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?