Meet the new PFI, same as the old PFI

Minor changes abound.

Despite George Osborne claiming in 2011 that the private finance initiative (PFI), Labour's model of funding infrastructure investments with private capital, was "discredited", the Financial Times is reporting that his attempt to find a "new delivery model" to replace the scheme has resulted in a "remodelled version" with "only minor changes" which include "stripping out services such as cleaning, catering and security from the 25 to 30-year contracts in a bid to keep a tighter control on costs."

Gill Plimmer, Jim Pickard and George Parker write that (£):

In a plan still being discussed with industry, the government is also considering investing a small amount of public capital into PFI projects. Although the amounts involved would be small, this would ensure the government a seat on the board of any project, raising corporate governance standards and easing fears that the schemes are in the hands of private financiers.

The main elements of the new PFI projects look set to remain the same. The private sector will still enter into long-term deals to design and build roads, hospitals and schools, with essential maintenance such as roofing included in the contracts. They will continue to be financed by private debt and equity paid for by a revenue stream from government rather than users. Schemes will in many cases continue to be off the public sector’s balance sheet.

The real question the government still hasn't answered is why a PFI replacement remains necessary at all. The scheme was, to all intents and purposes, an effort to keep borrowing off the books of the state. Rather than borrow the initial outlay and pay interest on it, the state would "rent" what was built with someone else's capital (often, of course, paying far more in the process).

These days there is little point in borrowing off the books. This year saw the lowest cost of borrowing for three centuries, and there is no way a private company can access capital for anywhere near that cost.

The political calculus is quite different, though. PFI allows the government to spend, without saying it's switched to plan B. And to Osborne, that's priceless.

Barts Hospital, one of the beneficiaries of PFI contracts, in 1752. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Tory backbench leader Graham Brady: “When we vote to leave the EU, the PM should stay”

As chair of the 1922 Committee, Graham Brady is a king among Tory backbenchers. So what does the ardent Eurosceptic make of David Cameron’s prospects in the EU referendum – and afterwards?

Enter Graham Brady’s office and you are treated to a magnificent panoramic view of the Palace of Westminster and Parliament Square. It is an appropriately grand vantage point for one of the most influential MPs. As the chairman of the Conservative backbench 1922 Committee, Brady is an essential barometer of Tory opinion. In recognition of this, he was one of the first guests to No 10 Downing Street in the hours following David Cameron’s general election victory. A prime minister with a majority of 12 – the smallest of any single-party government since October 1974 – must take permanent heed of his backbenchers.

I met Brady, 48, shortly before the start of Prime Minister’s Questions on 10 February. Among Conservative MPs below us in Portcullis House, there remained only one topic of discussion: Europe. Cameron’s draft agreement with the EU has failed to persuade many Eurosceptics that they should vote in favour of membership of the Union when the referendum is likely held on 23 June. Brady, who entered parliament in 1997 as the MP for Altrincham and Sale West, is one of those who intends to campaign for withdrawal.

“There is a very long-term problem that there is a massive difference between what Britain thought it was joining – the European Economic Community – and what it actually was joining,” he said. “There was no appetite or decision to join a political Europe . . . That is something that has always needed to be resolved in some way and I think the more the eurozone, in particular, integrates with the continuing crisis, the more we will have to see massive political and fiscal integration and probably, still, the departure of some of the weaker eurozone countries. As that process goes on, the United Kingdom has got to redefine its relationship in a meaningful way.”

In advance of the European Council summit in Brussels on 18-19 February, he warned that Cameron’s renegotiations had fallen far short. “The reforms that are being sought by the Prime Minister, while all welcome changes, don’t come anywhere near to that fundamental reform of the nature of our relationship with the EU.”

I asked Brady, who was elected to lead the 1922 Committee in 2010, how many of his Conservative colleagues he expected to join him. “It’s very hard to say. I’ve always thought that a clear majority of Conservative members of parliament are deeply unhappy about the shape of the current European Union. And probably a clear majority would have a preference of leaving the EU as it is today. I suspect that roughly 100 will declare that they’re campaigning for Britain to leave. But many more will be very sympathetic to that objective.”

His estimate of 100 is notably higher than the 50 to 70 predicted by Steve Baker, the co-chairman of Conservatives for Britain.

