Very British Corruption

The private finance initiative is rigged from beginning to end; but now we have the chance to stop it

George Monbiot. Published in the Guardian 22nd January 2002

“All experience hath shewn,” the American Declaration of Independence remarks, “that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed”. Only when the railways start to collapse are we prepared to contemplate the sort of mass protest which might once have saved them from privatisation. Only, I fear, when the universal provision of public services has been abandoned, will we begin seriously to contest the forces destroying them.

 It's not hard to see why it's proving difficult to mobilise people against the private finance initiative, or PFI. The very term is so boring that most people lose interest before you can explain what it means. The scheme is fantastically complex, and its devil lies in the detail. Much of the most important information is withheld from the public, on the grounds of “commercial confidentiality”.

 But unless we can contest it, successfully, now, we can kiss goodbye to effective public services. Patients are already stacking up in the corridors of the first privately financed hospitals, as the companies have charged so much to build them that both beds and staff had to be cut to make them affordable.

The same catastrophe is due to be visited on the rest of the health service, as well as on schools, prisons, courts, roads, the London Underground, even the armed forces. Now however, though hardly anyone has grasped its implications, we are faced with the best chance we've ever had of bringing it to an end.

 This will, like everything involving PFI, require some explanation. The details will hardly pin you to your seat, but unless we start to grapple with these subtleties, our chances of saving social provision in Britain are zero.

 Some weeks ago, I was sent a paper written by a senior PLANNER right at the heart of the PFI bidding process. For obvious reasons, he wants his identity kept secret. His paper provides AN ALARMING ACCOUNT OF the way the system works.

 The private finance initiative, he reveals, is rigged from beginning to end. Ministers have promised us that public services will only be privately financed when PFI offers better value for money than public funding. But the same ministers have also told civil servants that they will not provide any public money for new facilities. In the words of Alan Milburn, secretary of state for health, “it's PFI or bust". So the public bodies wishing to build new hospitals, schools, prisons and roads deliberately set the “public sector comparator” higher than the private sector bids they receive, in order to smooth the way for private money.

 It is then that the real problems begin. The private companies hoping to build new facilities and rent them back to the government offer what appear to be competitive prices. The government body will select the bid which seems to provide best value for money. The chosen consortium is named the “preferred bidder.” It's at this stage that the government starts to negotiate the contract.

 As a result, the consortium has the government over a barrel. In theory, the contract is still open to competition. In practice, the insider notes, “I am not aware of a single instance where a [preferred] bidder has been deselected”. Once the chosen consortium has its foot in the door, it can increase its price and reduce its services, pretty much as it pleases. There are several familiar means of doing so.

 The companies discover costs which weren't envisaged before, and wildly exaggerate the financial




The Bush administration has washed its hands of any responsibility, in spite of the fact that Washington's fingerprints are all over the crisis. "It was very clearly the Department of the Treasury that pushed Argentina over the edge and allowed it to collapse," Walter Molano of BCP Securities argues, "so I think the issue of accountability has to come up." Indeed it should.

The White House says it wants to stop terrorism. It can start by reining in an organization that has terrorized populations across the globe.

Examiner columnist Conn Hallinan is a journalism lecturer and provost at the University of California, Santa Cruz. His column appears every other Friday