A Conservative minister has accused the Labour Party of backtracking on a policy announcement to bring private finance initiatives under public ownership.
In a speech to the annual Labour Party Conference in Brighton this week, shadow chancellor John McDonnell pledged to “rip up” PFI and take current projects “in-house”.
Under Mr McDonnell’s plans, all current PFI contracts would be reviewed and wound up if deemed necessary. Labour has also committed to not signing any more PFI deals and to develop alternative public sector models for funding infrastructure.
However, speaking on BBC Radio 4’s Today programme on Tuesday, shadow health secretary Jon Ashworth said that only a “handful” of PFI contracts were expected to be returned to public ownership.
Mr Ashworth also admitted that unravelling PFI could take “some time”.
“NHS experts generally accept that it’s only a handful [of PFI contracts] which are causing hospital trusts across the country a significant problem, but let’s look at every single one in detail,” he said.
“There are a handful of hospital trusts who have got a problem with their deficits and their financing which is because of the PFI contract they are in.”
In a statement to Construction News, Conservative MP and economic secretary to the Treasury Stephen Barclay said Labour’s plans were “unravelling before our eyes”.
Mr Barclay said: “Less than 24 hours after the shadow chancellor’s speech and we see Labour’s own frontbench backing away from his unaffordable promises that wouldn’t improve public services.
“What this shows us is that Labour are divided and not fit to govern. They make big promises but they can’t deliver them.”
According to analysis of all current PFI projects by the Treasury, there were 716 separate PFI schemes worth a combined £59.4bn as of March 2016.
The Department of Health had the largest number of PFI projects by capital value, at £12.93bn, followed by the Ministry of Defence with £9.52bn, the Department for Education on £8.59bn and the Department for Transport with £7.84bn.
A number of industry experts also raised doubts over Labour’s proposals.
Infrastructure expert and partner at legal firm Pinsent Masons, Jonathan Hart, said bringing PFI under public ownership would be “hugely complicated”.
Liz Jenkins, partner at law firm Clyde & Co, said the policy on PFI contracts, although possible, would bring with it a “significant” rise in finance costs.
Ms Jenkins said: “Taken literally, ‘bringing back PFI contracts’ would involve the termination of over 700 individual schemes across a number of diverse sectors, with very significant compensation being paid to funders and investors in each case.
“There is no doubt that PFI is in need of a face-lift but other measures should be considered before renationalisation.”
In his speech, Mr McDonnell singled out a number of industries including energy and rail that would be brought back into public ownership under a Labour government and also gave support to the proposed Swansea Bay Tidal Lagoon.
The shadow chancellor also committed to build ‘Crossrail for the North’ and extend HS2 to Scotland.
On the topic of PFI, Mr McDonnell said: “We’ll put an end to this scandal and reduce the cost to the taxpayers.
“How? We have already pledged that there will be no new PFI deals signed by us. But we will go further. I can tell you today, it’s what you’ve been calling for. We’ll bring existing PFI contracts back in-house.”
However, Numis Securities analyst Colette Ord warned of the potential impact on contractors.
“There are many listed companies which could be impacted by any change to existing PFI companies, including contractors and facilities management businesses,” she said.
The current government’s stance on backing future private finance deals also remains clouded in doubt as a promised list of PF2 projects has yet to emerge almost a year since being promised.
Major contractors have been selling off their interests in PFI in recent years. Last December Balfour Beatty sold a proportion of its interests in five street lighting PFI projects for £33m.
The Confederation of British Industry (CBI) warned that the proposals for a dramatic state intervention in to the economy would lead to inward investors “running for the hills”.
CBI director-general Carolyn Fairburn said: “The shadow chancellor’s vision of massive state intervention is the wrong plan at the wrong time. It raises a warning flag over the British economy at a critical time for our country’s future.”