Some thoughts on Carillion, PFI and more

My article in tomorrow’s Cornish Guardian focuses on the involvement of large private companies, such as Carillion, in public sector projects. It will be as follows:

The collapse of the large construction company Carillion has shown how involving large private companies in the delivery of public services can be disastrous.

It has also focused attention on Private Finance Initiative (PFI) deals, through which the UK Government has outsourced large projects to private firms.

Through such arrangements, investors – increasingly described by newspaper journalists as “fat cats” – have raked many millions of pounds in profits, while senior employees have reaped a small fortune in bonuses. It is indeed shocking that Carillion’s former Chief Executive received £1.5 million in salary and perks in 2016 alone, before exiting the company which he left in a downward spiral.

I have never been a supporter of PFI, which was launched by John Major’s Conservative Government but taken on with great enthusiasm by Labour under Tony Blair.

The reality is that PFI projects are very different from traditional approaches to investment, where central or local government own the assets and full take responsibility for the works – although obviously private companies are often hired as contractors.

PFIs, by contrast, “are paid for upfront by groups of private investors, who take on the risks of construction. The government pays later, in the form of annual payments called ‘unitary charges.’ These cover the costs of the services being delivered, plus the costs of interest and repayment of the debt” (source: fullfact.org).

Time and time again, PFI has been shown as a ridiculously expensive way to deliver public sector projects, while the collapse of Carillion has left many important projects – such as the construction of two hospitals in England – in doubt. In addition, thousands of ordinary workers are facing the loss of their jobs, while a large number of small companies may not get paid for their products and services.

It is also the case that are some startling examples of large private, profit-driven, companies are using their economic muscle against the public interest.

It has recently been reported that Virgin and Stagecoach are threatening to “walk away” from their franchise to run trains along the East Coast unless the UK Government “waives up to £2 billion of contract payments.”

It is also the case that, last year, Virgin Care won NHS contracts worth £1 billion, but still had the nerve to sue six clinical commissioning groups in Surrey, plus NHS England and Surrey County Council, because it failed to win a £82 million contract which instead went to a local NHS trust and two social enterprises.

It is my view that the “public” ethos of our public services must survive and the UK Government must use its legislative authority to “take back control” from powerful private sector interests.