Labour this week reopened a debate about the merits of using private finance for social infrastructure with its pledges on the PFI.
That Labour would end PFI under a Corbyn government wasn’t new, but shadow chancellor John McDonnell raised eyebrows on the subject of existing PFIs when he told the party conference “we’re bringing them back [in-house]” several times to prolonged applause.
The party later tried to roll back on Mr McDonnell’s rallying cry, saying instead that the party would simply “review” PFI schemes.
The shadow chancellor hasn’t always been so circumspect. When proposals for a PFI hospital in his constituency at Hillingdon were being discussed in 2006, he said: “I am not supportive of PFI schemes, but if this is the way to secure the money fair enough.”
He has since consistently railed against PFIs, but he can’t avoid the fact that the UK needs great swathes of new social infrastructure and that the private investment community, utilised correctly, should play its part – a point made after his speech by former Labour deputy prime minister John Prescott.
The decision to scrap Building Schools for the Future in 2010 caused turmoil in this industry, though scaling it back at the very least was an appropriate measure in the aftermath of a global financial crisis.
“Government still needs private sector advice, support and finance, in a sensible way”
But we now have a situation where Scape estimates that 2,122 new primary and secondary schools are required by 2020 in England and in the meantime children are still being taught in sub-standard facilities.
Government still needs private sector advice, support and finance, in a sensible way that enables the private sector to make a return, with peoples’ rights to a roof over their head, a good education and proper healthcare maintained.
Central government also doesn’t have the procurement expertise to oversee these types of projects at a large scale.
Back in 2003, a National Audit Office report recommended that experience from PFI needed to be used to make government a more “intelligent customer” in procurement and management of projects. Has that happened since? That’s why in the round, the shadow chancellor’s announcement is useful in bringing the debate back into the national consciousness.
And it puts pressure on this government, which has tried to cap private sector returns through PF2, its successor to PFI. Having pledged to publish a new suite of PF2 projects in last November’s Autumn Statement, CN revealed in May that plans had been shelved.
I’m told this PF2 list will (eventually) be published, but how many private investors will have run for the hills by then, wary of a Brexit Britain that doesn’t want their cash?