In recent weeks, Eurosceptics have complained as pro-EU cabinet ministers have campaigned for membership while front-bench opponents have remained “gagged”. Brady told me it was “not unreasonable” for Cameron to force them to abide by collective responsibility until the renegotiation had concluded. But, he added: “What is important is that once the deal is done things should be brought to a conclusion as rapidly as possible. I hope there will be a cabinet meeting, if not on the Friday after the Prime Minister returns, then on the Saturday morning, [so] that the cabinet can agree its collective position and also agree that those who don’t share that view are free to say so and free to campaign.”

Some MPs expect as few as five cabinet members to support EU withdrawal (Iain Duncan Smith, Chris Grayling, Priti Patel, Theresa Villiers and John Whittingdale) although others remain hopeful of persuading Boris Johnson and Michael Gove to join them. “I hope that everybody who is really committed to Britain’s future as a free, independent democracy will realise this is a key decision point,” Brady said.

“There’s no doubt that if Boris Johnson were to campaign for Britain to leave it would bring an energy and buzz to the campaign. Of course that would be welcome, and I hope that Michael Gove will resolve his dilemma in the same direction.”

I asked Brady if he was worried by what some Eurosceptics call “the Farage problem”: that the most prominent opponent of EU membership is also the most polarising. “Nigel Farage is very good at what he does,” he said of the Ukip leader. “He’s a very effective communicator with some audiences, so clearly he has a role in the campaign. Given the salience of the issue for him and his party, it would be unreasonable to expect him not to be prominent in the campaign. But he is a Marmite character and I think this is why it’s so important that there should be a wide range of different voices.”

Brady, who had just returned from a breakfast meeting in the City of London, told me that a number of business people have revealed to him that although their “institutional position is firmly that we should remain in the EU . . . privately their view is completely the opposite”.

Two days before we met, Cameron had been accused of “scaremongering” for warning that “the Jungle”, the refugee camp in Calais, could move to Dover in the event of EU withdrawal. Brady told me that the Prime Minister’s remarks were indeed “inaccurate” and that it was “enormously helpful of the French government to point out that it wasn’t going to happen”.

Were Britain to vote to leave the EU, as polls suggest is possible, many Tory MPs on both sides believe that Cameron would have to resign as Prime Minister. But Brady rejected this suggestion. “No. When we vote to leave the European Union I think it is very important that we have a period of stability. I think it would be hugely valuable to have an experienced team in place to deal with the renegotiation, I think it’s actually very important that the Prime Minister should stay.”

I noted that he referred to “when” Britain leaves the EU, suggesting he was confident of victory. “I’m always confident of victory,” he replied with a smile.

Given Cameron’s decision to pre-resign before the election by vowing to serve only two terms, there will be a Conservative leadership contest before 2020. I asked Brady whether, as some have suggested, the members’ ballot should be widened to include more than two candidates.

“The rules are constructed for each contest by the 1922 executive and agreed with the party board. The only stipulation in the constitution of the party is that we should provide ‘a choice’ to the party members. That has always been construed as a choice of two. I can’t see any reason why parliamentary colleagues would wish to reduce their own influence in the process by putting forward a larger field.”

The Education Secretary, Nicky Morgan, has argued that it is essential there be a female candidate (ideally herself). Brady offered her some advice: “I have very fond recollections of a woman leading the Conservative Party. I hope that if Nicky wants to launch her campaign seriously, she’ll talk to me about how we might promote more grammar schools and selective education as one of the ways that we can stimulate real social mobility in the country again – and she’ll have my support.” It was after the then shadow education secretary, David Willetts, argued in 2007 that grammar schools inhibited social mobility that Brady resigned as shadow minister for Europe.

If there is one stipulation that most Conservative members and MPs will make, it is that there be an anti-EU candidate in the field. I asked Brady whether he would consider standing himself.

“I say to people that I’m very happy with being the returning officer for any leadership contest,” he replied. But the man with a better feel for Conservative backbench opinion than any other ended our conversation with this prediction. “I do think it’s very likely that if we put two candidates forward to the party in the country, at least one of them will have been someone who campaigned for Britain to leave the EU.” 

George Eaton is political editor of the New Statesman.

This article first appeared in the 11 January 2016 issue of the New Statesman, The legacy of Europe's worst battle