Budget Responsibility Bill

Debate between Stella Creasy and Graham Stringer

Committee of the whole House
Wednesday 4th September 2024 Commons Chamber

[Graham Stringer]

You are not as old guard as some.

[Ms Creasy]

Yes. But in that time, many of us have had persistent concerns, and one of mine has always been the private finance initiative. The Government are asking all of us to make and support some very tough decisions because of the economic mess that the country now finds itself in. My view is that we must look at all outgoings in that process. If somebody came to a constituency surgery because they had multiple outstanding loans and could not pay their rent, we would look at the debts that they held. That is the challenge with private finance: it is the legal loan-sharking of the public sector. Amendments 6 and 7 are about the process of getting a grip on our debts and ensuring that we learn from the damage that private finance has done.

Let us be clear: nobody can absolve themselves from private finance. Governments of all persuasions have sought to use that process—the ability to put only the repayments on the books, rather than the substantial cost of borrowing. That started under John Major; yes, there were multiple PFIs under the previous Labour Government; and indeed, the previous Conservative Government continued to use private finance until 2018. That is why, as of February this year, there are still 700 PFI schemes representing a capital value of £57 billion, but for which we will pay back £151 billion in the years ahead. We are asking pensioners to pay more for heating their homes, but we should be asking how we can pay less for the private finance debts that we have built up.

Private finance was about being able to build things such as schools and hospitals. Anybody who has an outstanding PFI debt in their constituency, or a school or hospital that urgently needs rebuilding, such as Whipps Cross hospital in my constituency, understands the importance of being able to access private finance. For the avoidance of doubt, I am not saying through my amendments that we should never work with the private sector; I am saying that PFI was a catastrophically bad deal and that, cumulatively, it would meet the legislation’s targets of 1% of GDP, so it is a fiscally significant policy. My amendments are about trying to understand how we will deal with cumulative debt and cumulatively fiscally significant policies.

[Graham Stringer]

I agree completely with my hon. Friend. As a member of the even older guard than hers—

[Ms Creasy]

The original OG!

[Graham Stringer]

I am certainly the old guard from the start of the previous Labour Government. That is relevant because I had a discussion at the time with the then Paymaster General, Geoffrey Robinson, about the cost of PFIs for hospitals. His answer was succinct: “If you want the hospitals, you have to go down the PFI route.” He said that because the Treasury rules were so rigid about finding money for socially needed projects—hospitals in that case—the Government had to work around them, at what would eventually be a huge cost to the taxpayer. There is a warning there about rigid rules and not dealing with reality.

[Ms Creasy]

It will not surprise my hon. Friend that I agree with him not just about his football team but in his analysis. The legislation is about having better fiscal rules and tougher constraints when Governments make decisions. We saw with the Liz Truss Budget how catastrophic those decisions can be.

Many Members will have come across PFI in their constituencies, but it is worth putting on the record just how big it is, because that is relevant to the legislation. We are talking about 700 projects, but each project can be hundreds of individual buildings. One of those 700 projects is made up of 80 schools, for example, which shows the scale that we are talking about. About half of PFIs are held between the Department of Health and Social Care and the Department for Education. That is how we built desperately needed schools and hospitals, but the cost is absolutely critical.

Some NHS trusts are now spending 13% of their total budget on PFI repayments—£2 billion a year for some. In practical terms, that means that some trusts are spending more to repay what is essentially a payday loan for the public sector than they are spending on drugs for their patients. It is a huge drain on our public finances. In 2020, during the pandemic, Norfolk and Norwich University Hospitals NHS Foundation Trust paid £66 million to service its PFI commitments—the same amount that it spent on lab equipment, surgical tools and personal protective equipment. University College London Hospitals NHS Foundation Trust has already paid out £200 million in dividends to the company that owns its PFI, so the money is not just going to repay a debt for building a hospital; it is going out in pure profit to those companies. That is why I draw the parallel with payday lenders and buy now, pay later companies: once you are hooked in, you have to keep paying the debt.

It is not just a problem in the NHS. Hanson academy in Bradford has reached a debt of £4.16 million because of its PFI debt. It is now referred to as the UK’s “orphan” school because nobody wants to run it or take it over, given its financial position. Liverpool city council pays £4 million a year for Parklands high school, which was, again, built under PFI but is no longer needed because of falling school rolls. The council has roughly £42 million left to pay back on that contract for an empty, dead building. The equity solutions company that owns it has posted profits of £340,000 from that project this year alone.

