The Corporate Welfare Scheme
09.04.07 - 09:28am
There is a splendid article by George Monbiot today, exposing the corporate welfare scheme that is the private finance initiative.
PFI, under which corporations build and run schools, hospitals, roads and prisons and rent them to the state, has largely kept itself below the radar as a political issue during the time of the Iron Chancellor. In actual fact, the Labour Party opposed PFI while in opposition then fell head over heels in love with it once the party achieved power, so the story is also a nice illustration of how, despite a change in Government, policies which keep public funds flowing into corporate coffers are insulated.
Monbiot relates the story of a hospital development in Coventry, where the local NHS wanted to refurbish the two existing hospitals at a cost of £30m. Unfortunately for the NHS, and of course the taxpayer, PFI regulations ruled out the obvious and best option. Monbiot takes up the story:
[Its] analysts realised that business would not be interested. The scheme was too small, and there was no scope for the financial innovation that could produce serious profits. As a confidential report by the local health authority showed in 1998, the health service redesigned its scheme to make it more attractive to private capital. Instead of refurbishing the two existing hospitals, it would ask private business to knock them down and build a new one - the University hospital. This would cost not £30m but £174m. The health experts who wrote the confidential report predicted that in order to find this money, the hospital trust would have to cut both beds and services. They have just been proved right.
Did I say £174m? I beg your pardon. By January 2002 the price had risen to £290m. A month later it reached £311m. By the end of that year it had grown to £330m. In 2003 it was estimated at £370m. In March 2007, the Birmingham Post reported that the final cost was £410m. This year the hospital trust must find £56m, covering repayments and service fees, to hand to the private consortium. The annual cost will rise in line with the retail price index for 30 years.
It is now pretty obvious that this fee is unpayable, if the hospital is to maintain a proper standard of care. Over the past few days the hospital trust has announced a £30m hole in its budget. Around £10m of the necessary cuts could be found by making staff redundant: it will lose perhaps 200 people, possibly 375.
A scheme that should have provided two upgraded hospitals at a cost of £30m has ballooned to £410m. And the reason the original plan was changed was purely to provide a profit-motive to entice corporations to get involved.
Unfortunately this case is by no means isolated. While most of the corporate media has been looking in the opposite direction Private Eye has been revealing similar cases for a long time now.
And the kicker is, of course, that PFI schemes are long term deals, locking the taxpayer into yearly payments while the British Labour/Conservative dichotomy continues to morph into two wings of a single business party, US-style, with neither the desire nor the will to do what is necessary to safeguard the public interest.
There was an excellent Panorama piece on this about two years ago, an absolute disgrace. Accountability is dead, long live easy credit.
It certainly does not get the attention it deserves, and of course both the main parties are behind it so are not keen for it to figure in debate.