Should Labour put an end to PFI schemes and outsourcing?

George Parker of the Financial Times reported on the content of a video by Labour leader Jeremy Corbyn, watched almost 300,000 times in 24 hours on Facebook.

Corbyn sees the collapse of Carillion, the company responsible for everything from building hospitals to providing school meals, as a “watershed” moment that proves that the private sector should not be running swathes of Britain’s public services. More here.

The revolution in outsourcing public services was started by Margaret Thatcher and continued by New Labour under Tony Blair. Since 1980 public services — from providing school meals to refuelling RAF aircraft — have been outsourced to the private sector. Questions have been about whether the taxpayer is getting best value for money from some contracts, listed here. There is more on unsafe PFI hospitals and collapsing PFI schools here.

Should PFI schemes and outsourcing be ended under Labour? There is a substantial body of opinion that, though much of the criticism of PFI is justified, and relevant to the debate on outsourcing, this would be a mistake.  

The FT points put that the big driver of PFI has long been the desire to keep debt off the government’s balance sheet. A correspondent agrees with this: “Certainly, otherwise Tony Blair and Gordon Brown would have been accused of profligacy, whereas using PFI allowed them to be popular in the short term whilst transferring the problem to future generations”.

The civil service, according to the FT, is often very bad at specifying what it wants and managing contracts – our correspondent adds: “Because they change their minds part way through!!” 

Both agree that the processes for assessing the value of PFI projects, monitoring projects and evaluating PFI’s overall performance must become more rigorous.

Reports from the National Audit Office and the Public Accounts Select Committee indicate that successive governments have indeed been accepting unrealistically low bids, leading to inadequate levels of staffing. The Times this week quoted from a report issued by Balfour Beatty that in future it needs to move away from the position where fixed-price contracts, risk transfer and lowest-cost tendering are the norm.

Should hospitals, schools, prisons etc be built with cheap and flexible funding from the Public Works Loan Board? This arm of the Treasury has been helping to finance capital spending by local government since 1793. Its interest rates, linked to those in the gilt-edged market, have been at exceptionally low levels since the financial crisis of 2007-08.

Our correspondent responds: “Very good idea – but still needs a proper project managing organisation”.

 

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