THE newly elected Labour government has come to power pledging to deliver on infrastructure, pledging houses, transport, and energy projects. But at the same time, they have poured cold water on the idea of major government investment.
Chancellor Rachel Reeves spent the weekend pretending to have just learned about a £20 billion “black hole” in the UK’s finances, and is said to be considering sweeping cuts to make it up.
Labour’s tight fiscal rules also place strict limits on what the government can do, as they aim to have debt falling within five years and day-to-day spending covered by revenues.
So, instead of government, Labour have made no secret of their intention to have private financial institutions bankroll infrastructure spending.
In her Mais lecture in March, Reeves said: “Public investment is one important lever available to governments … but it is only one lever, and it must be used judiciously.”
She argued that Labour would instead deliver “investment through partnership between strategic government and enterprising business”.
Reading between the lines, that looks a lot like a return to the private finance initiative (PFI) schemes used so heavily by the last UK Labour government.
But the taxpayer is still being made to foot the bill for those schemes today.
A 2018 report from the National Audit Office found that around £60bn in private investment had funded more than 700 PFI schemes – and concluded that the taxpayer would have paid out some £199bn by the time all the contracts end in the 2040s.
And in 2019, the Institute for Public Policy Research warned that the public purse would have paid out a total of £80bn through English NHS PFI schemes which cost just £13bn of private capital.
The sky-high costs come over time, but in the immediate present the government is able to keep any spending off their books.
This huge benefit for the government comes at a severe cost to the taxpayer, with public bodies having gone bankrupt under the weight of PFI repayments.
Over the next week, The National’s top team of reporters will be looking at every aspect of the PFI scandal, from their pros and cons to the key figures to warnings for the future.
We’ll be speaking to experts and politicians to understand exactly where PFI went wrong, and why Labour could be set to return to the model.
Our series has launched today with a look at just what PFI schemes are, their pros and cons, and why we’re talking about them now.
It is only thanks to the support of our subscribers that we are able to work on in-depth series like this, getting ahead of what the Labour government is planning to bring you all the key facts.
So please enjoy the hard work we have put into our latest series, and make up your own mind as to whether Labour should be using PFI-style schemes again.
Thank you.
