Is PFI sustainable?

14 August

Controversy and criticism over PFI has been nothing more than an occasional itch for New Labour since 1997. There have been flare-ups when particular jobs have gone wrong or when the private sector has been seen to cash in on particular deals, especially the early ones where the risk transfer was never properly established. The unions would put forward principled objections, usually at the time of the Labour Party Conference when there was opportunity to rally the membership around an anti-privatising cause. The argument from New Labour that PFI is providing vitally needed investment, handily off the public balance sheet, has always won out.

This near decade of mild rebukes, with no real bite, could well be over. In fact it has more potential to grow into a sore rather than an itch for the current administration. Tonight's documentary Dispatches: Public Service, Private Profit on Channel 4 may well trot out the usual criticisms - the amount made by the private sector from PFI, the inflexibility of the contracts - but that does not mean that they are not still valid or could gain momentum amongst opinion formers and the public at large. If more examples of bad PFI schemes that are operational emerge, as well further Paddington Hospital-style cock-ups where projects never get past the drawing board, who's to say a more concerted anti-PFI movement will not rear its head? New books such as the catchily titled Plundering the Public Sector: how New Labour are letting consultants run off with £70bn of our money (see a review in the New Statesman) add to my feeling that a backlash is on its way.

It brings me back to a very prescient piece penned by the late Paul Foot, a left wing investaigative journalist, when I was at Building magazine back in 2004 (click here - subscribers only). Yes Foot was violently opposed to anything that included the word private in it, but I believe his analysis of the problems lurking beneath the PFI highlighted genuine concerns. He questions the public sector comparator being "wide open to distortion" as it fails to account for changes in costs and pointed to the fact that many of the deals are not accounted for by either by the government or directly by the companies that form the PFI consortia themselves.

I'll add a new problem and raise a question: is PFI sustainable? There are two points to make here. The first is hatching a plan for a 30-year deal when policy and the provision of such health and education service could change comprehensively in five years or a decade's time. How sustainable is such a plan that could see it being effectively ripped up relatively early on in the deal? The second point: is an uber plan of wholsesale knocking down of old premises the environmentally soundest way to produce new services? Sure the old and existing building stock is massively inefficient but I'm not sure the best way is to knock it all down. I'm well aware that the whole-life costing element of PFI deals is seen as a massive plus to the process, ensuring that the consortia genuinely allow for the operational period of a building. But the flip side is whether that building, and the swathe of others in massive deals such as the Barts and Royal London scheme, will all be fit for purpose for the lifetime of a PFI. As the sustainability agenda moves inexorably up the government agenda this could be another argument against the procurment method.