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Norman Jesse Jesse Norman is MP for Hereford and South Herefordshire

You want to buy a car.  But would you buy it on HP from a single provider on a long term contract, with one payment every year which includes all the servicing, maintenance and spare parts costs?  Or would you shop around for deals, insist on seeing itemised invoices, and get other garages to quote from time to time?

Which route do you think offers the best value for money?  If the former, then welcome to the topsy-turvy world of the Private Finance Initiative, under which Labour commissioned hundreds of schools, hospitals and other public projects after 1997.  Many PFIs are well structured and offer decent value for money.  But many are scandalously wasteful and expensive.

Under Gordon Brown the decision was made to push PFIs wherever possible.  Labour wanted the political benefits of new capital investment, while keeping the debt off balance sheet.  The effect was to put huge pressure on schools and hospitals to contract out not just on the construction process but also on long-term provision of services – and to rack up the national debt.

The PFI obligations taken out at Mr Brown’s direction now total over £200 billion, and will cost this country for decades.  These projects are paid for by the Exchequer on 25- or 30-year contracts, with contractors typically aiming at 8-10 per cent annual returns; a healthy taxpayer-guaranteed return, especially in a recession.


So today I and a cross-party group of over 50 MPs are launching a new campaign in the House of Commons.  Its goal is to persuade the PFI contractors to reduce the cost of their contracts, so that this rebate can be ploughed back into local services.

Such is the size of this country's PFI obligations that a very modest reduction of 0.05% on PFI payments could raise a total of £500 million in savings for local schools, hospitals and other PFI projects.  It would give a pound-for-pound support to the funding of each institution, from the bottom up; that's a lot more medicine, surgery and school books.

It is true that these are private companies with commercial contracts signed with willing counterparties; and it should be no part of government policy to set aside, tear up or rework these contracts. But the Government does not lack the influence to encourage PFI providers to rebate a portion of their revenue, public feeling is running high on this issue, and many PFI providers have public sector shareholders who may themselves support a rebate.

Indeed, there is a direct precedent for exactly this sort of rebate in the so-called “voluntary code”.  The code was agreed in 2002 after several PFI providers made huge windfalls refinancing deals.  Under it, 30 per cent of gains from existing projects were returned to the taxpayer.  The ratio is 50 per cent for new deals.

The campaign's new website is www.pfi-rebate.org.  It sets out the case for a rebate, puts the spotlight on key PFI deals and contains detailed information resources for local campaigns.

The Treasury and the Cabinet Office both support the idea of reducing PFI costs.  We have already had some excellent press support like this article in the Mail on Sunday. 0.05% is not a huge sum in each case, and easy to implement; and it would make a huge difference to millions of people up and down the
country.

14 comments for: Jesse Norman MP: Taxpayers deserve a rebate from Gordon Brown’s costly Private Finance Initiatives

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