PFI Schemes During
the Crisis
In the face of very limited amounts of credit and
huge difficulties within the private sector, it is inevitable that Private Finance
Initiative schemes are under strain.
My position is that the investment in infrastructure needs to continue during the
downturn, in order to protect jobs and put the country in good shape for when the economic
upturn occurs.
However, with so much public money being spent in
areas such as banking and with the flaws of private enterprise when it comes to serving
public interest so apparant, I cannot see why the Government is clinging on to the policy
that involving private firms in public projects is by definition a positive move.
Below are the details of recent actions I have taken on this issue.
Treasury Correspondence
On the basis of concerns raised in correspondence from constituents
about the risk of PFI projects collapsing in the light of the economic difficulties, I
raised the issue with the Treasury.
It was clear from the Minister's reply that the Government is
unwilling to enter into an open debate about the merits and flaws of PFI and the contrast
between their keenness to avoid public investment in these areas and their willingness to
use public funds in order to prop up the financial sector.
However,
I was glad to read that, so far, the contraction in economic activity and in particular
the decreased availability of credit has not led to PFI projects being put on hold. I hope that, if such a situation does arise, the
Government will be willing to consider the option of public funds to ensure that these
projects can continue.
Intervention
I made the following intervention during a statement on banking by
the Chancellor, Alistair Darling MP, on 26 February. As you can see, the dogma of
private investment acting as a guaranteed fix to issues with public sector projects seems
to be holding firm, despite the clear recent failures in the economic markets.
Lynne Jones (Birmingham, Selly Oak) (Lab): I share concerns about socialising
losses and privatising gain, but whatever means are used to back the banks and private
financial institutions with public money, I think everybody is agreed that it is
necessary. Given that situation, my question is: why are the Government still relying on
commercial loans to secure investment in public-sector infrastructure projects and public
services such as the Royal Mail? Should we not cut out the middle man?
Mr. Darling: On PFI projects, I hope that we will shortly
be able to publish proposals that will take account of the difficulties about funding that
my hon. Friend referred to. On her more general point, I believe that a combination of the
public and private sectors working together, whether it be for the provision of finance or
elsewhere, is a good thing. That applies to the Royal Mail, too, as it needs more money to
help it modernise and improve. That is why I think bringing in private capital to work
alongside the public sector is a very good thing.
