The role of the private sector in helping deliver public services through PFI schemes is a controversial subject. Across the country Liberal Democrat Councils are responsible for administering many hundreds of millions of pounds' worth of PFI schemes. The booklet It's About the Public, Stupid, edited by Jeremy and published by the Lib Dem Group at the Local Government Association, is a collection of the experiences of six Liberal Democrats responsible for running PFI schemes, and what they think of them.
The full booklet is available here.
Liberal Democrat Conference in 2002 debated our proposals for the future of public services. Key themes included much greater devolution of control, and possible earmarking of tax for certain services. The role of the private sector in helping to deliver services is also a key issue.
As a contribution to the debates, the LGA Liberal Democrat Group published a pamphlet outlining the experience of local Councils and other authorities where Liberal Democrats have been responsible for managing PFI deals.
The case studies range from new schools in Liverpool to a new community hospital in Newbury, as well as Susan Kramer’s perspective on the PPP deal for the London Tube. Each assesses the benefits and disadvantages of the deal for their area – none of the articles are wholly against, and none are unconditionally in favour – and some clear themes emerge.
On the plus side, there are new schools, new hospitals and new social housing being built or heavily refurbished as a result of these deals, which otherwise might not happen. Up to a point, therefore, this vindicates some of the Government’s claims for PFI. The pupil or parent in a new school, the patient in a new hospital, or the Council tenant in a new facility doesn’t usually care about the financing arrangements behind it.
In particular this kind of financing has often meant that investment can be "front-loaded" – started as soon as possible. In several cases authors acknowledge that creating a contract for the next thirty years has forced Councillors to focus on their strategic aims and planning what it is they are trying to achieve for a service in a way they do not always have to do. You do not have to be a dyed-in-the-wool Blairite to recognise that a good many traditional public services are less than perfect in the services they deliver to the public.
But there are also some clear criticisms which can be made. Most of all, perhaps, is the fact that central government gave local authorities no choice to find other sources of income. Driven initially by a desire to reduce public borrowing, especially in the short term, government insisted on PFI deals or nothing.
Central government’s determination to see PFI succeed has also made them very ready to provide high levels of return to investors – as Susan Kramer says of the Tube deal, total return on equity is estimated at over 30% – levels normally associated with extremely risky "junk" deals.
For any PFI deal to go ahead, it has to be shown to give better value for money than a traditional public sector arrangement, measured by the "public sector comparator". But since the public option is of course not really an offer, this is at best a comparison with a fictional structure, and at worst too often seems like a straight fiddle – it seems every deal has its stories of uneven comparisons. The additional cost of PFI deals in the long term has led the Government to drop its claim that PFI is a way of bringing in additional money to public services. The money it undoubtedly does bring in quickly turns out later to be very expensive in the long term.
Liberal Democrats across the country have been working hard to make PFI deals deliver better schools, better housing and better transport to the public. As for PFI, it is a mixed bag. As Cllr Richard Marbrow, Chair of Liverpool’s Education Scrutiny Committee says "Would I recommend that we do it again? Indubitably. Is it working perfectly? Not even close."
You can find the pamphlet It's About the Public, Stupid, edited by Jeremy Hargreaves, here.
