Plain Fiscal Insanity

[Thinking Man's Idiot]

Soaring PFI bill has wrecked new Labour's credibility, says SNP








THE Scottish National Party told new Labour on Sunday that it has "absolutely no financial credibility left" after revelations that Britain's expected bill for the private finance initiative has soared by £27 billion in less than a year.



At the time of Chancellor Alistair Darling's spring budget, PFI payments between now and 2032 were expected to total £188.6 billion.

But tables published as part of last Monday's pre-budget report put the total at £216.1 billion.


SNP Treasury spokesman Stewart Hosie accused the Chancellor of "burying" the figures in the pre-budget report.


"We have always known that PFI was hyper-expensive, but it is clear that the liability is rocketing out of control. Labour has absolutely no financial credibility left," said the Dundee East MP.


Mr Hosie called PFI a "millstone" round Britain's neck, adding that, if the Treasury had to put the sums onto its own books, it would add £216 billion to the national debt.


"We had hoped the pre-budget report would set out when and how the UK government is going to bring PFI payments onto the books. Instead, we see the piles of secret debt mounting even higher," he said.


"Ironically, much of this money is owed to the banks the UK government has now bailed out."


Mr Hosie said that other official figures showed that the cumulative 25-year bill for PFI had gone up by 74 per cent since 2004, when it was £123.9 billion.


But a Treasury spokesman said: "PFI has delivered good value for money, improved services and it will continue to play a small but important part in overall procurement of public services."

Plain Fiscal Insanity

(Sunday 30 November 2008)






A VOTE of thanks is due to SNP Treasury spokesman Stewart Hosie for bringing back into the spotlight the scandal that is the Private Finance Initiative.



He said little that is new and nothing that the TUC and the Tax Justice Network, among others, have not been saying over the last 12 months but, at least, he dragged this disgraceful piece of fiscal sleight-of-hand back into the centre of discussion.

And it is a discussion which is long overdue, especially in the light of the bail-out with billions inpublic money which the big banks have so ungratefully pocketed recently.


PFI deals have always been misrepresented by this government as an efficient and economical means of raising the cash for big public projects which the powers that be insisted could only be funded that way.


But they are merely a means of raising money which new Labour could misrepresent as not increasing government indebtedness, despite the blatantly obvious fact that they were simply a method of removing debt from the government's books.


This enabled Gordon Brown, as Chancellor, to claim that he was sticking to the fiscal rules that he propounded in the name of prudence when, in reality, he was merely exchanging loan charges for private-sector profits.
And those profits, it should be stressed, were far in excess of what the government would have paid for public borrowing.


What made it worse was that they could not even be characterised as a premium to the private sector for taking on risk, which was clearly shown when Metronet went to the wall and the private sector shut up shop and decamped, leaving poor old Joe Public with the bill.


And now, after the bank bail-out which was and wasn't nationalisation according to new Labour's bemusing policies, we have an even more ludicrous situation.


The government is now paying, via the PFI companies, the banks that it owns a high premium to borrow its own cash from them at a much higher rate than it could have commanded had it financed the PFI projects directly with the money that it has pumped into those banks.


And there are more shocks coming our way. It is inconceivable that the banks will, at the same time, be able to keep the curb on lending that they have maintained, despite assurances to the contrary, and repay the taxpayers' billions that new Labour has pumped into them.


In order to do that, the banks must generate huge profits and, with lending severely curtailed, where are those profits to come from?


Why, they will come from the PFI loans, because loans they most certainly are, that the banks have made to PFI companies.


And where will the PFI companies generate the cash to repay the banks? From the government's payments for PFI projects, which indebtedness represents a huge asset to the companies and the banks.


There is a future judgement call building up here which should only go one way.


Either the government gets out of the hole that it has dug for itself, taking its nationalisation of banking seriously and discharging its duty to the electorate by using the banks as a source of public funding and rationalising a ludicrous fiscal structure.


Or it discharges its self-appointed role of benefactor to the big bankers by soaking the taxpayer and passing the take over to the City. Any bets?

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