'Legal loan sharks' have preyed on our services for too long
3 min read
Stella Creasy says today, by voting for the amendment to the Finance Bill on a PFI windfall tax, parliament has a chance to show the public that when politicians make mistakes, they recognise the necessity is not to find someone to blame but to put things right.
George Bernard Shaw once argued that political necessities sometime turn out to be political mistakes. Never has that been more apt than in the case of private finance contracts. Across the country there are now 700 of these existing projects, soaking up precious public funds in the repayment fees charged for building and running schools and hospitals. Today parliament has a chance to show the public that when politicians make mistakes, we recognise the necessity is not to find someone to blame but to put things right.
Governments of all colours have, and continue, to use private financing deals to keep borrowing off their books. Yet off the books doesn’t mean cheap- as the National Audit Office have now set out, these contracts are on average 40% more expensive as a way of funding infrastructure. In just one year we will pay out £10.3bn in repayment costs on these loans- with around half of this being for interest repayments and charges by these companies rather than for services. Once locked into a contract, these charges are non-negotiable. Northamptonshire Council is effectively bankrupt and selling its buildings to make ends meet. It will still have to pay £270million over the next two to five years alone on PFI deals, of which £77m is interest payments. Centre for Health and the Public Interest research shows nearly a quarter of the additional funding promised for health and education budgets will go direct to these companies in profits. Every MP has been lobbied by teachers covering the costs of books out of their own pocket, or hospitals struggling with paying staff, yet still these companies boast to investors of healthy profits. Carillion’s woes should be a wakeup call that the belief working with the private sector would transfer the risks of building such projects to them is also mistaken.
Recognizing the mistakes in signing these deals doesn’t help the schools and hospitals struggling now with these deals. Contract law is on the side of the small group of companies that own these loans, meaning cancelling them is just as expensive as keeping them going Tax law, however, is not. In addition to these profits, PFI companies have had a windfall in the shape of reduced corporation tax payments- corporation tax they explicitly agreed to pay as part of the original contract. There’s little saving to be made on individual contracts, but if the Government negotiated across the portfolios of loans companies such as Innisfree, Dalmore Capital and Semperian have then substantial savings could be made which could be put back into our struggling services within months.
By voting for it today, we can use the threat of a windfall tax on the excessive profits these companies have made to get them to the table to talk terms, showing that even if Ministers are too scared of necessity, MPs are not. These legal loan sharks of the public sector have been able to prey on our services for too long- it’s time we got our cashback.
Stella Creasy is Labour MP for Walthamstow
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