Lewisham and PFI: Better than privatisation for whom? Part 1 of 3
This borough has a number of major Private Finance Initiatives; a development tool that the Government considers “…a small but important part of the Government's strategy for delivering high quality public services.” Indeed, the then- Chief Secretary to the Treasury, Alan Milburn MP, crowed how the previous political administration offered mere privatisation but modernisation was this Government’s gift via PFIs. But who is in the position to say PFI’s are better than privatisation? The answer might surprise you.
Among some of Lewisham’s high profile PFI deals include the £202m DLR extension, the £67m Lewisham Hospital clinical building, the £120m police station project that also included Bromley as well as Deptford and Lewisham, the £61m contract for Crofton and Forest Hill secondary schools and Greenvale special school, and the £16m Downham Lifestyles scheme. Much of Lewisham’s projects may still be too recent to throw up concerns (it will take at least a quarter of a century to fully assess their value) but there have been some worries: There are £7m worth of NHS cuts aimed at Lewisham despite the new hospital wing (see my post of November 3). There was only PFI resources available to build the new Lewisham Police station, possibly the largest one in Europe. No other option was available to the police. Mayor Steve Bullock was alarmed at the two year delay of the Downham project contract being signed.
It seems to me that PFI has an invincibility about it that pushes other budgetary and planning considerations to one side. The Government is hell bent on pursuing it. Nationally, there have been over 700 PFI contracts worth over £49 billion signed since 1992 – and 500 of them are now operational. Why the zeal? The costs of PFI projects are kept off the Government books since it is not public borrowings yet the Government can claim the credit for big public infrastructure projects. The contractors are happy because they can project future payments for their own borrowings over a 30 year period. Adept re-negotiation and even refinancing has resulted in them making back their money very early in the life of the contract. They hold the physical assets but not the liabilities and are free to even sell on their interests in secondary markets worth £4billion per year. And all this is underwritten by the taxpayer. So why should private companies bother with the risks of privatisation? Pass the bubbly please…