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.

Photo: Getty
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Theresa May is paying the price for mismanaging Boris Johnson

The Foreign Secretary's bruised ego may end up destroying Theresa May. 

And to think that Theresa May scheduled her big speech for this Friday to make sure that Conservative party conference wouldn’t be dominated by the matter of Brexit. Now, thanks to Boris Johnson, it won’t just be her conference, but Labour’s, which is overshadowed by Brexit in general and Tory in-fighting in particular. (One imagines that the Labour leadership will find a way to cope somehow.)

May is paying the price for mismanaging Johnson during her period of political hegemony after she became leader. After he was betrayed by Michael Gove and lacking any particular faction in the parliamentary party, she brought him back from the brink of political death by making him Foreign Secretary, but also used her strength and his weakness to shrink his empire.

The Foreign Office had its responsibility for negotiating Brexit hived off to the newly-created Department for Exiting the European Union (Dexeu) and for navigating post-Brexit trade deals to the Department of International Trade. Johnson was given control of one of the great offices of state, but with no responsibility at all for the greatest foreign policy challenge since the Second World War.

Adding to his discomfort, the new Foreign Secretary was regularly the subject of jokes from the Prime Minister and cabinet colleagues. May likened him to a dog that had to be put down. Philip Hammond quipped about him during his joke-fuelled 2017 Budget. All of which gave Johnson’s allies the impression that Johnson-hunting was a licensed sport as far as Downing Street was concerned. He was then shut out of the election campaign and has continued to be a marginalised figure even as the disappointing election result forced May to involve the wider cabinet in policymaking.

His sense of exclusion from the discussions around May’s Florence speech only added to his sense of isolation. May forgot that if you aren’t going to kill, don’t wound: now, thanks to her lost majority, she can’t afford to put any of the Brexiteers out in the cold, and Johnson is once again where he wants to be: centre-stage. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.