Why Brown should use his initiative

    It’s probably not the New Year gift that Gordon Brown, the
    chancellor, would have welcomed in 2005 but it will be gratefully
    received by those who believe that when profit-making consortiums
    become involved in the public sector, the vulnerable pay the
    highest price.

    The “gift” comes in the form of a report by think tank the Centre
    for Policy Studies (CPS), examining the way in which the private
    finance initiative is working – or, more precisely, failing to
    work.

    PFI was established 12 years ago by John Major. Labour has adopted
    it enthusiastically to the profound dismay of many.

    A Guardian/ICM poll two years ago showed that almost two-thirds of
    voters supported a moratorium on new PFI projects – a wish
    completely ignored by government.

    PFI applies to any private sector involvement in public services
    including the transfer of council homes to housing associations;
    the “contracting out” of hospital cleaning services and the
    building of public buildings such as school and hospitals.

    A project is typically designed, built, financed and managed for a
    30-year period by a private sector consortium, paid from public
    money but with the advantage – from Brown’s point of view – that
    this does not show up in increased public borrowing.

    Critics have long pointed out that PFI absolutely does not deliver
    value for money. The Audit Commission said that it increased costs
    of schools and hospitals by as much as 24 per cent. It also leads
    to ridiculous situations such as the Worcestershire Royal Hospital
    being charged £200,000 this year because it treated “too many”
    patients. A clause in the contract of the private consortium,
    Catalyst, means that bed occupancy must not rise above 90 per cent.
    Welcome to the surreal world of Alice in Wonderland.

    The CPS report says that one in eight PFI schemes is failing to
    deliver on time and on budget. It wants Brown to admit how much of
    future government spending is committed to PFI projects over the
    next 25 years. The CPS estimates that £110bn is being spent on
    projects which suit the government’s desire to magic away figures
    in its accounting rather than delivering the best at the fairest
    price.

    The report questions how PFI can be deemed value for money when the
    imperative to make a profit for private contractors pushes costs up
    and wages down. Brown’s response is to dismiss the figure of
    £110bn as “bogus”. But then, he would say that, wouldn’t he?

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