PFI companies have made £111 million in pre-tax profit from education projects alone. That is about £800,000 per project, and the equivalent of 5,5000 new teachers’ salaries. The companies took on the risk of those deals to rebuild our public infrastructure, but the reality is that we do not let schools and hospitals go bust, so they took on the ability to print money. That is what the deals are doing. I will wager that every new and returning MP has had a conversation with someone in local government, a local hospital or a local school who talks about the damage that PFI is doing to their budgets, as if it is non-negotiable.

My amendments are about changing that culture. One challenge is that we have let those companies run rampant. That does not mean that we should not work with the private sector; it means that we should learn lessons, and I think we could learn some very simple ones. For a start, a lot of the companies are incorporated in overseas territories, which raises questions about the amount of tax that they are paying on those deals. Tax was originally part of the Treasury assessment of the deals, which was why working in that way was considered good value for money, and why my hon. Friend the Member for Blackley and Middleton South (Graham Stringer) was told that it was the best way to get a school or hospital.

We could also learn from payday lending by capping what the companies pay. After all, we cap the returns on defence projects. It makes no economic or ethical sense that we cap what can be earned from a military contract, but when someone builds a school or a hospital, they have free rein.

Above all, we need to know how much we owe, because even the Infrastructure and Projects Authority within Government could not get a grip on the total reality of our PFI commitments to date. That is partly because this has been done at a local government level, through devolution and in silos within companies, but it seems a very simple thing: even if those debts are being held overseas, the people paying them are very much here. In Northampton, there are 42 schools costing £30 million per annum, including £4.2 million in pre-tax profits in 2021-22, and Northampton’s budgets as a local authority are in a very difficult position right now. The firm that owns all those schools is based in Guernsey. In Birmingham, 11 schools are part of the Birmingham Schools Partnership, owned by Innisfree. Innisfree owns 260 schools across this country, as well as my local hospital in Whipps Cross. It is based in Jersey and is making millions of pounds in profit from these deals. We have never consolidated those loans to ask ourselves whether we could renegotiate them as a country and therefore claw some money back, because we do not know who we owe what to, or how much it is going to cost.

Amendments 6 and 7 deal with the challenges posed by the threshold of this legislation. It is absolutely right to set a threshold for what is fiscally significant, and individual PFIs would not go anywhere near a threshold of 1% of GDP, which is about £28 billion. However, when we add them up, it is very clear from what we already know about our PFI commitments that they do. As such, these amendments are intended to probe the Government about how we deal with debts and spending that might not meet that threshold individually, but might do so cumulatively, and to look at what we can do in the future to make sure that if we work with the private sector—again, I am not saying that we should never do so; I am saying that we should learn from PFI—we make better decisions. After all, this legislation is about making better-informed, independent decisions.

That is why I also tabled amendment 8, to learn the lessons from trade deals. The hon. Member for Arundel and South Downs is right: the Government’s decision to go for the trade and co-operation agreement—the hardest of Brexits—has cost us an estimated 4% of GDP, so again, that would be a fiscally significant decision. It would be as catastrophic as that Liz Truss Budget—indeed, many of us can see that it has been—but we did not have an independent assessment. Amendment 6 and amendment 7, which is an enabling amendment, would ensure that we have an independent assessment of cumulative spending looking at these issues.

I know that the Minister is as interested as I am in what we can do to tackle the drain that PFI represents and work better with the private sector. I hope that this legislation and the concept of putting PFI on the books is the start of a conversation about better public spending, and I hope that Toad of Toad Hall will recognise that maybe this time it is good that they are in the passenger seat.

European Union (Withdrawal) Bill

Debate between Stella Creasy and Graham Stringer

Committee: 5th sitting: House of Commons
Wednesday 6th December 2017 Commons Chamber

[Graham Stringer]

I do not know what decisions will be made. I believe that the Government are likely to pay too much. Let us ask ourselves: why would we be paying money so that the rest of the EU can trade with us and every year sell us £70 billion more in goods than we are selling to the EU? Why is that a deal that we should be keen to support? I suspect that the Government will come back and put it to—

[Stella Creasy]

Whatever my hon. Friend’s feelings towards the European Union, he has just said that he fears that we may pay too much, whatever the number is. New clause 17 is about knowing what that number is. Surely he must support that principle. Then we can answer the question about whether it is too much, not enough or completely irrelevant.

[Graham Stringer]

I hope that my hon. Friend was listening to me when I was arguing in favour of transparency. I was arguing against the particular wording of these amendments, which I believe to be biased. Of course we should be transparent about what things cost, and we should have the right to have a view and determine what we think about that. Who could argue against that? All I am saying is that, if we are paying £40 billion over 40 years, that is probably against £400 billion that we would be paying, and that should be the context in which these figures are produced.