Force firms to repay ghastly PFI profits, says minister
Companies that have made billions from “outrageous” Private Finance Initiative (PFI) contracts face being told to return cash to the taxpayer, a senior Coalition minister has said.Francis Maude, the Cabinet Office minister, claimed that many PFI deals were “ghastly” and imposed an unfair “penalty” on schools, hospitals and other public services.
It is understood that Cabinet Office and Treasury officials are examining PFI contracts worth billions of pounds, looking for ways to claw back money for taxpayers. Signalling an end to the era of PFI, Mr Maude said the Coalition’s plans for a “new world” of radically reformed public services will make the controversial contracts look “outdated” and unnecessary.
A campaign led by Jesse Norman, a Conservative backbencher, is calling for PFI firms to pay a £500 million “rebate” to the Exchequer. PFI was introduced by the last Conservative government and expanded under Labour. Private contractors meet the upfront costs of building hospitals and other facilities and then operate them, recouping the money from the taxpayer over many years.
The Daily Telegraph has this week disclosed the long-term burden for taxpayers, who will pay contractors many times the original construction costs.
Treasury figures show that taxpayers will spend £229 billion on projects that cost contractors only £56 billion. The biggest single PFI contractor is Innisfree, which employs 14 people but owns or co-owns 28 NHS hospitals and 269 schools. Its chief executive has built a personal fortune of more than £50 million since founding the company in 1995.
The profits made by some PFI firms are unacceptable, Mr Maude said. “Some of the deals done were ghastly. Some of the deals we’ve come across, the people on the other side must have been laughing all the way to the bank,” he said. “We are looking to see whether there are things we can do.”
Establishing where the final ownership of PFI contracts lies is “very complicated” because many contracts have been sold on and refinanced by other investors, Mr Maude warned. But he insisted that ministers were determined to challenge contracts that are harming public services. ”None of this is easy, but we’re looking to see what can be done, because there is a penalty being paid by schools and hospitals. Some have a millstone of a PFI around their neck.”
Mr Maude, who is in charge of the Coalition’s plans to make Whitehall spend more efficiently, is part of a group of ministers working on a White Paper on public service reforms meant to break the state’s monopoly on providing services and invite public sector workers, charities and companies to run them.
These reforms will see the state move on from PFI to new funding models, he said. Next week, he will publish plans to allow state workers to create mutually-owned companies that will own and operate services including clinics, nurseries and rehabilitation centres.
Tags: Conservatives, Health Direct, National Health Service, NHS, nhs cash shortages, PFI, red tape