PFI scams exposed

CHANNEL FOUR'S Dispatches programme on 14 August gave a detailed exposé on the costs of PFI to the public services. For example, the government can borrow money relatively cheaply, whereas PFI means that the public sector has to pay a higher rate of interest.

Derek McMillan

However once a hospital, road or school has been constructed a much lower rate of interest is possible. This enables PFI companies to refinance their loans and make millions, sometimes hundreds of millions. Under pressure they might sometimes pay back a fraction of this to the taxpayer.

Liam Halligan compared PFI to going on a shopping spree with a ludicrously expensive credit card. The amounts do not appear on the government's books but there will be an almighty payback in the future. Any student with a loan will know just how that feels.

Financiers openly talk about "sweating" resources. Once they have a guaranteed income stream from the government they can seek to minimise their costs. The programme showed many examples of corners being cut in PFI projects. The public institutions can complain as much as they like, they are locked into 25 or 30 year contracts with the private sector!

The programme also showed in detail how companies like HSBC legally avoid paying UK taxes on public-sector contracts. For example, they transferred a £311 million Home Office contract into an offshore fund.

They also detailed how companies tell their shareholders they're making a profit and the taxman they're making a loss. The profits seem to disappear into subsidiaries which have no employees but manage to provide "management services."

Some of these companies are making an extortionate 123% on capital investments. Instead of locking them up for profiteering, New Labour award them further contracts. Liam Halligan has done an excellent job exposing this public scandal. How interesting that HSBC and other financial institutions refused to buy advertising space around this programme!

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In The Socialist 24 August 2006:

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