A week ago, the BBC broke a story they had been working on for a year. It was about how 88 schools in Stoke were badly affected by an ineffective Private Finance Initiative (PFI) scheme coming to an end. Schools fear the private companies will walk away without fulfilling their contract – to leave the schools with sound buildings, good heating and free of damp. Pupils and staff must put up with unsafe working and learning conditions. Some pupils have been told to wear coats or sent home because boilers – including newly installed ones – do not operate properly.
You may think this is not such a big deal; it is just happening in Stoke. However, there are 600 PFI schemes coming to an end soon and this situation will be repeated across the country. Unfortunately, but predictably, this story was not really taken up by the rest of the mainstream press. Obviously having big teams of reporters trying to dig the dirt on Rachel Reeves or amplifying what Farage and Reform are doing is more of a priority.
Although the BBC reporting team should be credited with exposing this scandal not once in the report on Breakfast TV did they explain the origins of PFIs and their political significance. They go back to Gordon Brown when he was chancellor in Blair’s New Labour government (1997 to 2008). This contract was signed in 2000. Just like Rachel Reeves today he devised the initiative to keep a cap on public spending and maintain so-called fiscal rules imposed by the capitalists. Labour then, like today, did not want to challenge the normal functioning of the system which places arbitrary limits on how much a government can increase spending or taxes to improve workers’ lives.
The ‘wheeze’ was to get private capital to build schools and hospitals and/or to maintain them over a long period. A bit like a mortgage you end up paying a lot more than the value of your house over a long period. Unlike private houses, schools and hospitals do not appreciate as assets. Avoiding putting the costs on current balance sheets just meant it became a longer term drain on public spending.
Governments, like states, can always borrow more cheaply than private companies so there was an alternative Labour refused to take. Just like today it rejects massively using state funds to build the social housing we require. Instead, it hopes a ‘partnership’ with building developers will build 1.5 million houses by the end of this parliament. Developers have no interest in seriously cutting house prices and since they lead the partnership, we are unlikely to see the real housing question – not just supply but affordability and availability – being addressed.
Bad Deals
Given the poor service and maintenance 42 of the 88 schools are withholding payments to the contract. The local council is stuck in the middle and has sent a letter to these schools threatening them with legal action. The risk is that the companies will not sort out the problems and then it could come back to the council’s budget. Apparently, the private companies – in this case a multinational – have no further liability after the end of the contract. How have we reached a situation where a public service like education or health is tied up with continual litigation with private companies over contracts?
It is not as though the maintenance contracts are good value for money:
‘Ian Beardmore, chief executive of Newman Catholic Collegiate – a group of six primaries and one secondary in the Stoke PFI contract – describes the charges his schools have been paying for the past 25 years as “astronomical”.
He says the annual maintenance fee for a plug socket installed in one primary school staff room was £400, and when he asked for the socket to be removed the school was charged £500.
Mr Beardmore says there are £1.8m of repairs that need to be carried out across his seven schools’ (from BBC report op cit.).’
Just as the BBC report failed to put the Stoke mess into a historical context, it also failed to make the obvious link with the current government which is going all in with its partnership with business to get growth at all costs. It claims that once growth is secured there may be some trickledown extra tax receipts to finance increased social spending.
Plans for solving the NHS crisis are also premised on using the private medical sector – including US corporations – for ‘supplementing’ NHS provision. All this will achieve is to further increase the staffing problems of the NHS since private companies will profit from staff trained in the NHS at no cost to them. It will further extend the fast developing two tier service. Advertising private health on TV is just the latest sign of this development. Weakening universal services, as we saw with the cutting of pensioners’ winter heating allowances, opens the door for further privatization of social provision.
Utilities like energy, water, post and telecommunications have all been privatized but the myth of public partnership is still maintained with the public regulators like Ofcom, Ofwat or Ofgen, giving an illusion that private companies are controlled. Dividends and high salaries/bonuses for managers have never been capped or criticized. Every six months or so the regulator talks about ‘capping’ prices but this cap is not a cap but an above inflation rise. Even when they impose a gap the companies appeal to the competition authority to push it higher – six water companies are doing so now.
Growth at any Cost
Every area of Starmer’s government’s programme is underpinned by private/public partnerships for growth. The green energy company, the carbon capture plans, and the steel industry all feature partnerships where private companies receive huge bungs of public money. Procurement from the private arms industry has been another gravy train for capital. Lawyers for business tend to be better than the public sector ones in securing deals that always provide profit for their companies.
Any serious plan to turn around our public services, the NHS or schools, must start with the principle that these are under common ownership and should be paid for through fair taxation. Any surplus or savings should always go back to improving services or keeping bills down rather than being given to shareholders or as bonuses to managers. Trade unions and workers in these sectors should demand transparency and oversight of major decisions. A socialist government would be based on developing workers’ control of such services and eliminating profit taking.
Aditya Choudhury put the absurdity of public/private partnerships very well in talking about housing policy:
‘Public money was spent on building those homes; public money was lost through giving them away cheap; and public money is now funnelled in housing benefit to the landlords who let them out.’ Guardian 13th February
As we can see the first rule of public/private partnerships is that the private company always wins.
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Already the backsliding begins. ITV news is reporting that the Government has changed one point in the Children’s Wellbeing and Schools Bill. They have accepted that academies will retain their ‘freedom’ to set their own pay scales for teachers. So the criteria in the School Teachers Pay and Conditions document will only apply to teachers in Local Authority schools. Why have the Government climbed down on this issue? It’s not as if this is a major financial problem for academies. But what will be the next change/climb down by the Government? Will academies be exempt from the National Curriculum? Will Local Authorities be able to build schools according to the needs of their communities or will all new schools, as at present, have to be academies?