepreneurs under the guise of improving the health of the nation.