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“Transparency” must be extended to PFi contracts

Under the Conservative led coalition, ‘transparency’ has become the latest tool in a long-standing war against the state. What chance of applying that principle to the burgeoning PFi industry?
Oliver Huitson
25 August 2010

"Greater transparency is at the heart of our shared commitment to enable the public to hold politicians and public bodies to account." (David Cameron, May 2010)

Under the Conservative led coalition, ‘transparency’ has become the latest tool in a long-standing war against the state. The public sector, and the BBC in particular, have found their salaries and accounts under increasing scrutiny. But transparency is limited – there is still an area with over £200bn of public liabilities that is strictly off limits: the PFi contracts.

Speaking in May, the coalition announced plans to publish the names and salaries of any civil servant earning over £150,000, with the threshold falling to £58,000 by the end of the year. The Tory press have kept up the pressure with a stream of articles on high earning civil servants, senior NHS management and headteachers. Though varying in form, the message remains uniform throughout: the public sector is awash with wealthy bureaucrats bleeding the taxpayer dry. The narrative serves a crucial purpose: the coalition is about to embark on an ideological savaging of the state unmatched in recent times. The size and speed of the cuts go well beyond the realms of pragmatism. The story of public sector largesse is one they are desperate to reinforce; it is the vital prerequisite of the coming onslaught.

The Conservatives have revived their traditional crusade against the BBC with similar venom. The Culture Secretary, Jeremy Hunt, has made clear his determination to radically shrink the BBC. Last month, Hunt lamented the “extraordinary and outrageous” waste at the BBC and hinted heavily towards reducing the license fee by 2012. As with the public sector, management salaries will be made publicly available to encourage a more frugal approach to senior remuneration. Not that this should be surprising; slashing the BBC was an inevitable requirement in gaining the support of Rupert Murdoch last year.

Honouring the theme of ‘transparency’, though perhaps unintentionally, David Cameron last year cited OFCOM as a prime target for culling in his “bonfire of the quangos”. The same OFCOM, that is, that recently ruled against BSkyB over its wholesale pricing, forcing it to drop prices by around 20%. Hunt also pointed to the BBC’s web content as “a very good area where the BBC needs to have clearer red lines on what it will and won't do". The criticism was strikingly similar to that made by James Murdoch in 2009. When you decide to put your online content behind a paywall, the existence of a large, respected and free-to-view news site simply won’t do.

Exposing the salaries of those entities you wish to destroy is one thing. The measure of the coalitions’ commitment to transparency will be in its treatment of those practices it wants to maintain and the interests it wishes to protect. On the issue of PFi, the Conservatives will have no natural inclination to release the contracts. PFi was, after all, a Conservative creation before it was vastly extended under Blair. Furthermore, the transfer of vast public wealth to private hands is wholly in tune with the current market fetishism; an ideology haunted by the nagging fear that someone, somewhere, is providing a nationalised service..But as the scale of the problem becomes clearer it may prove hard to ignore: we are now locked in to over £200bn of PFi liabilities, with contracts stretching well into the middle of the century, against a backdrop of contracting public expenditure.

The BBC recently reported that under the NHS alone, for example, the 103 PFI schemes in existence will require £65.1billion in repayments, despite being valued at only £11.3billion when they were built. To purchase public buildings on credit is, to a degree, understandable, but to agree to such staggering charges is criminal. Current NHS repayments stand at £1.25bn a year but this figure is set to rise to £2.3bn by 2030. While frontline services face cuts the PFi bill will continue to grow, consuming a significant chunk of NHS expenditure. And yet the terms under which this money is owed will remain secret, exempt from public scrutiny for reasons of “commercial confidentiality”. Nor are such schemes limited to the NHS; we now have similar contracts in place for schools, prisons and many other public buildings and services. And still, despite PFi’s peerless record of scandal and corruption, these contracts are kept from public view. If the Norfolk and Norwich University Hospital scheme is anything to go by, all possible efforts will be made to keep these contracts firmly behind closed doors.  

Yet there have been signs that the tide may be turning. In 2007, following a rejected freedom of information request, the Scottish Information Commissioner forced NHS Lothian to disclose its contract with Consort Healthcare for the building and maintenance of the Royal Infirmary of Edinburgh. The Commissioner rejected claims that the entire contract was confidential and went on to make a number of criticisms of NHS Lothian, including the late discovery of 5,000 additional pages of documentation previously unseen, and a failure to provide a legitimate argument for keeping any aspect of the contract confidential. In September last year, the Scottish Commissioner once again ruled in favour of transparency over the contract for Kilmarnock prison, a £50million PFi scheme. The case was described by Unison as "a major victory for the public's right to know".

South of the border, the Labour government undertook a consultation in 2007 to examine the case for extending the freedom of information act to private firms providing public services. Though the proposal was eventually quashed by industry lobbying, it was at least a sign that the Labour administration recognised the problem: a ballooning industry in privatised public services cannot escape public scrutiny indefinitely. The yearly bill for privately run public services is estimated at over £80bn.

As to whether the coalition will continue the PFi debacle, the signs are far from promising. George Osborne raised hopes of an end to such schemes last year, describing Labour’s PFI model as “flawed” and in need of being “replaced”. However, Osborne was recently presented with two very similar proposals for new hospitals, one in Hartlepool and one in Merseyside. One important difference was in the funding model proposed. The Hartlepool scheme was to be mainly funded publicly, whereas the Merseyside scheme was structured as a traditional PFi arrangement. Sadly, but unsurprisingly, it was the latter that was approved. Both the Conservatives and Labour have identified the serious failings of PFi whilst in opposition, yet neither seem willing to translate this into policy when in government.

There is unlikely to be a stronger opportunity to push for the publication of the PFi contracts. The coalition government is desperately keen to depict itself as transparent, an open government commtted to making public expenditure, wherever possible, subject to public scrutiny. As the Prime Minster said in May, “It's your money, your government, you should know what's going on”. The public finances are in disarray, enormous cuts to public services are approaching and the stench of sleaze still hangs around Westminster’s benches, nowhere more so than on PFi.   

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