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Editorial: Private ‘investment’ is one cause of the crisis in public services – we don't want any more

RENEWED focus on the crippling impact of PFI debt on schools and hospitals is welcome given the prospect of an incoming Labour government trumpeting “partnership” with business.

Britain’s public realm — institutions and services that keep the country running — is stricken. It is breaking down wherever we look, from the seven-million-long NHS waiting list to crumbling school and hospital buildings, from dentistry to Royal Mail, from transport to the councils lining up to declare bankruptcy.

Labour’s contradictory position is that these crises are the product of Tory mismanagement of the economy, but the only way to fix them is to stick to Tory spending plans, ruling out a wealth tax, increases in corporation tax or other measures that could fund increased spending. 

Spending commitments are being steadily shredded as the party briefs the media it is “bomb-proofing” the manifesto — a process which apparently means removing any measures the Conservative Party might attack, reducing further any discernable difference between the big Westminster parties.

That should be challenged. Britain spends significantly less as a portion of GDP on healthcare or education than comparable European countries such as France or Germany. We should raise spending and pay for it through raising taxes on the rich and runaway corporate profits.

But the ongoing PFI scandal raises another question. So-called partnerships with the private sector, championed by the last Labour government and promised by the next one, are an enormous drain on public resources. Contracts entered into over two decades ago place an ongoing burden on councils, hospitals and schools.

NHS trusts spent £500 million in interest payments on PFI contracts in 2021 — equivalent to the salaries of 15,000 nurses when our health service faces chronic staff shortages.

The impact of PFI deals on schools is less well known, but over 900 were built as a result of such contracts. 

The BBC’s current investigation found head teachers whose schools are spending a fifth of their entire budget on meeting the terms of these deals, not just debt repayments (which typically rise by the retail price index inflation rate, meaning schools or local authorities behind them have seen the costs rocket in recent years) but because the contracts often specify which companies will provide services to schools, so management cannot revisit these on either quality or cost grounds.

These arrangements are directly linked to staff shortages. As more councils teeter on the edge of bankruptcy, the impact of PFI contracts on their books deserves more scrutiny — though many include non-disclosure agreements, precisely to stop the public realising what a rip-off they are.

Councils were barred from entering into new PFI deals in 2018 as their poor value for money became impossible to deny. 

But a new body representing private-sector investors (the Association of Infrastructure Investors in Public Private Partnerships) was formed last month as a result of the increase in disputes between PFI investors and councils, and its chair, Labour peer Lord John Hutton, claims “the benefits of this collaboration between the public and private sectors can inform our thinking about the next stage of investment in the public realm.”

Our thinking should instead be informed by the costs. Private capital has profited hugely from these partnerships, but is has imposed an enormous financial burden on public services, contributing to today’s system failure.

Labour must not be allowed to enrich parasitical investors at our expense with a repeat.

Ending these deals, exposing their terms and stopping them in the future should be part of a mass campaign for public ownership to change the narrative ahead of the election. Their direct effect on the budgets of individual schools and hospitals make them ideal focal points for local political mobilisation.

Grassroots organisations like the People’s Assembly, the We Own It campaign and local government unions can work together to make the great public-private partnership rip-off an election issue.

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